Generally, the time limit for amending a tax return is one year from the due date. But sometimes, it transpires that the tax calculation is excessive later on. For example, the individual may have mistakenly over declared income. Where the deadline for amending the tax return has passed, the return cannot be amended. However, it may be possible to claim overpayment relief so that the individual isn’t penalised financially.
Overpayment relief cannot be claimed in situations where a person has made a choice between tax treatments that, in hindsight, turn out to be sub-optimal.
Simon is a sole trader who runs his business from an office in his home. Under the simplified expenses rules he used a flat rate deduction to cover the use of his home for business purposes in his 2017/18 return. After the deadline for amending his return passed, Simon realised that if he had worked out the business proportion of his actual household running costs and used these figures instead, he would have paid less tax. Simon cannot claim overpayment relief. The fact that he could have paid less tax if he had made a different choice does not mean the tax he paid was not due.
Instead, the relief aims to provide recourse to assessments which are excessive.
Andy completed his return for 2018/19 and included a large capital gain of £25,920. However, three years later he realises he had entered £29,520, i.e. he had made a transposition error. This is a case where overpayment relief may be available.
Overpayment relief must be claimed within four years of the end of the tax year the claim relates to, e.g. by 5 April 2022 for the tax year 2017/18.
The claim must be made in writing, and contain information specified by HMRC in the Self-Assessment Claims Manual. The claim:
- must clearly state that the person is making a claim for overpayment relief;
- identify the tax year or 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, documentary proof of the tax deducted or suffered in some other way as you may be required to provide this at a later date;
- 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;
- state the amount that the person believes they have overpaid.