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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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Repayments: claims made outside a return: claims: made after the time limit

Since these claims are not amended returns, the return figures for the year should not be changed. The legislation does not permit a Self Assessment to be amended following the expiry of the date by which an SA return can be amended. But it does allow for any interest, penalty or surcharge for the year of claim to be mitigated to the amount that would have been due had it been possible to amend the return.

Where the claim involves one year only, the relief due as a result of the claim should be calculated clerically.

If liability for any year is outstanding (or will become due within 45 days) relief should be given by set-off. However, where no liabilities are outstanding but there is an amount becoming due within 45 days and the taxpayer insists on repayment as opposed to set off, the repayment can be made on condition that it is repaid before the due date of the future liability.

Where there are no outstanding liabilities (or any becoming due within 45 days), relief should be given by repayment.

Requests to revisit processed claims

A request submitted by a taxpayer or agent to revisit a claim that was processed on or after 6 April 1996 in order to amend any interest, penalty or surcharge for the return year should be accepted.

The request should be in writing and submitted to the office responsible for the processing activities. On receipt of a request, it should be acknowledged and forwarded on to the IRU (Interest Review Unit) at Cumbernauld with the full facts of the case under cover of the ‘Interest Submission Form’ stencil. An entry should be made in function MAINTAIN SA NOTES detailing the date of receipt of the request and that it has been sent onto the IRU.

The IRU will review the claim and where appropriate agree the mitigation of any relevant charges. At this stage the IRU will contact the office responsible for the processing activities to request transfer of the taxpayer’s record to them.

The IRU will deal with the remission of any interest and surcharges (only where part mitigation of a surcharge is agreed) and will return the case to the responsible office with instructions to cancel any penalty or surcharge as appropriate.

Any request for repayment that accompanied the request to revisit the claim should be dealt with by the office responsible for the processing activities when the case papers, together with any instructions and SA record are returned.

Interest, penalties and surcharge

When processing the claim any interest, penalty or surcharge for the year of claim should be mitigated to the amount that would have been due had it been possible to amend the return. These charges should be amended as follows

Interest and Surcharges

Where an interest or surcharge is to be reduced in full or in part

  • Transfer to OAS payments made against the original charge up to the value of the relief due
  • Create a freestanding credit (or credits) for the amount of the relief due and give it (them) the EDP of the relevant due date of the charge(s) for the year of claim

For example

1. The freestanding credit created for the relief should be given the EDP of the balancing charge debit (BCD) of the year of claim
   
2. Where the relief due exceeds the BCD amount, the excess should be divided into two equal amounts and two freestanding credits created with EDP equal to the payments on account (POA)
3. Where only POA exist for the year of claim, the relief should be divided into two equal amounts and two freestanding credits created with EDP equal to the POA
4. Where the relief also exceeds the total tax paid (BCD and / or POA) for the year of claim, this excess should be treated as a balancing charge credit (BCC) and a freestanding Credit created for this amount, with an EDP of the fixed filing date of the year of claim

These actions will automatically update both the interest and surcharge (interest immediately, surcharge overnight), then

  • Reallocate back to the record the payments transferred to OAS

Where amendment to the surcharge results in a reduction to an amount below the £50 imposition limit, the surcharge will remain on record in the reduced amount.

Tax geared late filing penalties 2010-2011 onwards

The tax geared late filing penalties are calculated on the amount of tax shown in the return and in most cases there will be a minimum £300 penalty charged and, if appropriate, an additional amount will be charged when the return is captured. Occasionally the whole of the penalty will be charged at capture for the minimum of £300 or 5% of the tax due, see SAM61240.

The total penalty(ies) charged should not be reduced below the minimum of £300 irrespective of the amount of additional relief given.

Where a minimum £300 penalty has been charged it should not be cancelled or capped but if the additional relief due means that the additional amount over £300 is now reduced to nil, the additional amount can be cancelled. However, where the additional penalty needs to be capped (reduced in part), ask the office responsible for the recovery activities to remit the relevant amount under Class 10 (miscellaneous).

If the whole of the penalty has been charged at capture, you will need to ask the office responsible for the recovery activities to remit the relevant amount under Class 10 (miscellaneous) to reduce the penalty to a minimum of £300 or 5% of the tax that would have been due.

Where an overpayment of a penalty or surcharge has been created by these actions, RPS will be payable on the overpayment from the original date of payment. This RPS will have to be calculated manually and a further freestanding credit created on the record. RPS is not payable on any overpayment resulting from the amendment of an interest charge.

Relief given by set-off / repayment

Whether relief is to be given by set-off or repayment, SA function CREATE FREESTANDING CREDIT will be used to enter a credit on the SA record.

Following the use of this function

  • A credit will be created on the SA record which will be available for repayment or allocation against an SA charge
  • A work item will be created and entered on the ‘Freestanding Credit Review’ work list
  • The No Repayment signal will be set automatically. (The setting of this signal will prevent an automatic repayment and possible over-repayment being made when the return is received)
  • You will be taken to function VIEW STATEMENT, from which you may want to access function ISSUE REPAYMENT FROM OVERPAID BALANCE. If repayment is not appropriate, you should exit that function
  • You should use SA function MAINTAIN SA NOTES to enter a brief note recording the fact that a repayment / set-off has been made

More detailed advice on creating a freestanding credit is provided in subject ‘Freestanding Credits’ (SAM110080).

More detailed advice on EDP and dates from which RPS is payable are provided in the section ‘Issue Repayment’, in subject ‘Effective Dates of Payment’ (SAM110070).

Repayment supplement (RPS)

When relief is given either by set-off or repayment, it should include any RPS (if appropriate).

RPS will be payable from

  • The date(s) the tax for the year of claim was paid, which is now being set-off or repaid (except where the original tax has been collected through the code)

And

  • For the amount of relief that exceeds the total tax paid for the year of claim, the fixed filing date of the year of claim

To

  • The relevant due date of the charge against which the set off is made, if to the same UTR

Or

  • The date the set off is made, if to a different UTR or Head of Duty

Or

  • The projected date of issue of the repayment, if repaid

Note: Where a set off is made to a charge for an earlier year under the same UTR, RPS will not be payable. This is because had it been possible to amend the original return to give effect to the claim, this earlier year liability would have been automatically cleared by the freestanding credit created for the relief and no overpayment would have arisen.

Any RPS that is due will need to be calculated manually and included in the total amount of the credit entered on the SA record, using function CREATE FREESTANDING CREDIT.

IRIS function SARI (Self Assessment Repayment Interest) will enable you to calculate RPS. More detailed advice about how to use function SARI is provided in the IRIS User Guide.

Payments on account

Once the self assessment for a year is no longer capable of amendment, payments on account for the following year are final. The same applies to a S29 assessment which is final. It follows that claims made after the time limit for amending the return has expired can have no effect on the payments on account for the following year.