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overpayment of tax rebate

overpayment of tax rebate

Hello, please can someone assist me? I am a sole trader, registered for VAT in my own name. In June this year, I received a letter from HM Revenue & Customs saying I have not paid the VAT for the first and second quarters of 2009.

I had paid both payments (total £2847.04) - I had to get copies of the cheques from my bank which I sent them, with copies of the bank statement showing the money going out.

They have now told me that when they received my cheques they mistakenly paid the amounts into my Self-assessment account.

I subsequently received a tax rebate which I had no reason to believe I was not entitled to.

They have not commented on why it took them over a year to notice the money had not been credited to my VAT account.

They are now wanting instant repayment of what they are calling non-payment of VAT.

I have done nothing wrong here. I paid the VAT on time, the VAT number was clear on the reverse of the cheque, they must have processed the VAT return form to know how much the payment was! I had no correspondence to tell me they had not received my payment of VAT.

I received a tax rebate which I have spent.

I do not agree this is non-payment of VAT. To me, it is an over-payment of tax rebate, and it seems to come under something called "Official Error".

Could anyone please tell lme wher I stand here? I do not have £2800. I have done absolutely nothing wrong. There is a catalogue of errors on the part of HMRC. Apparently, they should not even have sent me the tax rebate without prior investigation as to why it was due - they didn't even do that!

I would be grateful if anyone can assist. Thank you.


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By vince8
27th Oct 2010 16:35

Sorry but I'm having trouble being sympathetic

You sound like you know what your doing and presumably file your own VAT and SA returns? So, why would you believe the tax refund was correct and yours to spend. If you were represented properly your adviser would have told you to return the refund.

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27th Oct 2010 16:54

I don't want sympathy, just advice please

I don't do it myself - I have an accountant - I just write the cheques - it's not sympathy I want, just advice please whether they can ask me to pay this money within 2 weeks. Thank you.

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By Monsoon
27th Oct 2010 17:23

What has your accountant said?

What another example of sheer HMRC incompetence.

If it was me, I would absolutely argue that you shouldn't have to pay it back within 2 weeks, write a very strongly worded letter explaining the situation and arrange a (very generous) payment plan. I'd also have a look to see if there's an extra statutory concession that would wipe this out (such as this one which is similar

Also make the point you HAVE paid your VAT. They have refunded you income tax in error. The VAT is firmly paid and it's income tax they are chasing.

Their immediate demand is because they (like everyone) are having cashflow issuse and their 2 weeks is a wish, not a realistic proposition. Haggle, and haggle hard.

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27th Oct 2010 17:43

Thank you Monsoon - that makes me feel better - I don't have this money to repay them. I spent it over a year ago in good faith! I'll write back to them. Thank you again.

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27th Oct 2010 20:46

Having your cake and eating it ....

If you have an accountant and you "just write the cheques", surely you (or your accountant) would have asked yourself why HMRC suddenly decided to award you a self-assessment rebate out of the blue.

HMRC aren't perfect by any means and frequently make errors and are a constant cause of frustration, but that doesn't absolve you of common sense. If I received an unexpectedly large amount of money that I wasn't expecting, I wouldn't bank it and spend it and then look to blame another party for my own actions.

The situation is clearly one where you recognise a VAT liability hasn't been settled - I think the most you can hope for (and realistically achieve) is a payment plan to repay the amount owed.

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28th Oct 2010 19:37

Reference Numbers

 The solution here is see why the payments were allocated to your SA. You have obtained copies of the cheques, so look on the reverse and see what reference number you. or your accountant, wrote on them.

If the VAT number is on the cheques, this is HMRC's problem. Tell them to allocate the payments correctly, and this will sort out the SA position.  You will need to repay the over-repayment, but will have good grounds for getting an instalment arrangement.

If the SA reference is on the cheques, then it is your (or your accountant's) fault.  You should still be able to negotiate a time to pay arrangement, but you are starting from a much weaker position.

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28th Oct 2010 23:10

it was the VAT number

Thank you for your reply. The VAT number is written clearly on the reverse of both cheques. I also forwarded the VAT return at the same time, which they must have processed because they knew how much the amounts were for. I am partway through a letter to HMRC - thanks to everyone for your assistance.

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