On overpayment, yes, appeal if they try to recover - they may not. Usual considerations - did she misrepresent or fail to disclose a material fact? There is no trace of misrepresentation in the facts you give. Failure to disclose can only arise is she breached one of the requirements to disclose in reg.32, D+A Regs - broadly, if she was explicitly instructed to report something and didn't, or if she could reasonably have been expected to know that something needed reporting and didn't. If she was giving them income details as they came in, she committed neither offence.
I would be surprised if they tried to recover on these facts.
Richard Atkinson
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