When HMRC repays too much by mistake

Q: What are the rules for companies and VAT?

Corporation tax. Paragraph 52 of Schedule 18 applies the discovery assessment provisions to amounts paid to a company by way of repayment of tax, repayment supplement or repayment interest, to the extent they ought not to have been paid, and to certain tax credits such as R&D credits where the company was not entitled to them. CH56200 gives the time limit as the latest of 4 years from the end of the accounting period (6 if careless, 20 if deliberate), the end of the accounting period following the one in which the amount was paid, and 3 months after completion of an enquiry into a relevant return. VAT. VAT has its own power in section 73(2) of the Value Added Tax Act 1994 to recover a VAT payment or credit made incorrectly. CH56300 gives the time limit as the later of 2 years after the end of the VAT period in which it was wrongly paid or credited and 4 years from the end of that period (20 years if deliberate).

Q: What does this look like in practice?

Illustration only. Tom files his 2024 to 2025 return showing a repayment due of £800. A processing error means HMRC sends him £8,000 in June 2025. Tom had paid more than £8,000 in tax through PAYE and payments on account, so the whole amount was a repayment of tax. HMRC first tries to recover £7,200 through his self assessment record or the DRIER procedure. If that fails, it can make a section 30 assessment for £7,200. As the repayment was made in the 2025 to 2026 tax year, HMRC has at least until 5 April 2027, or until 5 April 2029 under the 4 year limit for 2024 to 2025 if later. Because the mistake was HMRC's, its guidance says interest should not be pursued. Common mistakes are spending a refund that is obviously too large, ignoring HMRC's first letter, and missing the 30 day window to appeal an assessment that is wrong in amount or out of time. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

If HMRC repays income tax or capital gains tax that it should not have repaid, section 30 of the Taxes Management Act 1970 lets it assess the excess and recover it as if it were unpaid tax. The assessment can be made up to the end of the tax year after the one in which the money was repaid, or later under the normal 4, 6 and 20 year limits, and companies face a parallel rule in Schedule 18 to Finance Act 1998. Late payment interest can follow once an assessment is made, but HMRC’s guidance says it should not be pursued against an individual where the excess arose through HMRC’s own error.

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What does section 30 TMA 1970 say?

Section 30(1) provides that where an amount of income tax or capital gains tax has been repaid to a person which ought not to have been repaid, that amount may be assessed and recovered as if it were unpaid tax. Three further points in the section are worth knowing:

Section 30(2) allows the assessment to include any repayment interest or repayment supplement that was added to the repayment and should not have been.
Section 30(7) says a reference to an amount repaid includes an amount allowed by way of set off, so a credit wrongly set against another liability is treated the same way as cash paid out.
Section 30(1A) says section 30 does not apply where the amount is assessable under section 29, the discovery assessment provision.

An assessment under section 30 is an assessment to tax that is not a self assessment, so section 31(1)(d) gives a right of appeal, and section 31A requires notice of appeal in writing within 30 days of the notice of assessment.

When does HMRC use section 30 rather than a discovery assessment?

HMRC’s Enquiry Manual at EM3266 says section 30 and paragraph 52 of Schedule 18 to Finance Act 1998 allow an officer to recover a repayment that is excessive because of HMRC error. It adds that section 29 should be used if the overpayment arose because the taxpayer inflated expenses or the amount of income tax already paid. The Debt Management and Banking Manual at DMBM215180 sets out the same order: officers first test whether section 29 applies, and if not, apply the section 30 test.

So section 30 is the tool for mistakes in the repayment itself: a repayment issued for the wrong amount, a duplicate payment, or repayment interest calculated wrongly. Where the return was wrong, HMRC corrects it by enquiry or discovery; see HMRC discovery assessments.

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What counts as a repayment of tax?

DMBM215190 says section 30 assessments are not appropriate where the amount overpaid was never held as a payment of tax from that customer. It gives examples:

Situation	Section 30?
Customer paid £1,000, was due £50 back, and was repaid £500	Yes, assessment for £450
Customer was due £1,000 plus £100 repayment interest, and the repayment was made twice	Yes, assessment for £1,100
Customer paid £100 in total but was repaid £1,000	No for the £900, as it was never paid as tax
Another person’s payment was allocated to this customer’s record and then repaid	No, as this customer never paid it

The Self Assessment Manual at SAM112010 describes the last two cases as overpaid money rather than tax, and says recovery by formal assessment is not appropriate for them. HMRC still expects the money back, but it must use other routes.

