PAYE47061 - employer returns: employer return - overpayments: overpayment notification (Action Guide)


If you receive an overpayment notification or claim to repayment follow steps 1 - 24 below. The Guide is presented as follows


Initial actionSteps 1 - 5
Overpayment to be referred to the Debt Management OfficeStep 6
Is the value of the overpayment £500.00 or lessSteps 7 - 8
Is the overpayment correct?Steps 9 - 10
Contacting the employer or contractorSteps 11 - 12
The employer repliesSteps 13 - 14
The employer does not replySteps 15 - 16
Unable to reconcile overpaymentSteps 17 - 19
Clearing overpaymentsStep 20
Authorising overpaymentSteps 21 - 22
Completion of a form P565 Request StencilSteps 23 - 24

For details of how to access any of the Employer Business Service functions use the [Index of Functions] button on the left of the screen

Note: Potential overpayments relating to years 2005 onwards must only be investigated where the captured return displays a Return Status Indicator (RSI) of either RSI2 or RSI 3 in the View EOY Returns History screen.


Initial action

  1. On receipt of any overpayment request / notification you must check the amount of the overpayment to ensure it is correct and all appropriate returns or return part for the year have been received and processed, including form P11D(b) where appropriate

  • Use Function VIEW BROCS (DESIGNATORY DATA FOR ASN) (Format 9) to check whether a form P11D(b) is due or has been received
  • If form P11D(b) is not due go to step 4
  • If a form P11D(b) is due and you are investigating the overpayment before6 July go to step 2
  • If a form P11D(b) is due and you are investigating the overpayment after 6July go to step 3
  1. If a form P11D(b) is due and you are investigating the overpayment before 6July and

  • The employer has not instigated the investigation of the overpayment
  • BF your papers until 6 July to check if a form P11D(b) has been received
  • If a form P11D(b) has been received by 6 July, and you are satisfied that all appropriate returns or return parts have been received and processed, go to step 4
  • If a form P11D(b) has not been received by 6 July, go to step 3
Or
  • The employer has requested the investigation of the overpayment
  • You must not withhold a repayment just because a form P11D(b) has not yet been received. (The P11D(b) is not due until 6 July). Continue in accordance with step 3
  1. If you are investigating the overpayment after 6 July and

  • The employer has not instigated the investigation of the overpayment
  • If a form P11D(b) is due but has not been received the overpayment will continue to appear on the monthly overpayment list. Continue to BF your papers until the P11D(b) has been received
Or
  • The employer has requested the investigation of the overpayment
  • Write to the employer to advise them that
According to our records we have not received all their returns due for the year of the overpayment

And

You are unable to investigate their overpayment until all their returns have been received
  1. Use Function VIEW BROCS (EMPLOYER DATA YEAR SUMMARY) (Format 2) to check the amount shown in the COLL field agrees with the amount claimed / notified to you, and take a screen print

  • If the amount agrees go to step 6
  • If the amount does not agree go to step 5
  1. If the amount does not agree then your next action will depend on whether a revised overpayment arises or if there is now no overpayment

  • No overpayment
  • Note the notification ‘No overpayment due’ and use Function AMEND EMPLOYER NOTES to record your actions and then file the papers along with the screen print in the employer record pad
  • If a repayment claim has been received from the employer write to advise them of the position
  • Revised overpayment
  • Note the revised amount on the notification and go to step 6

Overpayment to be referred to the Debt Management Office

  1. In certain circumstances the overpayment must be referred to the appropriate Debt Management Office for action

  • Use Function VIEW EMPLOYER INDICATORS to determine whether any of the following indicators have been set on the employer record
  • COLSTOP
  • P227
  • Use Function VIEW EMPLOYER SCHEME HISTORY to determine the status of the employer record and whether any of the following apply
  • Succeeded out followed by a new employer reference
  • Succession in followed by the old employer reference
  • Date ceased followed by the date and scheme type (not DOME, DCNI, DPGEN or DPNI scheme types)
  • If any of the conditions listed above apply
  • Complete a form P28 and if known indicate on the form the reason for the net overpayment
  • Forward the form P28 to the Debt Management Office with any relevant correspondence
  • Note the date the form P28 was issued to the Debt Management Office on the overpayment notification and put this away in the employer record pad
  • Use Function AMEND EMPLOYER INDICATORS to set the year-related indicator INSTIND(1) for the year of the overpayment
And
  • Use Function AMEND EMPLOYER NOTES to record the action you have taken
  • If none of the conditions listed above apply, go to step 7

Is the value of the overpayment £500.00 or less?

