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Forum Home  →  Discussion  →  Income support, JSA and tax credits  →  Thread

New guidance on how HMRC deals with tax credit overpayment?

Jon (CANY)
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Welfare benefits - Craven CAB, North Yorkshire

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Joined: 16 June 2010

Detailed overpayment recovery guidance used to be available at:
http://www.hmrc.gov.uk/leaflets/how-hmrc-handle-txcr-opay.pdf

That link now just says “This leaflet is being updated and is temporarily unavailable. A new version will be published soon”

Is this recent?

A copy of the old guidance is still knocking around, e.g. at:
https://web.archive.org/web/20130918211243/http://www.hmrc.gov.uk/leaflets/how-hmrc-handle-txcr-opay.pdf
(and attached)

But does anyone know when new guidance might be published, and if it might be significantly different?

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Andrew Hamilton
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Money advisers - Leicester Money Advice

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I think you may not be able access the overpayment guidance as section 2 is being updated. 

I have just seen a client who incurred an overpayment, they were claiming as a single person and HMRC have now decided retrospectively it should have been a joint claim.  They have now claimed with the partner and I initially advised the overpayment could not be recovered from the ongoing award as it was from a previous claim.

I then checked the new award letter which, in the payments section, shows TC already paid for the current tax year and so has reduced ongoing payments, this despite the fact that the TC already paid was from a previous claim.  I knew this was on the cards but have not seen any notices; latest CPAG book estimated it would be October 2014.

I’ve just looked at the latest COP26 which at page 13 states;

“If you’re still getting tax credits payments we’ll automatically reduce these payments to recover an overpayment from your ongoing tax credits. Overpayments we will recover may be from:
• awards you or your partner have had as single people
• awards you and your partner have had together either now or previously
We will not recover from your ongoing tax credits any overpayments from awards you or your partner have had with other partners.”

Have I missed something or is this now a new change?

LITRG
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Low Incomes Tax Reform Group

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My understanding (through the Benefits and Credits Consultation Group) is the same as CPAG - October 2014.

We produced some information on Revenuebenefits here: http://www.revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt/#ongoing_recovery_old_tax_credits_debt towards the end there is a document that was provided by HMRC for advisers which confirms it is October 2014.

I knew they had added it in COP 26 to cover it starting, but I haven’t heard of it actually happening.

If you could send any further details, i could try and raise it with HMRC via BCCG. It might also be worth checking with the intermediaries line just to double check it is a cross-claim recovery. My email is .(JavaScript must be enabled to view this email address)

With regards to the ‘How HMRC handle tax credit overpayments’ - we have been assured that it is being updated but no news on time limit. As far as I am aware there should not be any major changes, but who knows!

Victoria
LITRG

Jon (CANY)
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Welfare benefits - Craven CAB, North Yorkshire

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Thanks for the replies. I should have known that revenuebenefits would have a full list of the previous guides and publications.

Jon (CANY)
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Welfare benefits - Craven CAB, North Yorkshire

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So I guess new guidance never appeared…

Does anyone know if HMRC will still apply the same direct recovery policy, on debts that would take longer than 10 years to clear?

LITRG
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Low Incomes Tax Reform Group

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Hi John

Our latest pages are here http://revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt/ I checked with HMRC last year as to whether there had been any major changes and they said not and so what we have on the site is, to the best of my knowledge, accurate.

That ‘s not to say they haven’t changed things and not told anyone - but I would be interested in hearing how you get on.

Victoria

Surrey Adviser
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Benefits and debt adviser - Esher CAB, Surrey

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Victoria

“LITRG, along with other representative bodies, expressed concern that HMRC often pursued the engaging partner with vigour whilst the other partner remained ‘untraceable’. This often meant the mother with care of the children had to repay the whole joint overpayment debt where the absent partner was difficult to trace. Since August 2009, HMRC have implemented a much fairer policy in these situations. As before, provided a person engages with HMRC, they will allow repayment of 50% of the joint debt. Provided that this 50% is paid (either by lump sum or on a payment plan) HMRC will not pursue that person for the remaining 50%. Instead they will pursue the other partner, and if they cannot collect the money will not go back to the engaging partner to collect it.
It is important to note that the law still allows HMRC to pursue either partner for the full amount of the joint debt. Also, this process is not well advertised by HMRC, so you should ensure that you ask Debt Management and Banking if you think it applies to your client.”

This is from your LITRG item.  I have a client who has two overpayments from 16-17 tax year - one on a single claim & the other on a couple claim.  TCO have just started recovery by deducting 25% from an ongoing single claim.  We are considering a DRO for her, but her debts are around the £20,000 limit.  It would be helpful if we could include only 50% of the couple claim overpayment when submitting the DRO application.  I’d appreciate it if you could advise or comment on the following:

1.  You say the person will not be pursued for the other 50% “provided 50% is paid”.  Does getting the 50% written off in a DRO count as it being paid, so that our client would not be pursued for the other 50%?

2.  In any case, is it advisable to put the full amount of the couple overpayment in the DRO application, to be on the safe side?

3.  Our client has not “engaged with” HMRC.  From what she says it appears she has not been sent any demands for payment - they have simply issued an award notice & started the deductions.  Does this count as engagement for the 50% concession to apply?

4.  Can you say how TCO will apply the deductions to the overpayments?  Will they pro-rate them & apply the relevant % of each deduction to each of the two overpayments, or will they apply all of each deduction to the oldest overpayment first? 

Thank you

Derek