PAYE91037 - Reconcile individual: overpayments: repayments by BACS process

Introduction
BACS Exceptions
BACS Repayment overview
Successful BACS repayment
Customer contact
No contact made - BACS repayment not claimed
Extension to 21 day period – delayed Payable Order process
BACS rejections

Introduction

From 1 August 2016 most individual PAYE customers who are overpaid at the end of the tax year will be invited to claim their repayment by BACS. They will continue to receive a Tax Calculation (P800) but, instead of a payable order, they will register with their Personal Tax Account (PTA) and claim online through the ‘Your Tax Account’ service for the amount shown on their P800.

When a BACS repayment is claimed, information is passed digitally between the PAYE service and the individuals online Tax Account.  The PAYE system updates the repayment method to ‘BACS’ as soon as a successful BACS claim is submitted, preventing any duplicate claims by payable order or BACS. The BACS repayment will be paid in to the customers individual account within 5 working days.

From the 31 May 2024 a new service will be introduced for CY-1 BACS eligible customers that will require them to take an action to receive either a BACS repayment or Payable Order.

BACS Exceptions

Whilst most individual PAYE customers will be able to claim their repayments by BACS there are some exceptions.

PAYE customers who fall into the following exceptions list will continue to receive a payable order (note: now referred to on P800 as a `cheque`) using the current payable order process. (PAYE91005)

  • Records where the repayment is issued to a capacitor, agent or nominee
  • Overpayments from earlier years (CY-2 or earlier)
  • Multiple year reconciliations resulting in an overpayment
  • Individuals overpaid with a Temporary Reference Number (TRN)
  • Secure PAYE Accounts
  • An Individual’s claim for repayment by cheque that is subsequently cancelled cannot be reclaimed through their Personal Tax Account.

 BACS Repayment overview

When the tax calculation P800 has been issued to a customer who is eligible to claim via BACS:

  • They will have to take an action using one of the online services.
  • Once the customer has registered with PTA, if the PAYE record is reconciled as overpaid they will be directed to claim their repayment directly into their Bank/Building Society account.  Once the claim is successfully submitted by the customer the repayment method on the PAYE service will update from ‘In Claim’ to ‘BACS’.
  • The customer contacts HMRC to request a repayment by payable order (for example: the customer does not want to continue their claim online). For these cases a user can issue a payable order using an Action Link ‘Issue Payable Order’. At the point this is done the repayment method will change to ‘Payable Order’
  • After a designated number of days, the PAYE system will issue a payable order automatically and the repayment method will update

From the 31 May 2024 a new service will be introduced for CY-1 BACS eligible customers that will stop payable orders being issued automatically after 21 days if the customer doesn’t claim. For P800 calculations issued after 31 May 2024 the new service will require the customer to take an action to receive either a BACS repayment or Payable Order. The customer will receive a P800 containing a URN that is required to use the online service.

The ability for the customer to claim via BACS will be removed once the 'Repayment Method' on the 'Repayment Details' changes to 'Payable Order' or 'BACS'.

Note: When a copy of an overpayment calculation is issued using the Issue Copy of Tax Calculation action link, the Tax Calculation will change to Pending and prevent the individual from claiming a BACS repayment until the copy calculation has been issued, see PAYE93037.

Repayment by BACS to a Designated Account

From 15 January 2017 customers will be able to make a repayment by BACS to a `Designated` account. This is not the same as a payment to a nominee i.e. agent, capacitor or nominee held on the NPS record.
The customer will use their Personal Tax Account and input details of the designated account as follows:    

  • Name of account holder    
  • Bank sort code    
  • Account number    
  • Select the 'Designated Account' Indicator box.

The designated Payee details will be displayed on the Repayment Recipient screen within NPS.

Successful BACS repayment

Customer action

At the point the claim is submitted, the PAYE system will update as follows:

  • The Repayment Method on the Repayment Details screen is updated straight away from ‘In Claim’ to ‘BACS’. The payment method will remain as ‘BACS’ throughout the remainder of the BACS repayment process
  • The PAYE service will create a unique BACS number and update the repayment details
  • The BACS number will be displayed in the following format:
    • TAA1521300064217
    • T=PAYE
    • AANNNNN=NINO
    • 00064217=Unique BACS reference

Note: The BACS reference should not be used to indicate the BACS payment has been made as it is populated before confirmation has been received that the repayment has been successful.

  • The PAYE system will add a Contact History Note of the customer’s online action ‘BACS REPAYMENT CLAIM MADE’ on to the PAYE Service record
  • The repayment will be sent to PAYE Accounting to be issued

 Issuing a BACS repayment

BACS requests will be issued via PAYE accounting and from accounting to the Bank/Building Society. During the process of issuing a BACS repayment notification to the bank the PAYE system updates as follows:

When the BACS request is issued to accounting

  • The repayment status is updated from ‘Outstanding’ and ‘Pending’ to ‘Outstanding’ and ‘Issued’
  • The repayment ‘BACS’ is recorded on the Contact History

At the point at which the repayment is sent from accounting to the bank

  • The repayment status is then updated from ‘Outstanding’ and ‘Issued’ to ‘Settled’ and ‘Paid’

On rare occasions the Finance team will be notified that the BACS payment has failed after the repayment has been updated on the PAYE system as ‘Settled’ and ‘Paid’. For more information see BACS rejections.