  1. If the value of the overpayment is £500.00 or less has the employer requested an investigation of the overpayment?

  • If Yes – go to step 9
  • If No the overpayment can be reallocated – go to step 8
  1. Where the overpayment is £500.00 or less use Function OVERPAYMENT DISPOSAL to reallocate the amount as follows

  • If the value of the overpayment does not exceed £10.00 reallocate to the Permanent Overpayment account (POP) and complete an ‘Overpayment Reallocation Stencil - £10.00 or less’ and pass this with any supporting papers to your Authorising Officer and request them to use Function AUTHORISE OVERPAYMENT DISPOSAL to authorise the disposal instruction created
  • If the value of the overpayment is between £10.01 and £500.00 check whether current year (CY) is open
  • If CY is not open prepare a Proforma Return – go to step 16
  • If CY is open reallocate the whole overpayment to CY and complete an ‘ Overpayment Reallocation Stencil - £10.01 to £500.00’ and pass this to your Authorising Officer and request them to use Function AUTHORISE OVERPAYMENT DISPOSAL to authorise the disposal instruction created
Note: When overpayments are reallocated to CY as above, BROCS will automatically issue a letter to the employer and a separate letter will not be required.

Is the overpayment correct?

  1. Before overpayment disposal instructions can be given you must ensure you are able to show why an overpayment occurred and that the amount due is correct

For overpayments relating to a year from 2005 onwards
  • Use Function VIEW EMPLOYER EOY RETURNS HISTORY to obtain a screen print of the View EOY Returns History screen to confirm the captured return displays a Return Status Indicator (RSI) of RSI 2, unless the overpayment meets the criteria for making a provisional repayment as shown in the ‘Provisional Repayments’ Action Guide PAYE47105
For all years
  • Review the P228 charge information to see whether this agrees with the information held on the return(s)
  • Use ERIC tracking tool to check whether any returns are held but have not been processed
And where necessary
  • Use Function VIEW BROCS to look at the
  • EMPLOYER DATA YEAR SUMMARY (Format 2) to ensure that the status is WWTD (Working with the district)
  • Payment postings position using EMPLOYER DATA YEAR SUMMARY (Format 2) and POSTINGS SUMMARY (Format 3) for the year. Ensure that any PAYE Advance (PAD) payments shown on the employer’s BROCS record for the current year (CY) has been settled prior to considering a repayment to the employer. For more information see subject ‘PAYE Advance (PAD) Payments’ PAYE47100
For PSC and XP Schemes for years 2008 onwards
  • For any CIS and CAM postings shown in POSTINGS SUMMARY (Format 3) check in POSTING DETAILS (Format 4) whether the CIS Charge is recorded FULL, PROVISIONAL, or INACTIVE. If the employer / contractor contacts you about an overpayment and the PROVISIONAL indicator (which indicates that one or more monthly CIS returns are outstanding) is displayed then ask them to contact CIS helpline 0845 366 7899 (see note below)
  • If there is a difference in the CIS deductions from subcontractors recorded on BROCS and the figure recorded at Box 23 on the form P35, contact the employer / contractor to point out the difference and ask them to confirm the correct figure
  • If the employer / contractor agrees that the figures recorded on BROCS are correct, use Function EMPLOYER NOTES to record the details of your discussions
  • If the employer / contractor disputes the amount of the CIS charge notified to BROCS by the New CIS system, refer the employer to the CIS helpline 0845 366 7899 (see note below)
  • The CIS charge indicators are also shown in DESIGNATORY DATA (Format 9)
Note: Where you advise the employer / contractor to contact the CIS helpline 0845 366 7899 tell them that they will need to have details of all their monthly returns available when they call the helpline. The helpline staff will only be able to confirm the details provided by the employer / contractor about the returns recorded on the CIS system.

