UK Tax: HMRC Revenue & Customs Brief 22/10 - Overpayment relief and practice generally prevailing
The purpose of this Revenue and Customs brief is to:
- Publicise the introduction of overpayment relief from 1 April 2010.
- Advise how HMRC consider practice generally prevailing affects overpayment relief and error or mistake relief claims following the judgment of the Court of Appeal in the Franked Investment Income Group Litigation.
It is no longer possible to claim error or mistake relief for income tax, capital gains tax and corporation tax. From 1 April 2010, it has been replaced by overpayment relief. Guidance on the new relief can be found at SACM 12000 onwards.
Other formal or informal processes for reclaiming overpayments have not changed.
Claims must be made within 4 years of the end of the tax year or accounting period to which the claim relates.
This time limit does not apply where the claim relates to a mistake in an individual's 2004-05 or 2005-06 self-assessment return if they were not given a notice to make the return within 12 months of the end of the tax year. The time limits for claims in these cases are 31 January 2022 and 31 January 2022 respectively.
Form of overpayment relief claims
Claims must be made in writing and:
- State that the person is making a claim for overpayment relief under Schedule 1AB TMA 1970 (Paragraph 51 Schedule 18 Finance Act 1998 for corporation tax claims).
- Identify the tax year/accounting period for which the overpayment or excessive assessment has been made.
- State the grounds on which the person considers that the overpayment or excessive assessment has occurred.
- State whether the person has previously made an appeal in connection with the payment or the assessment.
- If the claim is for repayment of tax, include documentary proof of the tax deducted or the tax being suffered in some other way.
- 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.
Claims cannot be made in self-assessment returns and will not be accepted if they are made on an SA return form (SA100) or equivalent, such as the Trust and Estate Tax Return SA900 or company tax return (CT600).
Practice generally prevailing
Both error or mistake relief and overpayment relief have an exception where the tax was calculated in accordance with prevailing practice at the time.
HMRC have considered the comments of the Court of Appeal concerning prevailing practice in the Franked Investment Income Group Litigation (paragraphs 255 to 264).
In the view of the court, the practice generally prevailing exception is to be read as subject to the limitation 'that it applies only if and to the extent that the United Kingdom can consistently with its [EU] treaty obligations impose such a restriction'. The court concluded that practice generally prevailing does not affect a claim for repayment of taxes paid in breach of EU law.
HMRC understand this principle also applies to the new overpayment relief. Therefore, if a claim for error or mistake relief or overpayment relief relates to taxes paid in breach of EU law, HMRC will not seek to disallow it on the basis that the tax liability was calculated in accordance with the prevailing practice.
The other conditions for error or mistake relief and overpayment relief, such as time limits, will still need to be met in all cases.