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Tax Credit Overpayments

 

Working Tax Credit and Child Tax Credit are benefits paid by HM Revenue and Customs (HMRC). They are 'means-tested', which means that your income affects how much you can get.

When working out your tax credit award, 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 change after HMRC makes its decision, or if your estimate of your future income proves to be 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 after the end of the tax year. If this happens you could get a letter saying you have had an overpayment of tax credit, which you may struggle to repay.

If you have been underpaid, the extra money you should have got should be paid to you in one lump sum after the end of the tax year.

 

Avoiding Overpayments

To help avoid overpayments, make sure you give HMRC accurate information when you make a claim or renew a claim for tax credit. Let HMRC know about any mistakes on your tax credit award letter.

Ring the Tax Credit helpline on 0345 3003900 to report changes in your income and family circumstances during the tax year. If you fail to report a change which meant your award should have been reduced, you risk having to pay a penalty, as well as having to pay back the overpayment.

A full list of the changes you have to report is available at www.hmrc.gov.uk/leaflets/cop26.pdf.

 

Challenging A Decision That Led To An Overpayment

If HMRC decide that a change means you can no longer get tax credit, or that the amount you get should be less, you may get an overpayment. This happens if you delay reporting a change, or if HMRC delays acting on a change you report.

In these circumstances you cannot 'appeal' the overpayment itself. However, you can challenge the decision that stopped or reduced your tax credit in the first instance. For decisions made after 6th April 2014, you can do this by:

  1. Contacting HMRC on 0345 3003900. Ask why your tax credits were stopped or reduced.
  2. Ask HMRC to look at their decision again. This is known as 'mandatory reconsideration'. You should do this within 30 days of the date on the HMRC letter giving you their decision.
  3. HMRC will send you a 'mandatory reconsideration notice' letter telling you whether they have changed their decision. If you are still not satisfied, you can now complete appeal form SSCS5 (https://www.gov.uk/government/publications/appeal-a-tax-credit-child-benefit-or-guardians-allowance-decision-form-sscs5), and send this with a copy of the 'mandatory reconsideration notice’ letter to the address on the form. Your form needs to have been received by HM Courts and Tribunals Service within 30 days of the date on the 'mandatory reconsideration notice' letter.

 

Paying Back Overpayments

You should not have to pay back an overpayment if you met all your 'responsibilities' (e.g. reporting changes) but HMRC did not meet any of theirs (e.g. acting on changes you report). If both you and HMRC failed to meet some of your responsibilities, you may only have to repay part of the overpayment. A full list of these responsibilities is available at www.hmrc.gov.uk/leaflets/cop26.pdf.

If HMRC failed to meet some or all of their responsibilities, you can use form TC846 (www.hmrc.gov.uk/forms/tc846.pdf) to 'dispute' the overpayment (i.e. argue that you should not have to pay back some or all of it). Your completed form must be received by HMRC within 3 months of the date on the decision letter or 'mandatory reconsideration notice' letter.

If HMRC insist on recovering an overpayment, or if you are otherwise unhappy with the way HMRC is handling your case, following their formal complaints procedure can sometimes help.

HMRC will usually try to recover overpayments by reducing your future payments of tax credit. If you are not due any future payments, HMRC will send you a letter asking you to repay in full within 30 days. If you ring them, they will usually let you repay in instalments over a longer period of time. If you cannot agree repayment, HMRC may pass your case to a debt collection agency, or start county court proceedings against you.

 

Further Information & advice

A list of useful websites containing further information can be found here.

Tameside Citizens Advice Bureau offers information and advice on a whole range of issues at their drop-in (09:30-12:30 every weekday) at Ashton Customer Services (Tameside MBC, Council Offices, Wellington Road, Ashton-Under-Lyne, OL6 6DL).

Tameside MBC Welfare Rights Service offers specialist telephone advice on benefits on 0800 0749985 (09:30-12:30, Mondays and Wednesdays).