Tax repayment claims are usually made via the submission of a tax return. The time limit for amending a return (whether individual or company) is usually one year from the deadline for submitting the tax return. If that date has passed, a claim can only be made via an overpayment relief claim. Under this relief, the general rule is that a refund or repayment cannot be claimed more than four years after the end of the tax year to which the claim relates for personal taxes and more than four years from the end of the relevant accounting period for corporation tax after the end of the relevant accounting year. Overpayment relief also applies to claims for overpaid Class 4 National Insurance contributions.
The claim process should be relatively straightforward. However, this is one occasion whereby HMRC insist that the claim is in a set format or it can be refused. The claim must be in writing, signed by the taxpayer or someone entitled to sign on their behalf, e.g. a power of attorney for the taxpayer’s financial affairs, but not their accountant. For a company, the claim must be signed by someone with authority, e.g. a director.
The claim must state that the person is making an overpayment relief claim and the best way to do this is to quote the section of the relevant taxes act under which the repayment is being claimed (i.e. ‘This claim is being made under Schedule 1AB Taxes Management Act 1970’ for personal taxes, or ‘This claim is being made under para. 51 Schedule 18 Finance Act 1998’ for corporation tax).
The claim must also state the tax year or accounting period and the reason why the overpayment or excessive assessment has occurred. Documentary proof is needed of tax deducted or suffered and the claim should include a declaration signed by the claimant stating that the particulars given in the claim are correct and complete to the best of their knowledge and belief. If the person or company has previously appealed in connection with the payment or the assessment, that also needs to be stated.
See this as well: WHAT ARE DETERMINATIONS AND CAN THEY BE CANCELLED?
HMRC will not accept an overpayment claim if the return was made according to the ‘practice prevailing at the time’. But the interpretation of the law changed later e.g. because of a decision in a subsequent court case. Neither will they accept a claim due to a mistake or failure in making an election or where the matter has already been the subject of a tribunal decision or court hearing.
The relief cannot be used where an overpayment arises due to an error in a capital allowances claim. A business has a choice of whether or when to claim capital allowances. If a deliberate choice was made when calculating capital allowances. And at a later date, it is found that more tax relief would have been allowed if calculations had been undertaken differently. Then, no relief is available.
There is an exception from the above four-year time limit for ‘special relief’ cases. Special relief is a form of overpayment relief that can only apply to amounts charged in HMRC determinations where no other statutory remedy is available. Unlike claims for overpayment relief, there is no time limit for making a claim. The relief is also not automatically excluded where the business knew, or ought reasonably to have known, that it had some other means of correcting an overpayment or over-assessment.
Partner note: TMA 1970, Sch 1AB, para 3A; SACM12220; SACM12005; FA 1998, Sch 18, Pt IV.