Charge details will be passed from CIS to BROCS early in May and will then be updated daily. If you receive a request for a repayment before the charge details are passed to BROCS, inform the employer / contractor that the repayment will be made when all the expected returns have been processed and the actual overpayment established. If the employer states they cannot wait and they will suffer hardship, you can consider a provisional repayment as detailed in PAYE47105

And
  • Use Function VIEW EMPLOYER NOTES, check the employer record pad and any post on hand to review the information recorded

Following your checks


  • If you can agree the overpayment figure, go to step 10
Otherwise
  • If you are still unable to agree the overpayment figure, then overpayment disposal instruction(s) must not be given
  • You must take further steps to establish the correct payment position (for example pursuing an additional / correction return with the employer)
  1. If there are entries on the form P35 for either of the following you must check if the employer reference appears on the ‘Post Capture’ Work List

  • Tax Credits Paid to employees (TCP)
And / or
  • Tax Credit Funding (TCF)
And / or
  • CIS deductions suffered (CIS)

If the employer reference appears on the ‘Post Capture’ Work List you must follow the Action Guide ‘Post Capture’ PAYE53012 to resolve all discrepancies relating to TCP, TCF and CIS.

On 9 February 2007, all Tax Credit Paid (TCP) entries on the Post Capture Work List were removed and archived. Any entries for TCP discrepancies generated after that date will continue to populate this Work List, but these new cases should only be reviewed where an employer overpayment arises. You must continue to work cases shown on the Work List under the categories TCF and CIS.

In all cases where you are required to investigate an apparent overpayment and the employer has paid tax credits, you must continue to reconcile any amounts of TCP shown on the relevant P35, even though there may not be an entry for that employer record on the Post Capture Work List

Note: If an employer tells you that they have paid Working Tax Credit after 31 March 2006 and / or has carried forward Tax Credit Funding into 2006-07, you should advise the employer to contact the Employer Helpline on 0845 714 3143 (text phone 0845 602 1380).

Following your Post Capture checks


  • If you establish the reason for the overpayment, go to step20
Otherwise
  • If you are unable to establish the reason for the overpayment, go to step 11

Contacting the employer or contractor

  1. If you have been unable to satisfy yourself how the overpayment arose you will need to consider contacting the employer / contractor or where applicable the agent or payroll agent.

However, you do not need to contact the employer in the following circumstances
  • If the overpayment is between £10.01 and £500.00 it can be reallocated to current year (CY) using Function OVERPAYMENT DISPOSAL, go to step 8
  • If the overpayment is £10 or less it can be treated as a Permanent Overpayment. The subject ‘Net Overpayments’ PAYE47050 explains how to calculate this figure. If this is the case you must dispose of the overpayment using Function OVERPAYMENT DISPOSAL, go to step 21
  • If the employer or contractor has gone unknown
  • If the Debt Management Office has reconstructed the return
  • If the employer / contractor has already told you that they have chosen not to recover the full amount shown on the return
  • If any of the last three circumstances above apply you must dispose of the overpayment manually using a form P565 Request Stencil to request the completion of a form P565 – go to step 22
Or
  • If none of the above circumstances apply, you will need to contact the employer to establish how the overpayment arose - go to step 12
  1. Contact the employer / contractor / agent or payroll agent to establish the reason for the overpayment. Ensure where contact was made by telephone that a full note of the interview is completed

  • When you have a reply from the employer - go to step 13
  • If you are unable to get an immediate reply by telephone or if the details are complex and are better sent in writing
  • Issue a form P35D to establish how the overpayment occurred
  • BF the papers for 4 weeks
  • If you do not have a reply to the P35D within 4 weeks – go to step 14
  • If you have a reply to the P35D – go to step 13
Note:

If details of an overpayment are being sent to the employer / contractor using form P35D or a letter, ensure that the deductions on the CIS system match the amount claimed at Box 23 of the P35 return.