Does HMRC always need an assessment?

No. For self assessment taxpayers HMRC usually tries simpler routes first. SAM112030 explains that where a repayment is found to be excessive, for example after an amended return is processed, the excess appears on the next statement as a charge and is pursued automatically by the self assessment system. SAM112020 describes the “duty repaid in error refunded” (DRIER) procedures for excess repayments that cannot be recovered through the record, and notes that if a payable order has not been cashed, HMRC may still be able to stop it. SAM112010 says recovery by formal assessment is used where the amount cannot be pursued through the self assessment system and the DRIER procedures have not worked.

HMRC can also set a wrongly paid amount against other debts or credits you have; see HMRC set off of repayments.

How long does HMRC have to assess an excess repayment?

Section 30(5) says an assessment is not out of time under section 34 if it is made before the later of the end of the tax year following the one in which the amount was repaid, and, where the return was enquired into, the day the enquiry is completed by final closure notice. Section 30(6) preserves the extended limits in section 36. HMRC’s Compliance Handbook at CH56100 therefore gives the time limit as the latest of:

4 years from the end of the tax year concerned (6 years if careless, 20 years if deliberate);
the end of the tax year following the one in which the excessive repayment was made; and
the closure of any enquiry into the relevant return by final closure notice.

Section 30(1B) also applies subsections (2) to (8) of section 29 to a section 30 assessment. That brings in the discovery conditions where a return has been made for the year, read as if the loss of tax were the repayment that should not have been made. Our page on how far back HMRC can go covers the general time limits.

Is interest charged on the amount recovered?

For individuals, SAM112010 says the original excess repayment does not attract late payment interest, but once a formal assessment is raised, interest becomes chargeable on it, and for section 29 and section 30 assessments it runs from 31 January following the end of the relevant tax year. The same page says that if the excess repayment arose through HMRC error, interest should not be pursued. Where an excess repayment charge is created on the self assessment record instead, SAM112030 says it accrues late payment interest from its due date unless it arose because of, or was affected by, HMRC error or delay.

For companies, paragraph 52(6) of Schedule 18 says the sum assessed carries interest at the rate used for section 87A TMA 1970 from the date the payment being recovered was made until it is repaid. HMRC’s published late payment interest rate has been set at Bank of England base rate plus 4% since 6 April 2025. See HMRC late payment interest.

What are the rules for companies and VAT?

Corporation tax. Paragraph 52 of Schedule 18 applies the discovery assessment provisions to amounts paid to a company by way of repayment of tax, repayment supplement or repayment interest, to the extent they ought not to have been paid, and to certain tax credits such as R&D credits where the company was not entitled to them. CH56200 gives the time limit as the latest of 4 years from the end of the accounting period (6 if careless, 20 if deliberate), the end of the accounting period following the one in which the amount was paid, and 3 months after completion of an enquiry into a relevant return.

VAT. VAT has its own power in section 73(2) of the Value Added Tax Act 1994 to recover a VAT payment or credit made incorrectly. CH56300 gives the time limit as the later of 2 years after the end of the VAT period in which it was wrongly paid or credited and 4 years from the end of that period (20 years if deliberate).

What does this look like in practice?

Illustration only. Tom files his 2024 to 2025 return showing a repayment due of £800. A processing error means HMRC sends him £8,000 in June 2025. Tom had paid more than £8,000 in tax through PAYE and payments on account, so the whole amount was a repayment of tax.

HMRC first tries to recover £7,200 through his self assessment record or the DRIER procedure.
If that fails, it can make a section 30 assessment for £7,200. As the repayment was made in the 2025 to 2026 tax year, HMRC has at least until 5 April 2027, or until 5 April 2029 under the 4 year limit for 2024 to 2025 if later.
Because the mistake was HMRC’s, its guidance says interest should not be pursued.

Common mistakes are spending a refund that is obviously too large, ignoring HMRC’s first letter, and missing the 30 day window to appeal an assessment that is wrong in amount or out of time.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.