Tax Credit Overpayments
This factsheet was put together by Tameside MBC Welfare Rights Service in October 2014. It is a general guide and does not cover every circumstance. Though we have tried to make sure it was correct at the time of publication, it may become inaccurate over time, for example because of changes to the law.
Page 2 covers how to help avoid overpayments. This information could also help you understand why you have been overpaid.
Pages 3 & 4 cover what to do if your tax credits have stopped or been reduced, and this has led to an overpayment.
Pages 5 & 6 cover what to do if you feel you should not have to repay some or all of an overpayment.
What are tax credits?
Working Tax Credit and Child Tax Credit are both benefits paid by HM Revenue & Customs (HMRC). Working Tax Credit is for people who are working but who have low incomes. Child Tax Credit is for people on low incomes who are ‘responsible’ for a child. They are both ‘means-tested’ benefits, which means that the income you receive (e.g. from wages) affects how much you get. People with high incomes may not get anything, even though they are in work and ‘responsible’ for a child.
How can tax credit overpayments happen?
The tax year runs from 6th April one year to 5th April the next year (e.g. from 6th April 2014 to 5th April 2015). When working out how much tax credit you should get, HMRC will look at either your income from the previous tax year, or your estimate of what your income will be for the current tax year.
If your income or family circumstances then change, or if your estimate of what your income would be was wrong, you will have had too much tax credit (an ‘overpayment’) or too little (an ‘underpayment’). HMRC may not realise you have been overpaid until the end of the tax year. In practice, this can mean you get a letter telling you that you have received an overpayment of tax credit, that you may struggle to repay.
How can I help avoid overpayments?
To help avoid overpayments, you should make sure you give HMRC accurate information about your income and family circumstances when you first claim tax credits, and when you renew your claim.
When you receive an ‘award notice’ letter from HMRC, you should check it for mistakes. Use the checklist provided with the letter, and report any mistakes to HMRC as soon as possible.
You should also tell HMRC about changes to your income or family circumstances during the tax year.
In some cases reporting a change may mean you can no longer get tax credits, or that your tax credits will be reduced. But if you do not report certain changes within 1 month, you risk having to pay a penalty, as well as having the repay any resulting overpayment.
If a change means you should have been getting more tax credit, HMRC can only ‘backdate’ the change by up to 31 days. For example, if you have a new baby on 1st May, this may increase your tax credits. But if you do not tell HMRC until 1st September, HMRC will only pay you any extra amount you should have been getting from 1st August onwards.
A full list of the changes you have to report is available at www.hmrc.gov.uk/leaflets/cop26.pdf.
You can report changes by ringing the Tax Credit helpline (see page 8). Remember to record the date and time of your call, and the name of the person you spoke to.
If you are responsible for a child aged 16-19 in full-time education, you now need to tell HMRC by 31st August every year if they will be continuing in their education, or your tax credits will be affected.
What if I have been underpaid tax credits?
If you have been underpaid tax credits, the extra amount you should have got will usually be paid to you in one lump sum after the end of the tax year.
How do I challenge a HMRC decision that led to you being overpaid tax credits?
This section tells you how to challenge HMRC decisions made after 6th April 2014. For challenging decisions made before this date, seek advice immediately.
If HMRC decide that you can no longer get tax credit, or that the amount of tax credit you get should be less, it is likely that you will also have been overpaid.
For example, if there is a change that means you should no longer be getting tax credit from 1st December onwards, but you do not tell HMRC until 15th December, you will have been overpaid by 15 days. You may be overpaid by even more if there is a delay in HMRC acting on the information you give them.
You might be told by HMRC you cannot ‘appeal’ an overpayment. But if you think the decision that stopped or reduced your tax credits in the first place was wrong, you can still appeal that decision, though there is a clear process you must follow:
1. Contact the Tax Credits helpline
Ask for an explanation of why your tax credits were stopped or reduced. Record the date and time of your call, and the name of the person you spoke to.
2. Mandatory Reconsideration
If you disagree with the HMRC’s decision, ask them to look at it again. This is called a ‘mandatory reconsideration’. It is best to do this using the form available at www.hmrc.gov.uk/leaflets/wtc_ap.pdf, though you can ask for a ‘mandatory reconsideration’ by phone or by letter. Remember to keep a photocopy of your completed form and, ideally, get proof of postage.
You must request a ‘mandatory reconsideration’ within 30 days of the decision you wish to challenge. If you have missed the 30 day deadline, you may lose the right to appeal the decision, so seek specialist advice as soon as possible.
3. Appeal
Once HMRC have looked at their decision again, you will get a ‘mandatory reconsideration notice’ letter telling you whether or not they have changed their decision. If you are still not satisfied, you can now appeal directly to an independent tribunal, which has the power to overturn the HMRC’s decision.
To appeal, you need to use form SSCS5, which is available at http://hmctsformfinder.justice.gov.uk/courtfinder/forms/sscs005-eng.pdf.
You need to send the completed form, along with a copy of the ‘mandatory reconsideration notice’ letter, to HM Courts & Tribunals Service. The address to post it to is on page 7 of the form itself.
Your completed form needs to have been received by HM Courts & Tribunals Service within 30 days of the date on the ‘mandatory reconsideration notice’ letter, except in very exceptional circumstances. Seek specialist advice immediately if you have missed the 30 day deadline.
HMRC should stop trying to recover any overpayment once your completed SSCS5 form has been received by HM Courts & Tribunals service.
It is best to get advice before filling out form SSCS5. If you request a face-to-face hearing from HM Courts & Tribunals, an adviser may be able to come along with you to your hearing, or help you prepare for it.
If you disagree with the tribunal’s decision, you can appeal to the Upper Tribunal, but only if the tribunal has made a mistake in how it has interpreted the law. You should always get specialist advice if you are thinking about appealing to the Upper Tribunal.
