HMRC systems stall OWR returns using transitional provisions

Self Assessment returns that claim Overseas Workday Relief alongside the transitional provisions are not being processed automatically by HMRC.TAX Where boxes 40 (OWR election) and/or 41 (OWR claim) are ticked together with box 43 (transitional provisions) of the residence and FIG regime pages, the return may be logged as received while the information in it is not captured.TAX The taxpayer's Self Assessment balance consequently shows as £0 even though a liability was submitted.TAX

Advisers with submitted returns containing OWR claims should check that each return has been processed correctly and that the taxpayer's Self Assessment record reflects the information submitted. Contacting HMRC should result in the return being added to a worklist for processing. That step does not necessarily resolve the matter, because there have also been cases where the OWR claim has subsequently been rejected after being added to the worklist.

Some taxpayers have received letters stating that their claim cannot be processed because no entry was made in box 47, the maximum relief available under the financial limit. That treatment is inconsistent with HMRC's tax return helpsheet for the residency pages, which says that a taxpayer who puts an 'X' in box 43 because the OWR transitional provisions apply does not need to consider the financial limit and must not put anything in box 47. These letters are not always being copied to authorised agents, so an agent may be unaware that a client's claim has been refused unless the client forwards the letter or the agent checks the record.

A parallel problem affects applications under section 690, which allow PAYE to be operated by reference to a reduced amount of earnings covering UK duties only. Cases are reported in which section 690 claims have been rejected where the OWR transitional provisions apply, apparently arising from the same issue about where the financial cap applies.

HMRC has confirmed that the issue has been raised for investigationTAX and that it will provide an update in due course. For now there is no official advice on how best to submit claims to ensure they are processed correctlyTAX, and no timescale for resolving returns already submittedTAX. The position may therefore persist through the filing season while HMRC works on a fix.

Until a solution and timescale are confirmed, members should review relevant returns already submitted, monitor clients' Self Assessment records and follow up with HMRC where a return does not appear to have been processed correctly. Where the processing problem is likely to delay a repayment or otherwise affect the client's tax position, advisers should manage expectations about the potential for delay while the timing of an HMRC resolution remains uncertain.

Clients should be advised to pay by 31 JanuaryTAX the liability shown on the submitted tax return, even where HMRC's systems show £0 dueTAX, to avoid late-payment interest and penalties. The legal basis is the post-6 April 2025 Overseas Workday Relief regime for qualifying new residents eligible for the FIG regime, with the annual financial limit in section 41R ITEPA 2003 set at the lower of 30% of relevant qualifying employment income and £300,000 (EIM43560, EIM43600).