Lee Sharpe looks at overpayment relief, which should be welcome in theory but, in practice, can be quite a slippery claim to pin down.
Readers will be aware that there is generally a ‘cooling-off period’ of about a year, during which a taxpayer can amend most aspects of their tax return. For an individual’s self-assessment, the time limit is 12 months following the statutory filing date of the return, usually 31 January following the tax year of the return (TMA 1970 s 9ZA).
So, if I discover that some expenses were omitted from my 2023/24 tax return that was filed in November 2024, I have until (31 January 2025 + 12 months) 31 January 2026 to amend my return, include those additional expenses and reduce my self-assessment liability.
Enter ‘overpayment relief’…
However, there is provision in the tax code for a taxpayer to amend their tax return when they find that they have made a mistake that goes well beyond the customary one-year window.
We used to call this ‘error or mistake relief’, but this was replaced by ‘overpayment relief’ from April 2010 (TMA 1970, Sch 1AB). One of the key differences between the old error or mistake relief and the new overpayment relief is the timeframe:
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Error or mistake relief could be claimed within six years or, under self-assessment, within five years of 31 January immediately following the tax year of assessment of the return.
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Overpayment relief must be claimed within four years of the tax year of assessment of the return.
Restrictions on making an overpayment claim
Perhaps understandably, there are numerous limitations in the legislation to the kind of scenarios where a taxpayer should be permitted to make a claim; the legislation lists various ‘cases’ including, amongst others, (and put quite simply):
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various mistakes in the making of a tax claim, such as loss relief or capital allowances, including failure to make one at all;
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where relief is available by other means (such as still being in time to ‘repair’ one’s tax return);
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where relief was available by other means and the taxpayer knew (or should have known) but failed to act in time to take advantage of that other route;
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where the grounds for claim have already been covered at tribunal (or the taxpayer knew earlier but failed to take their argument to tribunal in time); or
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where the return was made in accordance with ‘practice generally prevailing’ at the time.
One might conclude it would be easier to list the fewer scenarios where an overpayment relief claim can be made rather than where it cannot.
Mistakes in a claim
The restrictions are widely drawn, but the main themes seem to be that the relief should not be easy to use to circumvent a particular claim process or time limit, nor to support laxity in one’s affairs.
On the other hand, there is little point to overpayment relief if it cannot be used, and the idea that HMRC might simply argue: “You are too late because you should have known”, is potentially concerning.
But what does it mean that the taxpayer cannot secure relief for a ‘mistake in a claim’? This has been considered in two recent cases, with quite different results:
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BTR Core Fund v HMRC [2024] UKFTT 00885 (TC), (taxpayer lost); and
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Candy v HMRC [2025] UKFTT 416 (TC) (taxpayer won).
BTR core fund
The taxpayer had acquired a substantial block of residential properties in April 2019, alongside a modest commercial part. In November 2020, HMRC announced a change in its interpretation of how stamp duty land tax (SDLT) multiple dwellings relief worked; too late by that stage just to amend its SDLT return, the taxpayer put in an overpayment relief claim to reduce its SDLT, in line with HMRC’s new guidance, in January 2021 (NB the overpayment relief mechanism for SDLT is found at FA 2003 Sch 10, para 34A, rather than in TMA 1970, but it broadly works in the same way for our purposes).
HMRC initially granted overpayment relief but then changed its mind, arguing that the taxpayer had made a mistake in their multiple dwellings relief claim, so overpayment relief couldn’t change it.
The taxpayer argued its ‘claim’ was simply to ask for multiple dwellings relief in the first place, which it had done and was still asking for. The change was in how the claim was then calculated, and that calculation was part of the wider SDLT return, not the claim itself. The taxpayer relied on R (oao Derry) v HMRC [2019] UKSC 19 and income tax law to argue that the claim here was simply a mechanism – broadly, a tick in a box – while the resulting liability, as ultimately calculated, was a separate matter.
In refusing the taxpayer’s claim, the tribunal decided that the faulty calculation must have formed part of the claim, essentially because a specific amount was being claimed. While the senior member of the tribunal held sway, the junior member disagreed and would have granted the taxpayer’s claim to overpayment relief. Perhaps that junior member would have preferred the next case.
The Candy case
More recently, in Candy v HMRC [2025] UKFTT 416 (TC), that taxpayer won an SDLT overpayment claim that, at first glance, looks quite similar to the BTR Core Fund claim. The taxpayer initially acquired a series of leases in a large residential property in 2012, and paid SDLT on the aggregate consideration immediately on starting development even though, strictly, the contracts had not yet ‘completed’ (because of the rules that state SDLT is payable when a chargeable contract is ‘substantially performed’ – such as when work starts on a property).
However, the taxpayer transferred his property interests to his brother in 2014, basically still before the contracts had been fulfilled, so that the taxpayer had overpaid his original SDLT. He tried to reclaim the excess on his return. Unfortunately, the particular rules for that regime stated such claims must be made within 12 months of the original return, so he was almost a year too late. He therefore made a separate claim for overpayment relief.
This time, the tribunal held that Mr Candy was entitled to overpayment relief. At the time of writing, HMRC may yet appeal (and I suspect they will). Even so, it is potentially arguable that both decisions should stand. In particular, note that in Candy, the taxpayer was well past a more conventional claim by the time circumstances changed and his original payment proved excessive – he never had a chance at a ‘normal’ refund: only overpayment relief.
When is a claim NOT a claim?
Given the potential issues around reworking old claims, it is worth considering what are not actually claims. Some reliefs, etc., are effectively given automatically, so changing these amounts later on should not amount to rectifying a ‘mistake in a claim’, and then being denied overpayment relief.
For example:
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Ordinary expenses in a set of business accounts are not ‘claimed’. The starting point is that the profits (i.e., net of such expenses) should be taxed (ITTOIA 2005, ss 7, 271E; CTA 2009, ss 2, 210, for trades or property businesses aside from the cash basis).
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Carry forward of property business losses (ITA 2007, s 118) are given automatically but not trading losses; the latter must be claimed (ITA 2007, s 83).
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Carry forward of capital losses – while a loss must be ‘notified’ or included in a return within four years (‘as if it were a claim’ for the purposes of time limits), the relief itself is automatic (TCGA 1992, s 16(2A)).
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CGT incorporation relief – it is granted automatically and must be actively disclaimed in order not to apply (TCGA 1992, ss 162, 162A).
Conclusion
It is arguable that, if the approach in BTR Core Fund is correct, then overpayment relief has been hobbled, while HMRC considers its broadly parallel powers of ‘discovery’ as near-unstoppable.
Given the further restriction on overpayment relief that it cannot be used to overturn ‘practice generally prevailing’ at the time of the return (see (e) above) it is quite surprising that HMRC decided to remove that point from its original defence in the BTR Core Fund case. While we wait for the courts to provide much-needed clarity, it seems careful consideration of this oft-overlooked relief may be the best approach.
