Tax credit overpayments: recovery via UC

Does anyone know what DWP Debt Management policy is about recovering a tax credit overpayment via UC, when HMRC have been asked for mandatory reconsideration of their overpayment decision? BORG (Benefits Overpayment Recovery Guide) says Debt Management’s policy is that recovery of legacy benefits is suspended during MR but recovery of UC overpayments is not. But I can’t find anything in BORG or elsewhere stating what the policy is for transferred tax credit overpayments, or indeed third party debts generally.

Hi Paul
I think DWP Debt Management policy will be to continue recovery because the tax credit overpayment is treated as an overpayment of UC under TCA s28(1) as modified by https://www.legislation.gov.uk/uksi/2014/1230/regulation/12 where this applies. Repayment may be renegotiated at DWP Debt Management’s discretion on hardship grounds.

However, the government said in its response to the HoC Select Committee in March 2018: “Debts are only transferred when they are not subject to ongoing disputes or appeals.” https://www.parliament.uk/globalassets/documents/commons-committees/public-accounts/Cm-9596-Treasury-Minutes-march-2018.pdf para 7.4

See also discussion in recent consultation forum minutes: “When a customer claims UC, we will only transfer stable debts, this means where MR rights have passed, and we are not expecting any changes. Once the debt has gone to DWP, debt belongs to DWP in law so HMRC cannot affect the recovery amount per month. HMRC can write off a debt that has gone to DWP as a revised debt amount, this is if the customers award changes after the transfer. If there is an event that leads to remission, HMRC will send a new debt amount to DWP.”  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1025930/HMRC_Tax_credits_consultation_forum_minutes_8_July_2021.pdf

So if the MR was in time, it should not have been transferred, and if the MR request was accepted late, it is strongly arguable that HMRC should take the debt back from DWP until ongoing dispute or appeal exhausted.

Mark

Thank you, Mark, that’s massively helpful.

Does this therefore imply that any TC debts should be under MR/ appeal before the UC claim is made?

I think the big problem is claimants having no knowledge of any tax credit overpayment until they claim UC, so no mr/appeal will have happened or even notification of an op from HMRC

Vonny - 11 February 2022 01:02 PM

I think the big problem is claimants having no knowledge of any tax credit overpayment until they claim UC, so no mr/appeal will have happened or even notification of an op from HMRC

4

That is exactly what i was thinking!  Presumably the transfer to UC does not extinguish appeal rights against HMRC decisions even if they were made at the point of transfer to UC