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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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Repayments: issue repayment: repayment set-off (BCC and FSC)

Balancing charge credits and freestanding credits.

Set-off from PAYE/CODA to SA

Where a PAYE or CODA overpayment is to be set-off against an SA liability, function CREATE FREESTANDING CREDIT will be used to enter a credit on the SA record. More detailed advice on creating a freestanding credit is provided in subject ‘Freestanding Credits’ (SAM110080).

The effective date of payment (EDP) attaching to the set-off will normally be the later of

  • The date the overpayment is established

And

  • The relevant due date of the SA charge against which the credit is to be set

Set-off from a ‘stand alone’ claim

Detailed guidance about set-offs and ‘stand alone’ claims can be found in section ‘Claims Made Outside A Return’ (SAM114000 onwards).

See subject ‘Effective Dates of Payment’ (SAM110070) for information on EDP’s.

Set-off from SA to a non-SA liability (excluding Class 2 liabilities)

Where the taxpayer has requested that all or part of an SA overpayment is to be set against a non-SA liability the set-off should be made through OAS.

The EDP attaching to a set-off will normally be the date the overpayment is established. (The established date is the date the relevant information became available in order to make the set off.)

However, where the overpayment arises from a captured return, the EDP of the balancing charge credit (BCC), will automatically be allocated as the filing date of the return, that is 31 January following the end of the tax year.

As a concession the EDP should be amended where appropriate, to the date the return was received (logged) if this is earlier than the filing date.

Note: Repayment supplement (RPS) does not arise unless the set off is made after the 31 January following the end of the tax year in which the credit for set off originates.

Set-off from SA to a Class 2 NIC liability

Where an entry has been made in function MAINTAIN SA NOTES stating that a Class 2 NIC liability is outstanding, the ‘No repayment’ signal should have been set on the record. In these cases where an overpayment arises on SA, this can be set-off against the Class 2 NIC debt.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

To make the set-off, the appropriate amount of the SA overpayment to be set against the Class 2 NIC debt should be transferred to OAS and an SA331 OAS Allocation Form (to be completed and printed from SEES) should be completed giving disposal instructions to the appropriate Banking Operations office.

If the taxpayer subsequently objects to the set-off and requests a different set-off or repayment, then a revised set-off or repayment must be made in accordance with the taxpayer’s request. The taxpayer should be advised that the Recovery Office will continue to actively pursue the Class 2 NIC debt until paid, in which case they may incur recovery costs.

In these cases the National Insurance office should be contacted to request the return of the set-off to the SA record.

Set-off within SA to an earlier tax year

Where a credit is set-off automatically against an earlier SA liability the EDP attached to the set-off may require amending.

The EDP attaching to a set-off will normally be the date the overpayment is established. (The established date is the date the relevant information became available in order to make the set off.)

However, where the overpayment arises from a captured return, the EDP of the balancing charge credit (BCC), will automatically be allocated as the filing date of the return, that is 31 January following the end of the tax year.

On this basis when a BCC is set off against an earlier SA liability, it generates an interest charge and surcharge calculated to an EDP of the filing date of the return. This is irrespective of whether the return on which the BCC is shown was received prior to the filing date or not.

In these cases, as a concession the EDP of the BCC should be amended to the date the return was received (logged) if this is earlier than the filing date. This applies to all BCC’s irrespective of the income source from which the overpayment originates.

Note: RPS does not arise unless the set off is made after the 31 January following the end of the year in which the credit for set off originates.

To amend the EDP you have to transfer the credit to OAS and then transfer it back amending the EDP in the process.