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Tax credit debt - The Universal Credit problem nobody is talking about - ?

 

Andrew Dutton
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http://www.politics.co.uk/comment-analysis/2018/01/09/tax-credit-debt-the-universal-credit-problem-nobody-is-talki

This item caught my interest t’other day and I came back to it today when I received a complaint that a claimant has had a ‘mystery’ £87.70 taken off their monthly UC.

It shows on their calculation but there are no details given (they have to phone up for details)

It appears to be a TC overpayment, notified to them on 29/12/17 - so there is still time to seek MR, even more time to seek to dispute recovery - and yet the money is taken right away.

HMRC will not tell them anything (it isn’t clear why this is so)

TCs were told of the change of circumstances at the end of July 2017. They appear to have paid until October.

It seems unreasonable to start taking for a debt which may not exist once MR/dispute has been pursued, and for UC not to label the deduction clearly for what it is (it only says ‘DWP Benefits Recovery’)

If TC debts are added undiscussed to the myriad other deductions, lots of people are going to be in trouble financially.

     
Sally63
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For whatever reason, TC overpayments seem almost inevitable—an awful lot of UC claimants have them and they turn out to date from the transition. I suppose you could say—well the claimant has been paid twice—she received the TCs and the UC at the same time and now she has to pay one back.

If you ask via the journal they will tell you what the recovery is for. Not any detail, of course, just TC overpayment.

     
Andrew Dutton
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Andrew Dutton
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I do think that we need to discuss this more fully.

As I said above, this person’s right to challenge the decision may have been undermined - she is within time to do both MR and dispute, but the overpayment has become a UC matter and they are deducting an entirely arbitrary amount without discussing the matter or checking if it will cause hardship. I wonder if HMRC are refusing to discuss the matter because it’s not their problem anymore?

If the matter had remained with HMRC there would, if all else failed, be the protection of COP26 to argue hardship - but with UC the equivalent document has been removed from circulation without explanation and it is not at all clear what the position is.

As the MPs state:

7.Vulnerable people receiving Tax Credits are at increased risk of financial problems as they transfer to Universal Credit. People receiving Tax Credits from HMRC are in the process of transferring to Universal Credit, which is administered by the Department for Work and Pensions (DWP). So far, HMRC has transferred 110,000 people. Tax Credits are complex and many of the people transferring have not been receiving the right amount of award, and HMRC is seeking to recover any overpayment. The responsibility for collecting these overpayments will transfer to DWP. DWP has greater powers to recover debt than HMRC, including the ability to deduct amounts directly from earnings. We are concerned that vulnerable people could therefore be subjected to more aggressive attempts to recover any Tax Credits overpayments, potentially placing people into greater poverty.

     
past caring
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It is reg. 12 of the UC (Transitional Provisions) regulations 2014 that provides for an overpayment of tax credits to be ‘treated as’ an overpayment of UC and so recovered from UC - so long as it is for the current tax year.

Arguably, because the mechanism is for it to be ‘treated as’ in this way (as opposed to making a tax credits overpayment straightforwardly recoverable from UC) then a claimant must also have a right to challenge via MR and appeal of the UC decision. And with the same rights to be properly notified by UC as if it were an overpayment of UC. And if that is the case, the claimant may not have been significantly disadvantaged in as much as neither tax credits nor UC have a right of appeal solely against recoverability.

And there is a discretion not to recover in UC - again, arguably, where it is an overpayment of tax credits ‘treated as’ an overpayment of UC, the COP26 guidance should apply - though it may require a challenge via JR to make that stick.

      [ Edited: 16 Jan 2018 at 12:31 pm by past caring ]
Andrew Dutton
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past caring - 16 January 2018 12:20 PM

It is reg. 12 of the UC (Transitional Provisions) regulations 2014 that provides for an overpayment of tax credits to be ‘treated as’ an overpayment of UC and so recovered from UC - so long as it is for the current tax year.

Arguably, because the mechanism is for it to be ‘treated as’ in this way (as opposed to making a tax credits overpayment straightforwardly recoverable from UC) then a claimant must also have a right to challenge via MR and appeal of the UC decision. And with the same rights to be properly notified by UC as if it were an overpayment of UC. And if that is the case, the claimant may not have been significantly disadvantaged in as much as neither tax credits nor UC have a right of appeal solely against recoverability.

And there is a discretion not to recover in UC - again, arguably, where it is an overpayment of tax credits ‘treated as’ an overpayment of UC, the COP26 guidance should apply - though it may require a challenge via JR to make that stick.

Interesting points. Worth a try I think, but of course the missing ingredient is any kind of proper notification of rights from UC. I will try to get DWP to clarify the position.

See you in 2025 or so…...

     
stuart
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Not specific to tax credits but rather to ‘legacy benefits’ so not clear if this includes tax credits, this written answer shows that there are more than 40,000 universal credit claimants subject to benefit overpayment recoveries (around 6 per cent of current claimant count) with outstanding balance averaging more than £1,000.

     
phewitt15
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I have recently won an appeal about the WCA assessment and my client should have had a back pay of the component (as there was pre April 2017 linking). 100% of the UC underepayment released after the tribunal decision was taken for an old tax credit overpayment. I think this will happen more and more and I couldnt see any right of appeal as any overpayment for a benefit UC replaces can be taken from a lump sum underpayment for anything except housing costs and a few other exceptions. So, for instance, if UC underpaid due to UC error and it took a while to fix any underpayment except for housing costs can be taken for old overpyaments. Just for info, if I was cynical I’d say it was in DWP interest to underpay UC to recover old overpayments.