Government may keep overpaid tax

HMRC buildingPA

Any kind of interaction with the taxman is not something to be relished. Unless you're a sucker for frustration, expense and threats, HMRC is not a body you want to have anything to do with. Very occasionally, however, there's a time when talking to the taxman can yield great joy: when you discover he owes you money.

Unfortunately there's every chance even this could end in frustration and expense too, because there is a change to the rules about reclaiming overpaid tax, which could leave the government hanging onto far more of it.

New rules

In the past you had six years in which to reclaim any overpaid tax. This could be an overpayment they have alerted you to, or a mistake you discovered after you have submitted a payment. It was designed to give plenty of time for the error to come to light, and ensure there was time to put things right.

From April last year the deadline was changed for those who complete a self-assessment form. They now have four years from submitting the form to making a claim. This isn't too draconian. After-all, if you are submitting a return, then in theory you should be sitting down to check everything you owe and double-checking the figures every year.

However, from this April, the deadline will be cut to four years for those who don't submit tax returns. This means that those who have their tax deducted by their employer or pension firm through the PAYE system will have the time cut for making a claim - and this is far more likely to cause problems.


If you rely on someone else to do the maths for you, then there's a far higher chance that any mistakes will be missed. There's every chance you could be merrily paying over a small fortune more than you should, after a large employer or pension firm made a mistake. You trust them to do things correctly so don't check the figures, and they have many hundreds or thousands of people to deal with, so one small individual could easily be overlooked.

And if you miss it for more than four years, then you lose the chance to reclaim that tax forever - unless you can prove that the error is due to HMRC or another government department.


On the plus side, the taxman's deadline for spotting underpayment has also been cut to four years - unless you can have been shown to have been careless or trying to diddle the system.

The government claims that cutting these deadlines means more certainty for taxpayers that they're not going to have the rug pulled out from under them.

Mind you, it's hard to see just how we will benefit from the certainty that we'll never receive our overpaid tax back...
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