Understanding Overpayment Relief
In 2024, HMRC launched a campaign to help taxpayers with their side hustles, but for those with complex tax returns, another issue remains on the horizon—overpayment relief. This allows taxpayers to amend their tax returns outside the usual time limit when they’ve made an error, but only under specific conditions. Let’s break down the key aspects of overpayment relief, some recent case law, and the finer details you need to understand to avoid missing out.
What is Overpayment Relief?
Overpayment relief, as defined under TMA 1970, Sch 1AB, came into effect in April 2010, replacing the older error or mistake relief provisions. Here’s how it works:
- Normal timeframe for making amendments: Generally, you have 12 months from the statutory filing date (31 January after the tax year) to amend your self-assessment and reduce your liability. For example, if you filed your 2023/24 tax return by November 2024, you have until 31 January 2026 to make any adjustments.
- Overpayment relief timeframe: Unlike the six-year window for error or mistake relief, overpayment relief has a four-year time limit from the tax year of assessment. This shorter period is important to note, as it limits the window for correcting tax liabilities after the fact.
When Can You Claim Overpayment Relief?
The legislation lists several scenarios where overpayment relief may be available, but it’s not always easy to make a claim. Here are the main conditions:
- Mistakes in the tax claim: If you made a mistake when claiming things like loss relief or capital allowances, overpayment relief could be a way to correct it.
- Failure to act in time: If there’s an available route to rectify a claim (such as amending your tax return) but you missed the deadline, you can’t claim overpayment relief just because you failed to act in time.
- Prior tribunal decision: If your case has already been dealt with by a tribunal, or you were aware of the issue but didn’t take it to tribunal, you won’t be eligible for overpayment relief.
- Compliance with general practice: If your return was filed according to the practice prevailing at the time, you generally can’t amend it under overpayment relief.
The key takeaway? Overpayment relief isn’t designed for everyone, and it’s a mechanism that can’t be used to simply bypass deadlines or avoid filing a tax return on time.
Case Studies: BTR Core Fund vs. Candy
Two recent tribunal cases highlight how overpayment relief is applied in practice:
1. BTR Core Fund v HMRC [2024]
In this case, the taxpayer sought to claim overpayment relief after HMRC changed its interpretation of Stamp Duty Land Tax (SDLT) in November 2020. However, by this time, the original SDLT return had already been filed, and the taxpayer’s claim was rejected.
- The taxpayer argued that the claim was simply for multiple dwellings relief (MDR), but it was rejected because the calculation error was considered part of the initial claim, which couldn’t be amended using overpayment relief.
- Outcome: The tribunal sided with HMRC, ruling that overpayment relief doesn’t apply when it involves correcting errors in calculations.
2. Candy v HMRC [2025]
In contrast, this case involved a taxpayer who overpaid SDLT when acquiring property in 2012 but was denied a refund due to missing the normal 12-month filing period. Instead, the taxpayer sought overpayment relief, and the tribunal ruled in his favour.
- Outcome: The tribunal found that overpayment relief was appropriate here, as the taxpayer never had a chance to correct the error through a “normal” claim due to the time limits.
- Key takeaway: Overpayment relief can still be granted even if the taxpayer misses the usual claim process if the original claim was excessive and not subject to a conventional refund.
When is a Claim NOT a Claim?
An important consideration is what doesn’t count as a mistake in a claim. In cases where certain reliefs or allowances are granted automatically, such as personal allowances or tax-free savings, adjusting these figures later on shouldn’t qualify as a “mistake in a claim” for overpayment relief.
Practical Tips for Overpayment Relief:
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Know Your Time Limits: You have four years to claim overpayment relief from the tax year of assessment. Don’t miss that window!
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Don’t Rely on Overpayment Relief for Lax Filing: The legislation is clear that overpayment relief should not be used as a workaround for missed deadlines or errors that could have been corrected earlier. Always ensure you’ve filed your returns in a timely manner and with proper care.
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Seek Professional Help: Overpayment relief can be a complex area of tax law. If you think you’ve overpaid or made an error on your return, it’s a good idea to consult a professional to get the relief you’re entitled to.
In short, overpayment relief offers an important opportunity for taxpayers to correct mistakes, but it comes with strict time limits and conditions. Case law has shown that overpayment relief isn’t always available if you’ve missed your filing deadlines, but it can provide much-needed relief when circumstances are complex or when the initial claim was made in good faith.
If you’re unsure whether you qualify for overpayment relief or have a specific situation involving an old tax return, get in touch with Merranti Accounting for expert advice and guidance.