The employer replies

  1. If you are satisfied that the explanation given by the employer adequately covers the overpayment - go to step 20

If you require further information to verify the overpayment is correct
  • Issue form P35D, or where a P35D has already been completed write, to the employer to establish how the overpayment occurred
  • BF the papers for a further 4 weeks
  1. Do you have a reply to form P35D or your letter

  • If you are satisfied that the explanation given by the employer adequately covers the overpayment - go to step 20

The employer does not reply

  1. If there has been no reply after the BF review and

  • If the overpayment is greater than £2000 you must go to step 18
  • If no payments are shown as being received, on BROCS Posting Summary (Format 3), after 19 April (22 April if payment received electronically) following the year end - go to step 16
  • If any payment has been received after 19 April or 22 April - go to step 18
Or
  • If despite a reply from the employer you are unable to reconcile the overpayment - go to step 17
  1. If there has been no reply from the employer and no payments are shown as received after 19 or 22 April or if you are reallocating an overpayment of £500.00 or less when the current year is not open

  • Prepare a pro forma P35 return to mirror the overpayment amounts held on the BROCS record (format 2)
  • Prepare the P35 proforma return Authorisation Stencil and pass the papers and the P35 proforma return to the Authorising Officer
  • After authorisation use Function RECORD RETURN RECEIPT to record the receipt of a pro forma complete return at RSI2 with no forms P14
  • Use Function CAPTURE EOY RETURN DETAILS to capture the information provided on the return. You must check the pro forma checkbox to show that a pro forma return has been captured
  • Use Function AMEND EMPLOYER NOTES to record your actions and then file the papers in the employer record pad

Unable to reconcile overpayment

  1. If despite receiving a reply from the employer you are unable to reconcile the overpayment

  • Prepare a letter to the employer informing them that the explanation of the reasons for the overpayment is not adequate. Ask them for a further explanation and inform them that, unless a satisfactory explanation is provided, the payment will be permanently left on their record
Note: Where it is considered that the case is more complex and should be reviewed by DMB – go to step 18
  • BF the papers for a further 4 weeks
  • If the employer provides a satisfactory explanation – go to step 20
  • If you do not receive a reply or the explanation is still not satisfactory - prepare a pro forma P35 to mirror the overpayment amounts held on the BROCS record (Format 2)
  • Prepare the P35 proforma return Authorisation Stencil and pass the papers and the P35 proforma return to the Authorising Officer
  • After authorisation use Function RECORD RETURN RECEIPT to record the receipt of a pro forma complete return at RSI2 with no forms P14
  • Use Function CAPTURE EOY RETURN DETAILS to capture the information provided on the return. You must check the pro forma checkbox to show that a pro forma return has been captured
  • Use Function AMEND EMPLOYER NOTES to record your actions and then file the papers in the employer record pad
  1. When the overpayment needs to be referred to the Debt Management Office to investigate further

  • Use Function AMEND EMPLOYER INDICATORS to set the year-related indicator INSTIND(1)
  • Keep a copy of the repayment papers use Function AMEND EMPLOYER NOTES to record your actions and then file the papers in the employer record pad
  1. Refer the overpayment to the Debt Management Office to investigate

  • Do this by completing a form P28 and attaching any relevant repayment papers that may be of assistance
  • Use Function AMEND EMPLOYER NOTES to make a note of the action you have taken
  • Use Function AMEND EMPLOYER INDICATORS to set the year-related indicator INSTIND(1)
  • Keep a copy of the repayment papers use Function AMEND EMPLOYER NOTES to record your actions and then file the papers in the employer record pad

Clearing overpayments

  1. When you are satisfied that the overpayment is correct you will need to decide what method of overpayment disposal is appropriate

  • Automatic disposal - using Function OVERPAYMENT DISPOSAL
Or
  • Manual disposal - using form P565
When deciding which disposal method is appropriate you must review the employer record pad and employer record to establish whether there is an instruction to treat an overpayment in a particular way. For example to set any overpayment against another liability / employer record

To help you to determine which disposal method is appropriate see subjects ‘Completion Of Form P565 Request Stencil’ PAYE47020 and 'Using Function Overpayment Disposal' PAYE47125
  • If you decide that disposal can be made automatically using Function OVERPAYMENT DISPOSAL - go to step 21
Or
  • If you decide that disposal must be made manually using a form P565 - go to step 23

