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Chapter DMBM700010

Document Cited authorities 2 Cited in Related
Vincent
Published date29 April 2016
Record NumberDMBM700010
CourtHM Revenue & Customs

HMRC has for many years set off repayments against outstanding debts within computer systems and between tax and National Insurance Contributions. The judgment of Walker L J in the case of Mellham v Burton [2006UKHL6] confirmed that set-off is a normal business principle.

S130 FA2008 gives HMRC the power, with effect from 21 July 2008, to set-off amounts that are due to be repaid to a person against debts owed to HMRC by that person, including contract settlements. The power to set-off applies only in England, Wales and Northern Ireland and aligns with existing common law in Scotland. It enables HMRC to operate UK-wide across the whole range of debts administered by them. However Tax Credit payments, Child Benefit payments and Guardians Allowance need special treatment as a matter of policy.

For further information see DMBM700060.

The power is limited in insolvency by S131 FA2008, which prevents repayments for periods after a person’s insolvency being used to satisfy debts from before their insolvency (unless the repayment also relates to the earlier period).

Application of set-off

The new power does not affect HMRC’s duty to set-off in specific circumstances such as S81 (3) VATA 1994 and some NICs and so on. Where HMRC is already obliged to set-off under specific legislation these set-offs will continue to take priority. Examples are for NICs, VAT, Landfill Tax, Aggregates Levy and Excise Drawback and existing HMRC computer systems support these mandatory set-offs.

Significantly the legislation:

  • removes the need to seek authority from taxpayers before set-off takes place
  • reinforces the need to tell the taxpayer of the set-off in...

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