PAYE91040 - Reconcile individual: overpayments: nominees

Repayment claim forms, such as P50 and R38, enable an individual to nominate someone else to receive a repayment on their behalf.

Note: As from 30 October 2017 a payable order cannot be sent direct to a UK bank/building society because of changes within the Banking Industry. HMRC cannot make repayments to foreign bank accounts. A claimant may also authorise you to repay a nominee in a letter. Some go further than this and legally assign, by deed or letter, their repayment to a nominee. See action guide tax80006.

A nominee will frequently be the individual’s agent. Many agents insist that clients nominate them to receive the repayments so that they can be sure of getting their fees. However, because a claimant may withdraw a nomination before a repayment is made, some agents now get their clients to legally assign repayments to them to be certain of receiving those repayments. Sometimes the repayment is assigned not to an agent, but a loan company.

Note: For cases where you receive a repayment claim and the repayment is to be made to a nominee, where you are required to issue an enquiry for further information to allow you to process the claim at the time of issuing the enquiry, you should

• Set the No Repayment indicator (PAYE91075)
• If the year has not already been reconciled, set the Inhibit Automatic Reconciliation indicator (PAYE93015) for the years concerned

This will prevent the system from automatically reconciling the year (in which case it would incorrectly issue any repayment arising directly to the individual) during the period in which your enquiries are ongoing. Having set the indicators, at the point at which you conclude your enquiries you will be required to unset the No Repayment indicator before you process the claim to repay the nominee.

Where a repayment is being made to a capacitor and the capacitor is a company, it will be necessary to select nominee and follow the nominee guidance to ensure the correct details are included within the payable order, PAYE103055 refers.

Differences between a nomination and an assignment
Agents customised claim forms
What is a valid assignment?
2008 Finance Act changes
2023 Finance Act changes
Bankruptcy cases
Assignment revoked
Nomination withdrawn
Nominees with addresses outside the United Kingdom
Nominee with an Isle of Man address

Differences between a nomination and an assignment

A customer may nominate someone else to receive a repayment on his or her behalf by completing the appropriate authorisation on a return, claim form or repayment request form, in a letter, or telephone call (Note the telephone request can only be accepted if the repayment is by cheque only).  This is a ‘bare’ nomination. The individual remains the person legally entitled to the repayment and we comply with the nomination at our discretion, (This content has been withheld because of exemptions in the Freedom of Information Act 2000).

Also, as the person legally entitled to the repayment, the individual may withdraw the nomination if he or she chooses.

If, however, the claimant legally assigns a repayment to a third party by a deed or letter of assignment, the assignee becomes the person legally entitled to the repayment. The assignment is legally binding. We are obliged to make the repayment to the person to whom it has been assigned.

Agents customised claim forms

Recent practice has seen agents submitting repayment claims and assignments of repayment on their own customised forms, rather than the standard forms available from HMRC. These customised forms incorporate things such as nominations, letters of assignments, agent authorities and agreements to terms and conditions (including fee structures).

The contract and terms (including fees) between the customer and agent should ideally be a separate agreement from the repayment claim. This is because there should be no confusion for the customer that HMRC in any way endorses, approves or is responsible for the terms of agreement.

HMRC accepts that for commercial or practical reasons agents may wish to continue the practice of combining the two. In those circumstances, HMRC requires that:

• the contractual agreement and terms between the agent and their customer forms its own separate section within the combined document
• the customer must acknowledge those terms separately from the repayment claim/assignment by separate signature; and that
• there are specific words before the signature of that separate section to the effect that:

"This contract is between [agent] and you only. HMRC has not seen the terms of the contract and the inclusion of these terms as part of your repayment claim should not be taken to imply that HMRC endorses or otherwise approves of those terms."

What is a valid assignment?

