Overpayment Relief Exclusion: Mistakes in SA Returns and Prevailing Practice Explained

When SDLT overpayment relief is blocked by generally prevailing practice

Overpayment relief for SDLT may be refused where too much tax was paid because of a mistake in a return or calculation, if that calculation followed the generally prevailing practice at the time. Whether such a practice existed is a factual question, and HMRC must prove it using objective evidence.

• The rule is designed to stop settled tax positions being reopened simply because an accepted approach is later found to be wrong.
• A generally prevailing practice is usually one that is relatively well established, easy to identify, and accepted by both HMRC and professional advisers.
• HMRC guidance, technical advice, case law and professional commentary may help show whether a practice was generally prevailing, but HMRC’s view alone is not enough.
• A practice can still count as generally prevailing even if it was not followed in every case.
• If a tribunal or court rules that the practice is wrong, it should no longer be treated as generally prevailing from that date, even if there is an appeal.
• In practice, the key issue is the state of accepted practice when the return was filed, not just whether the legal analysis was later shown to be incorrect.

Scroll down for the full analysis.

When overpayment relief is blocked because HMRC followed the generally prevailing practice

This page explains one of the limits on overpayment relief for SDLT. In some cases, a taxpayer cannot recover tax simply because the return or tax calculation turned out to be wrong. If the tax was calculated in line with the practice generally prevailing at the time, overpayment relief may be excluded. The difficult part is working out what counts as a generally prevailing practice, and when that practice stops.

What this rule is about

Overpayment relief is a route for recovering tax that was not in fact due. But it is not available in every case. One exclusion applies where the claim is based on a mistake in a tax return or other tax calculation, and the liability was worked out in line with the practice generally prevailing at the time.

The policy behind this is that overpayment relief is not meant to reopen settled tax positions merely because the accepted approach later turns out to have been wrong. If a taxpayer calculated tax in the same way as the approach generally accepted at the time, that may block a later claim.

The source material also notes an exception for claims relating to PAYE income, but that exception is part of the wider overpayment relief rules and is not developed further in this source.

What the official source says

The official material says that overpayment relief is not due where:

• the claim relates to a mistake in a self-assessment return or other tax calculation, and
• the tax liability was calculated in accordance with the practice generally prevailing at that time.

Whether there was a practice generally prevailing is a question of fact. The source cites case law for that point.

It also refers to judicial comments in HMRC v Household Estate Agents Ltd. Those comments say, in substance, that a practice is generally prevailing only if it is relatively long-established, can readily be identified by those concerned, and is accepted by both HMRC and taxpayers’ advisers.

The source makes several further points:

• the practice does not need to have been followed in every single case
• on an appeal, HMRC must show that there was a generally prevailing practice
• evidence may include HMRC published guidance, advice from HMRC technical specialists, reported cases, and external commentary
• if a tribunal or court decides that the practice is wrong, it should be treated as having stopped being generally prevailing from that point, even if the decision is appealed

What this means in practice

The key practical question is not just whether the return was wrong. It is whether, at the time the return was made, the approach used reflected an established and broadly accepted practice.

This matters because a taxpayer may say:

• the legislation was later interpreted differently
• a tribunal or court showed the accepted view was wrong
• too much tax was paid

Even so, overpayment relief may still fail if the original calculation followed the generally prevailing practice at the time.

Equally, HMRC cannot simply assert that there was such a practice. The source is clear that this is a factual issue, and in an appeal HMRC has to prove it. That means the existence of a generally prevailing practice should be supported by objective material, not just by saying that HMRC internally took a particular view.

It also means that a practice can be widespread without being universal. A few departures from the accepted approach do not necessarily prevent it from being generally prevailing.

How to analyse it

A sensible way to approach the issue is to ask the following questions.

• What was the alleged mistake in the return or tax calculation?
• At the time the return was made, was there an identifiable practice on that point?
• Was that practice relatively long-established, rather than new or unsettled?
• Could interested parties readily find and understand that practice from public or professional sources?
• Was the practice accepted not just within HMRC, but also by taxpayers’ advisers more broadly?
• What evidence exists: HMRC manuals or guidance, technical statements, case law, or commentary from professional sources?
• Had any tribunal or court already rejected the practice by the relevant date?

The timing point is especially important. The question is whether the practice was generally prevailing at the time of the relevant calculation. If a later decision shows the practice was wrong, that does not necessarily mean there was never a generally prevailing practice. But once a tribunal or court has decided the practice is wrong, the source says it should no longer be treated as generally prevailing from that point onward.

Example

This is an illustration of how the rule can work.

A taxpayer files an SDLT return using an approach that matches HMRC guidance and the view commonly taken by specialist advisers at that time. Two years later, a tribunal decides that approach was wrong and that less tax was due on those facts. The taxpayer then makes an overpayment relief claim.

The taxpayer may be right that the original legal analysis was wrong. But the claim could still be blocked if HMRC can show that, when the return was filed, the calculation followed a relatively settled and widely accepted practice. If, however, the supposed practice was unclear, disputed, short-lived, or not truly accepted outside HMRC, HMRC may struggle to prove that the exclusion applies.

Why this can be difficult in practice

The phrase generally prevailing is not a mechanical test. It depends on evidence and context.

Several points can make disputes difficult:

• A published HMRC view is relevant evidence, but it does not automatically prove a generally prevailing practice.
• A practice may be common among some advisers but contested by others.
• The age of the practice matters. A newly stated HMRC view may not yet be long-established.
• The effect of litigation is time-sensitive. Once a tribunal or court rejects the practice, the source says the practice should be treated as no longer generally prevailing from that point, even if an appeal is pending.
• The issue is factual, so the answer may depend heavily on what material existed at the relevant time and how widely it was accepted.

This means the real dispute is often not about the underlying tax rule alone, but about the state of professional and HMRC practice at a specific moment in time.

Key takeaways

• Overpayment relief can be excluded if the return followed the generally prevailing practice at the time, even if that practice was later shown to be wrong.
• Whether such a practice existed is a question of fact, and HMRC must prove it on appeal.
• A practice usually needs to be relatively established, identifiable, and accepted by both HMRC and advisers, and it stops being generally prevailing once a tribunal or court rejects it.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Overpayment Relief Exclusion: Mistakes in SA Returns and Prevailing Practice Explained

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