SAM110130 – Repayments: issue repayment: nominations and deeds / letters of assignment
General
2008 Finance Act changes
Differences between a nomination and an assignment
A valid assignment
What to do when you receive a deed or letter of assignment
Bankruptcy cases
General
A Self Assessment return and / or claim form R38(SA) enable a
taxpayer to nominate someone else to receive a repayment on their
behalf. A taxpayer may also authorise by letter that a repayment is
to be issued to a nominee.
Some taxpayers choose to go further than just a nomination
and legally 'assign' a repayment by deed or letter to a nominee. A
deed or letter of assignment assures the nominee that the repayment
will definitely be paid to them as opposed to a nomination that can
be withdrawn by the taxpayer at any time.
For example, a nominee is frequently the taxpayer's agent
and sometimes agents insist that their client nominate them to
receive a particular repayment so they can be sure of getting their
fees. But because the taxpayer can withdraw their nomination, some
agents are now getting their clients to legally assign a repayment
to them to be certain of receiving the repayment.
Sometimes a repayment may be assigned to a loan company that
lends money to a taxpayer in anticipation of them receiving a
repayment.
2008 Finance Act changes
Section 133 of the Act closes off the possibility of separating
a person’s right to claim a repayment from their liability to
pay their HMRC debts by assigning that right to another person. All
assignments received on or after 21 July 2008 are secondary to
set-off.
In effect S133 allows HMRC to make set-off of any
overpayment to a taxpayer’s outstanding debts in accordance
with S130 of the Act (HMRC powers to make set-off), before making
payment of any remaining assigned repayment to the assignee. This
ensures that an assignee cannot receive any more of a repayment
than the original taxpayer would have received had the repayment
not been assigned.
Also any outstanding debts owed by the assignee should be
taken into account and considered for set-off before any assigned
repayment is made to the assignee.
Differences between a nomination and an assignment
A taxpayer may nominate someone else to receive a repayment on
their behalf by completing the appropriate authorisation on the
return, form or by letter and this is known as a 'bare' nomination.
In the case of a nomination a taxpayer remains the person legally
entitled to the repayment and the repayment is issued to their
nominee at our discretion. The taxpayer may also withdraw their
nomination at any time prior to the repayment being issued.
The nomination can be withdrawn over the telephone if the
repayment is to be issued to the taxpayer
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
If a taxpayer legally assigns a repayment to a third party
by a deed or letter, that third party (the assignee) becomes the
person (or company) legally entitled to the repayment. The deed or
letter of assignment is legally binding and we have no option but
to issue the repayment to the person (or company) to whom it has
been assigned.
The assignment can only be revoked if both the taxpayer who
made the assignment and the person to whom the repayment was
assigned both agree to it being revoked. The agreement to revoke
the assignment must be in writing and forwarded to HMRC.
An assignee may also nominate someone else to receive the
repayment on his or her behalf and this nomination must be in
writing.
A valid assignment
An assignment may be made by either a deed or letter and in both cases in order to be valid must meet the following criteria
- It must be absolute, that is it must transfer the right to the repayment from the taxpayer to the assignee unconditionally
- It must be in writing and signed by the taxpayer entitled to the repayment
- The actual assignment must be submitted to HMRC (telephone call reporting it's existence or photocopy will not suffice)
No particular form of words is required for the assignment but
it must specify the repayment that is being assigned. For example,
'The Income Tax repayment of £1,345.75 due to me for the year
2006/07' or 'Income Tax and Class 4 NIC overpaid by me for the two
years ended 5 April 2007' are acceptable, but 'any repayment of tax
due to me' is not.
If you consider that an assignment does not satisfy the
above criteria, you should inform the taxpayer of this (or the
agent if the assignment was submitted by the agent) and explain why
the assignment is not valid.
If the taxpayer has already nominated the same assignee in
the normal way to receive the repayment, then you should proceed
with the issue of the repayment to the nominee.
If you are not sure about the validity of an assignment, you
should contact the SA Business Help Desk for advice.
If a taxpayer has assigned a repayment due to them to a
third party, the assignee will usually also be nominated on the
return or claim form to receive repayment. Where the assignee is
not the same as the nominee shown on the return or claim form or,
the nomination section has not been completed, the relevant
repayment must be issued to the assignee, as they are legally
entitled to it.
What to do when you receive a deed or letter of assignment
It is important that a deed (or letter) of assignment is
identified in the receiving office as soon as possible to ensure
that the repayment assigned under the deed (or letter) is not
issued to the claimant or another nominee in error.
If a taxpayer has assigned a repayment to a third party, the
assignee will usually also be nominated on the return or claim form
to receive repayment. Where the assignee is not the same as the
nominee shown on the return or claim form, the nomination is
superseded by the assignment and the relevant repayment must be
issued to the assignee as they are legally entitled to it.
Bankruptcy cases
Special rules apply to set-offs in bankruptcy cases (S131
FA2008) and mutuality of debt is crucial, but a repayment which has
been legally assigned to a third party on or after 21 July 2008 is
now secondary to set-off against outstanding HMRC debts. In effect,
any repayment that is assigned can first be used for set-off
against the taxpayer’s outstanding debts and then against any
outstanding debts of the assignee, before any remaining amount is
repaid to the assignee.
The taxpayer cannot assign a repayment, which under the
Insolvency Act 1986, legally belongs to the trustee in bankruptcy.
If you receive a deed or letter of assignment which seeks to assign
a repayment which legally belongs to the trustee, do not accept it.
Return it to the taxpayer (or agent) and explain why the repayment
cannot be assigned.