An assignment may be made by letter and in order to be valid must meet the following criteria

• It must be absolute, that is, the wording should be clear, unambiguous and unconditional. To do this it must state the customer unconditionally gives up the right to a repayment in favour of someone else
• It must be in writing and signed by the individual entitled to the repayment (‘wet’, scanned, photocopied and faxed signatures are all acceptable)
• The actual assignment must be submitted to HMRC (telephone call reporting its existence or photocopy will not suffice)
• The assignment must specify the years involved. That is, years cannot include future tax years (as taxes must have actually been overpaid to be assigned). Valid assignments will therefore cover previous tax years, the current year will only be assignable for an in-year repayment claim
• The wording of the assignment must not include any statements around agreement to terms and conditions or fees
• Terms and conditions/fees can appear in the combined document but must appear separate to the assignment, in its own section of the form, with its own signature. The wording of the assignment must be provided before the customers signature, it cannot appear in small print or after the customer’s signature

No particular form of words is required for the deed or the letter, but the assignment must specifically identify the repayment that is being assigned. For example, ‘Income tax overpaid by me for the two years ended 5 April 2009’ is acceptable, but ‘any repayment of tax due to me’ is not.

The individual entitled to the repayment must physically sign the letter or deed, an electronic, digital or wet signature can be accepted. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If the assignment is to be made by deed in addition to being signed it must also be witnessed.

If an individual has assigned the repayment to a third party, the assignee will usually be nominated on the claim form to receive the repayment. Repayment must be made to the assignee because he or she is legally entitled to it, even if the nomination section of the claim form has not been completed. The person legally entitled to the repayment, the assignee, may also nominate someone else to receive the repayment on his or her behalf.

It is important that a deed (or letter) of assignment is identified in the receiving office as soon as possible to ensure that the repayment assigned under the deed (or letter) is not issued to the claimant in error.

Where the deed or letter of assignment is year specific, care will need to be taken when reconciliation is triggered. If a multi year reconciliation is produced, the multi year reconciliation should not be approved if any of the years are not included within the assignment.

2008 Finance Act changes

Section 133 of the Act closed off the possibility of separating a person’s right to claim a repayment from their liability to their HMRC debts by assigning that right to another person. All assignments received on or after 21 July 2008 are secondary to set-off.

In effect S133 allows HMRC to make a set-off of any overpayments to a customer’s outstanding debts before making payment of any remaining assigned repayment to the assignee. This ensures that an assignee cannot receive any more of a repayment than the original customer would have received had the repayment not been assigned.

Also any outstanding debts owed by the assignee should be taken into account and considered for set-off before any assigned repayment is made to the assignee.

2023 Finance Act changes

Section 333 of the finance (No 2) Act 2023 renders assignments void if HMRC receives notice of them after 15 March 2023.

Bankruptcy cases

A customer cannot assign a repayment which under the Insolvency Act 1986 legally belongs to the trustee in bankruptcy.

If you receive a deed or letter of assignment which seeks to assign a repayment to a nominee, check whether the claim is valid using action guide tax80023. For any valid claim see PAYE93036 for further information.

Assignment revoked

The assignment is enduring and can only be revoked (provided the repayment has not already been made) if both the customer who made the assignment and the person (or company) to whom the repayment was assigned both agree. The agreement to revoke the assignment must be in writing and forwarded to HMRC.

Nomination withdrawn

A customer has the right to withdraw his or her authority for repayment to be made to a nominee (provided the repayment has not already been made). The notice of revocation can be given over the phone.

Nominees with addresses outside the United Kingdom

Where the claimant has nominated for someone else to receive a repayment and the nominee has an address outside the UK (see below if nominee has an Isle of Man address) complete the nominee address fields following PAYE103025, sub heading ‘Foreign address’.

Nominee with an Isle of Man address

Where the repayment is being issued to a nominee with an address in the Isle of Man

• Complete the address fields and select Isle of Man from the country drop down menu
• Enter the nominees postcode in the Postcode field, this is mandatory for Isle of Man cases only