If you feel you need further information, or if you are unsure whether you need to be following this process or the process on pages 5-6, seek advice from an organisation like the Citizens Advice Bureau or Tameside Welfare Rights.
Do I have to repay my overpayment?
This depends on whether you have met all your ‘responsibilities’ to the HMRC, and whether they have met all their ‘responsibilities’ to you. For example, you have a responsibility to report relevant changes to your circumstances, and they have a responsibility to act on the changes you report to them within 30 days.
A full list of these responsibilities is available at www.hmrc.gov.uk/leaflets/cop26.pdf
If HMRC have met all their responsibilities but you have not met yours, you will usually have to repay in full. If you have met all your responsibilities but HMRC have not met theirs, you may not have to repay anything. If both you and HMRC failed to meet some of your responsibilities, you may only have to repay some parts of the overpayment.
If you report a change which HMRC does not act on within 30 days (meaning you are overpaid), any overpayment after this 30 day deadline will usually be written-off. For example, on 1 September you tell HMRC about a change in your circumstances they do not change your award until 16 October. HMRC should not try to collect any overpayment that arises after 30 September.
How do I challenge a HMRC decision to recover an overpayment?
You cannot technically ‘appeal’ a HMRC decision to recover an overpayment. However, you can still ‘dispute’ the overpayment if you think you should not have to repay some or all of it because HMRC have failed to meet some or all of their ‘responsibilities’.
To do this, you are best using form TC846, which is available at www.hmrc.gov.uk/forms/tc846.pdf. You can also ring the Tax Credit helpline to get a paper copy of this form posted to you.
Your completed form must usually be received by HMRC within 3 months of the date on the letter giving the decision. If you have already tried to challenge this decision by ‘mandatory reconsideration’ or appeal, the deadline will be 3 months from the date of the ‘mandatory reconsideration notice’ letter or Tribunal decision. If you miss the 3 month deadline, seeks specialist advice as soon as possible.
It is a good idea to attach a letter to the form, setting out in more detail why you think HMRC have not met some or all of their responsibilities and why you have met yours. In this letter give them the times and dates when you rang the Tax Credits helpline, and what you were told. You can also attach copies of any letters from HMRC that back up your case.
After they get your completed TC846 form, HMRC will still try to recover the overpayment while they consider whether or not you must pay it back. If your dispute is successful, the money HMRC has already recovered should be paid back to you.
If HMRC do not change their decision, you can only ask them to look at the decision again if you have new, relevant information. If you have such information and HMRC refuse to look at the decision again, seek specialist advice as soon as possible.
Complaints
If ‘disputing’ an overpayment has been unsuccessful, or if you are otherwise unhappy with the way HMRC is handling your case, making a formal complaint can sometimes help.
Firstly, you need to write to the Complaints Manager at the Tax Credit Office (see page 8). Write ‘complaint’ at the top of your letter and keep a photocopy of it yourself.
If you are not satisfied with their response, you could write another letter asking for your complaint to be looked at again, this time by a senior officer of the Tax Credit Office’s Customer Support Unit. Again, keep a copy of your letter.
If you still do not get a satisfactory reply, you can ask the Adjudicator’s Office to investigate within 6 months of HMRC’s ‘final response’. Their address is: The Adjudicator’s Office, PO Box 10280, Nottingham, NG2 9PF.
If you are not satisfied with the Adjudicator’s Office’s response, you could ask your MP to refer your case to the Parliamentary and Health Service Ombudsman.
How does HMRC recover overpayments?
HMRC will usually try to recover overpayments by reducing your future payments of tax credits. Your tax credits could be reduced by 10% or 25% (depending on your circumstances) until all of the overpayment has been recovered.
If you are not due any future payments of tax credits, HMRC will pass your case to their Debt Management & Banking team, who will send you a letter asking you to repay the overpayment in full within 30 days. However, if you ring them, they will usually let you repay by instalments over a longer length of time. You should make sure any suggested instalments are affordable, and tell HMRC if they are not.
If you are in PAYE employment, and the overpayment is less than £3,000, HMRC can tax you more until the overpayment is fully repaid. They will write to you before they start doing this, but can go ahead without your permission unless you agree a different method of repayment with their Debt Management & Banking team (e.g. by paying them regular instalments from your bank account).
If you and an ex-partner are both legally responsible for paying back an overpayment, HMRC will usually ask each of you to pay back 50% of it.
You can ask HMRC to delay recovery action for a while before you start to repay. In very exceptional cases, HMRC may write off all or part of an overpayment if you can show that recovering the overpayment would cause you or your family hardship. This is known as ‘remitting’ the debt.
If you do not agree repayment with HMRC, they may ask a debt collection agency to try to recover the overpayment, or start county court proceedings against you. In rare cases, they may take action to lawfully seize goods from your home (‘distraint’). In these instances, please get specialist advice.
HMRC Contact Details
Tax Credit helpline 0345 3003900 (textphone 0345 3003909)
Address: HMRC Tax Credits Office, Preston, PR1 4AT.
Further Information
Advice Tameside www.advicetameside.org.uk/
Citizens Advice Bureau AdviceGuide www.adviceguide.org.uk/england
Advice For Tameside Residents
General advice:
Tameside Citizens Advice Bureau offers information and advice on a whole range of problems at their drop-in (09:30-12:30 every weekday) at Ashton Customer Services (Tameside MBC, Council Offices, Clarence Arcade Stamford Street, Ashton-Under-Lyne, OL6 7PT).
Specialist advice:
Tameside MBC Welfare Rights Service offers telephone advice on benefits on 0800 0749985 (09:30-12:30, Mondays, Wednesdays and Thursdays).
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