RTI and withheld repayments

Some of the consequences of the introduction of PAYE “Real Time Information” are obvious. Some are more subtle. One thing which is only now becoming apparent is the effect on repayments, whether of VAT, Corporation Tax or Income Tax.

It has, of course, long been the case that, where a repayment has been due but HMRC have been aware of other outstanding liabilities, they have declined to make the repayment but have instead set it off against the liabilities. Granted that in some cases the left hand and the right hand have sometimes seemed to have been unaware of each other’s existence let alone their activities and the system has not always operated quite as intended; but that is the theory. And the practice has over the years been coming increasingly into line with the theory.

But in-year PAYE debt has hitherto always been a problem for HMRC, because it has been difficult to quantify and establish the exact amount of tax debt due at any one time. So in practice HMRC have sometimes found themselves making tax repayments in cases where it turned out that there has never in truth been – after taking into account unpaid PAYE liabilities – any net repayment due. RTI changes that: under the new regime HMRC are aware of the true amount of overdue PAYE in real time and so can readily exercise set-off of VAT and other refunds against such debts.

Of course, HMRC have never much appreciated being used as an unofficial source of business cash-flow: that was, essentially, what lay behind the PAYE RTI initiative in the first place. But the fact that HMRC’s collection is becoming ever more joined-up needs to be taken into account by cash-constrained businesses.

For more on RTI, business funding or expediting tax refunds, contact your usual BKL contact partner.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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