Customer contact

The PAYE system has been developed so that if a customer eligible for BACS contacts PAYE for the following reasons

  • Does not want to claim BACS online
  • The customer has received an error message during their claim to contact PAYE

Where the customer does not want to claim the repayment online, an operator can issue a Payable Order using the ‘Issue Payable Order’ Action Link.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

For Cases where the customer has tried to claim their repayment online and they have received a message asking them to contact HMRC, there has been a change on their account since the P800 inviting the customer to claim by BACS was issued. In this case you should follow the appropriate guidance to process their repayment further.

No contact made - BACS repayment not claimed

If the overpayment is not claimed by a maximum number of days (currently 21 days) the PAYE system will automatically begin the following process:

  • The PAYE system will check if any repayment inhibitors have been added to the record following issue of the Tax Calculation (P800)
  • Where the following inhibitors are found the Payable Order will not be issued until the case has been worked clerically
  • RLS address
  • Deceased indicator set
  • No Repayment indicator set
  • PAYE customer was under Self Assessment for the year of repayment
  • If there are no inhibitions on the individuals account the PAYE system will issue a payable order. Exceptionally this period may extend beyond the 21 day period. Please see ‘Extension to 21 day period – delayed Payable Order process’ below
  • The repayment method will change to payable order and continue in line with Payable Order processing (PAYE91005).
  • A Contact History note “Deferred R37” is entered on the PAYE record

From 31 May 2024 payable orders will no longer be automatically issued to CY-1 Bacs eligible customers if they do not claim within 21 days. For customers who have received a CY-1 BACS eligible P800 issued after 31 May 2024 the will be required to take an action to claim their repayment either by BACS or by payable order.

Cases ‘Suspended and ‘Stopped’ and the repayment method is ‘BACS’

Where the customer has successfully completed a claim online but the case fails a subsequent security check. Whilst the case is under review the PAYE record will show the following:

  • The repayment status will update to ‘Suspended’ and ‘Stopped’
  • A contact history note ‘Repayment Being Reviewed’ is automatically entered on the PAYE record

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Cases with the above status are dealt with by a specialist unit. Separate guidance has been issued to cover these cases.

Extension to 21 day period – delayed Payable Order process

There may be limited circumstances where a repayment with a status of ‘In Claim’ will not automatically trigger a Payable Order after 21 days from the date of the reconciliation

This occurs when a further reconciliation trigger for the year takes place within the 21 day period, the trigger will restart the automatic delayed Payable Order Process. Note that a new P800 may not always be issued or required in these cases and in some instances a duplicate P800 of the original (not changing the previous reconciliation result) may be issued. For CY-1 only after 31 May 2024 if there is a reconciliation that takes place after the original P800 has been issued a second P800 will be issued superseding the original one.

Example

  • Reconciliation takes place on day 1 – repayment is available to claim by BACS for a maximum of 21 days
  • On day 10 a further reconciliation trigger is operated
  • The repayment will be available to claim from the date of the trigger for a further 21 days (31 days after the original reconciliation took place). At this point if the repayment has not claimed or a payable order has not manually issued the system will automatically issue a Payable Order
  • As per the CY-1 note above any further reconciliation that is carried out would result in a new P800 being issued. The customer would then need to take an action to claim their repayment. There would be no automatic issue of a Payable Order

BACS rejections

Where the customer has made a successful claim online there are limited circumstances where the repayment by BACS will fail.

This can occur at the following stages of the BACS repayment process:

  • When the repayment has been issued to Accounting i.e. when the repayment status is ‘Outstanding’ and ‘Issued’.  In this case the BACS repayment is automatically cancelled and a Payable Order is issued by the PAYE system
  • When Finance are notified that the Bank/Building Society could not accept the BACS repayment.  Finance would normally receive this information after the repayment status has updated to ‘Settled’ and ‘Paid’.  In this case the repayment is cancelled by Finance and a Payable Order will be issued by the appropriate team. The BACS repayment is automatically cancelled and a Payable Order is issued by the PAYE system
  • From 31 May 2024 there is a new process for CY-1 BACS eligible customers. If the BACS repayment fails, the customer will have to take an alternative action to claim their repayment

Where the BACS fails the PAYE record will show the following information:

  • A contact History note ‘BACS Repayment Cancelled’ is added to the PAYE record
  • The BACS repayment is cancelled with the cancellation reason ‘BACS Failure’
  • The repayment status will be updated to ‘Outstanding’ & ‘Cancelled’
  • The cancelled repayment will be paid by Payable Order. This is displayed as a new Financial Event on the PAYE account and the repayment will continue via Payable Order process PAYE91005