HMRC SDLT: SDLTM54170 – Overpayment relief: Exclusions: Case G practice generally prevailing

Overpayment Relief: Exclusions – Case G Practice

This section of the HMRC internal manual provides guidance on overpayment relief, specifically focusing on exclusions under Case G practice. It outlines the principles and concepts that generally prevail in such cases.

• Details the criteria for overpayment relief exclusions.
• Explains the Case G practice and its application.
• Provides examples of situations where exclusions apply.
• Clarifies the prevailing practices and guidelines followed by HMRC.

Overpayment Relief Overview

Overpayment relief allows taxpayers to reclaim tax that has been overpaid, but there are specific conditions under which it applies. One important condition is that if the overpayment is linked to a mistake made in a Self-Assessment (SA) return or another tax calculation, relief is usually not available. This is true unless the error pertains specifically to income from PAYE (Pay As You Earn).

What is “Practice Generally Prevailing”?

The term ‘practice generally prevailing’ refers to the accepted methods and interpretations of tax rules at a given time. This concept was explored in a legal case, Rose Smith 17 TC 586, where it was examined whether there was indeed a widely accepted practice or methodology applied.

In the HMRC case against Household Estate Agents Ltd, Judge Henderson described how a practice should be understood:

• The practice must be well-established and not a recent development.
• It should be easy for taxpayers and advisors to find out about.
• It must be recognized by both HMRC and those who offer tax advice.

This definition is important in determining whether overpayment relief can be claimed.

HMRC’s Responsibility in Appeals

In the context of making a claim for overpayment relief, if there is an appeal, HMRC must prove that a ‘practice generally prevailing’ was followed at the time the tax in question was assessed. When evaluating this, you may need to look into several types of sources, such as:

• Official HMRC guidance documents
• Insights from technical specialists within HMRC
• Historical court cases related to tax practice
• Opinions and statements from external experts in taxation

Unique Circumstances and Practice Changes

An important aspect of this principle is that a practice does not need to be universally applied to be considered ‘generally prevailing.’ There may be instances where not everyone follows the same approach, but if it is accepted by a reliable number of taxpayers and professionals, it can still be deemed a prevailing practice.

However, if a tribunal or a court determines that a specific practice is incorrect, it is treated as no longer being a generally prevailing practice from that moment onward, even if there is an appeal regarding that decision.

Summary of Key Points

• Overpayment relief is generally unavailable if the claim arises from mistakes in tax returns adhering to the prevailing practice, with an exception for PAYE income.
• The “practice generally prevailing” must be established, known, and accepted in the tax community.
• HMRC carries the burden of proof in cases where taxpayers are appealing for overpayment relief.
• Practices might change based on new court rulings, affecting their status as generally prevailing.

Taxpayers should stay informed about these principles when considering a claim for overpayment relief, as the conditions are quite specific and rely on historical practices followed at the time of the tax calculation.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM54170 – Overpayment relief: Exclusions: Case G practice generally prevailing

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