Tax overpayment

What it means

An overpayment arises when a company has paid more than it owed, typically because advances exceeded the final tax for the year.

It is not refunded automatically. The office returns it on request and only if no other arrears exist; otherwise it is set off and only the remainder comes back.

An overpayment differs from an excess VAT deduction in where it comes from. The excess deduction is the result of the return itself, when input VAT exceeds output VAT, and the office refunds it by law without a separate request. An overpayment is money the company actually paid over and above what it owed.

How it works in practice

The request goes in electronically and the refund period runs from its receipt. So it belongs with the return, not six months later when somebody notices it while reconciling.

An overpayment on one tax is not transferred to another by itself. To use corporate tax money against VAT, the company has to ask explicitly.

Overpayments also arise by mistake, when the same tax is paid twice or a payment goes out with the wrong reference. When reviewing the taxpayer’s account we look for such amounts deliberately and file the refund request at once, so the money does not sit idle for months.

What to watch out for

The right to a refund lapses with time. Forget about it and miss the deadline, and the money simply stays with the state even though it sits visibly on the tax account for years.

A refund goes only to the account named in the request. Give an old, closed account or the director’s own, and the money either fails to arrive or ends up outside the company, while the sub-ledger keeps a claim on the state that is tedious to trace and explain.