Authorising overpayment

  1. Where you establish the overpayment must be disposed of automatically

  • Use Function OVERPAYMENT DISPOSAL to select the relevant year and disposal method
  • Forward the following to your authorising officer and request them to use Function AUTHORISE OVERPAYMENT DISPOSAL to authorise the disposal instruction created
For overpayments relating to a year from 2005 onwards
  • Take a screen print of View EOY Returns History screen confirming an RSI status of RSI 2, unless the overpayment meets the criteria for making a provisional repayment as shown in the ‘Provisional Repayments’ Action Guide PAYE47106
For all years
  • Take a screen print of BROCS EMPLOYER DATA SUMMARY (Format 2)
  • Take a screen print of BROCS POSTINGS SUMMARY (Format 3)
  • Obtain any other evidence to substantiate the overpayment
  • Obtain any supporting information from the employer record pad
  • Issue a signed letter (plus 1 copy) to the employer or contractor advising them how you have disposed of the overpayment. The letter must advise
  • The amount reallocated / transferred / repaid
  • Why the overpayment arose
  • Did they
Forget to account for any incentive payments made

Forget to account for an overpayment brought forward from a previous year

Enter an incorrect amount on their form P35 for an advance or reimbursement
  • If appropriate, to restrict their next payment to Banking Operations by the amount reallocated to the current year
Note:

Where the disposal instruction is ‘Repay’, the disposal will be subject to additional security rules and may be referred to the Repayment Security Officer for review. This may delay the release of the disposal. Further information can be found in the ‘Using Function Overpayment Disposal Action Guide PAYE47126


  1. Where you establish the overpayment must be disposed of manually by using a form P565 you must

  • Complete a form P565 Request Stencil for referral to your authorising officer

Completion of a form P565 Request Stencil

  1. When completing the Form P565 Request Stencil you must

  • Complete the whole of the left hand side of the form
  • Provide a detailed report of how the overpayment has arisen highlighting any special / unusual circumstances, for example write ‘Pro-forma Return’ in the ‘Report of Overpayment’ box if the only return for the year for the employer record is a pro-forma return
  • Tick all applicable sections on the right hand side of the form. Leave all other sections blank
  • When completing the ‘Details of Overpayment’ box put ‘M’ against ‘Tax’ or ‘NIC’ to show a minus amount where appropriate
  • Write the total amount of the repayment and the amount of the notional overpayment in the appropriate boxes on the form if the repayment involves a notional overpayment
  • Where an overpayment arises wholly or partially from Construction Industry Scheme (CIS) deductions, for example where the CIS deductions recorded on the form P35 exceed the total liabilities due, you must note the ‘Report of Overpayment’ box ‘CIS deductions’
  • Only use one form if you want to reallocate amounts to more than one year. Where the overpayment is to be allocated to more than one year include full details in the ‘overpayment report’ box on the left hand side of the form
  • Include details in the ‘notional overpayment’ box on the right hand side of the form if the repayment involves a notional overpayment
  • Attach evidence of the outstanding liability if the repayment, or part of the repayment is to be reallocated to another type of tax
  • Attach the authority to repay which must include the full name and address of the payee if any part of the repayment is to be repaid
  • Sign and date the P565 Request Stencil
  1. Pass the completed form P565 Request Stencil to your authorising officer together with the following

For overpayments relating to a year from 2005 onwards
  • The screen print of the View EOY History screen confirming an RSI status of RSI 2, unless the overpayment meets the criteria for making a provisional repayment as shown in the Action Guide ‘Provisional Repayments’ PAYE47106
For all years
  • The screen print of BROCS EMPLOYER DATA SUMMARY (format 2)
  • The screen print of BROCS POSTINGS SUMMARY (format 3)
  • The screen print of return details in ERIC tracking tool
  • All other evidence to substantiate the overpayment
  • The authority to repay where the overpayment is to be repaid
  • Evidence of the outstanding liability where the overpayment is to be allocated to another type of tax
  • Any supporting information from the employer record pad
  • The signed letter (plus 1 copy) to be issued to the employer / contractor advising them how the overpayment has been disposed of. The letter mustadvise
  • The amount reallocated / transferred / repaid
  • Why the overpayment arose. Did they
Forget to account for any incentive payments made

Forget to account for an overpayment brought forward from a previous year

Enter an incorrect amount on their form P35 for an advance or reimbursement
  • If appropriate they must restrict their next payment to Banking Operations by the amount reallocated to the current year

On receipt of the P565 Request Stencil your authorising officer will consider the completion of a form P565.


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