Is HMRC holding on to your PAYE refund?

27th January 2020 Nicky Cole
Is HMRC holding on to your PAYE refund?

Your bookkeeper has picked up on an error in the PAYE calculations for your business. It means you’re entitled to a refund, but under HMRC’s policy it has no plans to repay you. What steps can you take to get your money back?

Where’s my refund!

One of Tax Essentials subscribers recently alerted them to a particularly unsavoury practice adopted by HMRC in respect of PAYE refunds. Her bookkeeper was checking her figures and discovered a double payment to HMRC. She contacted it to ask for a refund and was shocked at the response. At first the tax officer told her that there was no refund on record, but on further investigation found that actually, as a matter of policy, HMRC’s system had made an adjustment to cancel the overpayment as the amount was small. We were appalled by this and asked HMRC to justify its actions.

Don’t rely on HMRC’s online records of PAYE liabilities and payments to check for refunds. They are often out of date and sometimes inaccurate.

Pre-emptive action

Getting your hands on a refund depends on two factors; what year it relates to and the amount involved. If the refund of PAYE relates to the current tax year and you have further PAYE and NI payments to make, the best way to recover the money you’re owed is to simply knock it off your next PAYE and NI payment.

Where the refund is for a prior year, or if it’s too large to be recovered by reducing your PAYE payments for the remainder of the tax year, it might be trickier to get your money back:

  • if the refund is less than £500, HMRC is unlikely to argue. Call its employer helpline (0300 200 3200) and simply ask for the money to be refunded
  • if the amount you’re owed is more than £500, you’ll need to provide HMRC with an explanation of why you overpaid PAYE. And even after HMRC has agreed the amount, you could be in for a long wait – HMRC is currently taking around four months to process repayments.

Explain yourself

Simply telling HMRC that you or your bookkeeper made an error, e.g. a double payment, or anything that simple will generally be met with stony silence and inaction. HMRC will usually want a detailed account of the circumstances which caused the overpayment. While we think this is unwarranted there’s little point in arguing as it will just take more of your valuable time and further delay the refund.

HMRC’s guidance on how to “Fix problems with running payroll” includes examples of possible reasons why an overpayment might occur, which might help you formulate your explanation and secure your refund with the minimum of trouble. It also includes information about the process of making a claim.

Make your claim clear

When claiming a PAYE refund, it will speed things up if you set out details of your PAYE liabilities and payments for the year in which the overpayment occurred in an easy-to-follow format. For example, a table showing PAYE and NI due according to your RTI reports, your payments and an explanation of any differences in separate but corresponding columns.

HMRC will generally hold on to PAYE refunds unless you ask for it back. If the amount is greater than £500 you’ll have to provide an explanation of how and why it occurred. For small amounts check that HMRC hasn’t made an adjustment to your account that cancels the refund – if it has ask for it to be reinstated.
If you would like and help and advice on this topic, give us a call!

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