PAYE47060 - Employer returns: employer return - overpayments: overpayment notification

Overpayments will be notified to you in a number of ways

  • Repayment claim made by the employer or contractor direct
  • Monthly list ‘End of year overpayments not cleared’ - from BROCS to EBS
  • Form AZ6 - from Banking Operations

You must treat any overpayment work as priority.

The majority of overpayment notifications will arise from BROCS when the reported P228 charge from the capture of the annual return or the Class 1A NIC charge in respect of the capture of the form P11D(b) does not agree with payments made by the employer.

BROCS sends the information to EBS and then to you on form AZ6 as post from Banking Operations.

BROCS and Banking Operations do not advise the employer or contractor that an overpayment has been referred to you. It is therefore important you reconcile all overpayment notifications quickly and

  • Instruct BROCS how to dispose of the overpayment by either
  • Using Function OVERPAYMENT DISPOSAL to create an overpayment item. This will be authorised by your authorising officer (Word 27KB) using Function AUTHORISE OVERPAYMENT DISPOSAL
Or
  • Completing a form P565 Request Stencil (Word 43KB) for referral to your authorising officer. Providing your authorising officer is satisfied that the overpayment is correct and has been fully substantiated they will complete a form P565 to authorise the overpayment
Or
  • Report the net overpayment to the Debt Management Office responsible for the employer record on a form P28 to pursue

Further information is available in this section within subjects

  • ‘Disposing of an overpayment’ PAYE47025 
  • ‘Form P565’ PAYE47045 
  • ‘Completion of form P565 request stencil’ PAYE47020 
  • ‘Using function overpayment disposal’ PAYE47125 

What to do when any overpayment notification is received

Potential overpayments relating to a year from 2005 onwards must only be investigated where the captured return displays a Return Status Indicators (RSI) of either RSI 2 or RSI 3 in the View EOY Returns History screen.

Note: Even if a P35 status is not shown as RSI2 or RSI3, we should still investigate any CIS discrepancies while waiting for the RSI status to be updated.

Upon receipt of notification that an overpayment has arisen you must satisfy yourself that the overpayment is correct. You will need to consider whether

  • Any PAYE Advance (PAD) repayments have been made to the employer from the current year (CY) which have not been cleared. For more information see ‘PAYE advance (PAD) payments’ at PAYE47100 
  • The last return was captured correctly
  • The correct indicators were set on the employer record
  • All necessary returns have been received
  • The employer has completed their return correctly
  • The employer has paid their Class 1A payment early
  • The employer is a limited company that is claiming for CIS deductions suffered

In order to reconcile any overpayment you will need to consider the following courses of action

  • Check the return and any papers relating to the year in question
  • Ensure that all checks in 'Post capture - 2007-08 onwards (Action Guide)' at PAYE53012 have been made
  • Use Function VIEW EOY RETURNS HISTORY to review P228 information for the year of the claim or overpayment notification
  • Use Function VIEW BROCS to check payments made against that employer record for the year
  • Use Function VIEW BROCS to check whether any PAYE Advance (PAD) repayments have already been made to the employer from the current year (CY) which have not been cleared
  • Use ERIC tracking tool to check whether any returns are held but have not been processed
And
Issue form P35D to the employer or contractor to confirm that the return was correct and complete if you are otherwise unable to reconcile the overpayment

When you are satisfied that the overpayment is correct you must pass your papers to the authorising officer with

  • Your decision on the appropriate method of disposal and a completed form P565 Request Stencil (Word 43KB) where appropriate
  • An explanation of how the overpayment has arisen
  • All other evidence to support 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
  • A signed letter (plus one copy) to be issued to the employer / contractor advising them of how the overpayment has been disposed of
Note: A letter is not required when £500 or less is reallocated to the current year (CY) using Function OVERPAYMENT DISPOSAL because BROCS will automatically issue a letter.
And
  • Any supporting information from the employer record pad

Treatment Of Overpayments Table (Word 32KB) has been produced to help you to recognise what action is taken when various amounts of overpayment arise.

‘Overpayment notification (Action Guide)’ at PAYE47061 gives full details of the process that must be followed in all cases on receipt of an overpayment notification.