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Carrying forward an overpayment to the next return

How to carry an overpayment from a previous tax year into the next tax return to mitigate tax

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I have a client who is not in SA (he has a UTR for legacy reasons) but wishes to claim legitimate mileage expenses of £5000 for the tax year 2019/20.

He has shown me a copy of two P800 calculations (2018/19, 2019/20, both dated 11 Aug 2020) that he was sent. His 2018/19 calculation had an overpayment of £1000, but was carried forward to the 2019/20 tax year. His 2019/20 calculation had an underpayment of £500, but due to the overpayment from the carried forward 2018/19 year, he was still sent a cheque of £500 which he banked.

The problem is that when I input his 2019/20 earnings into my software, I obviously have an underpayment of £500, and therefore even when I add in the mileage, the refund is £500 less than what it should be. There is no way for me to tell the 2019/20 tax return that there is an overpayment from a previous tax year that was never fully sent but was used to offset the tax owed in 2019/20.

(There is a field for the opposite scenario, where there is an underpayment carried forward, but not for an overpayment.)

As you cant claim expenses over £2500 via PAYE, what can my client do to claim this tax back without suffering extra tax as a result of the SA system not understanding that there was already an overpayment offset against it from 2018/19?

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By Paul D Utherone
06th Apr 2021 23:53

Isn't it the same underpayment covered by overpayment brought forward, so just a matter of explaining to the client?

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By SXGuy
07th Apr 2021 07:40

Not understanding the issue. Explain to the client he's already had any overpayment repaid and the balance offset against the tax due and file the return?

You don't need to show the overpayment was offset against tax due, hmrc will already know this when the tax return gets filed.

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Replying to SXGuy:
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By redarrow1995
07th Apr 2021 10:15

Thanks for your reply. Are you saying that even if though the software says that the refund will only be a certain amount, the true refund that will come from hmrc will be higher, as the SA system will know the underpayment has already been offset?

Is this is so even if the client is not required to file any of the returns?

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By SteveHa
07th Apr 2021 09:16

Are you sure that this is for a client and not for yourself. This is basic stuff for any advisor, and the use of anon in posting forces the question.

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By Tax Dragon
07th Apr 2021 09:28

That is entirely correct, Steve.

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Replying to SteveHa:
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By redarrow1995
07th Apr 2021 10:17

Apologies for being anon, but I am a newly qualified accountant just starting up and cant afford to be seen asking basic questions. (By nature a programmer, and getting into the tax world. Sorry if the question is too basic.)

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Replying to redarrow1995:
Stepurhan
By stepurhan
07th Apr 2021 12:05

If you are still having to ask basic questions, you should not be offering your services to clients. They are the ones who will suffer if you make errors because you lack basic knowledge. If you "cannot afford" to have clients know that (how would they identify you anyway? Do you trade under your pseudonym?) then you are effectively deceiving them about your level of knowledge, which is hardly ethical.

On another slant, newly qualified with who? Most qualifications require a practicing certificate. Practicing certificates require you to prove experience relevant to practicing. If you haven't dealt with this properly, you may have other issues already.

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