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Tax Credit overpayment recovery

 

JayKay
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Benefits Adviser Penwith Housing Association Penzance

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I’m working with a client who has some learning difficulties.  Two of his children moved out, but he didn’t notify HMRC as he hoped it would be only temporary - however it wasn’t.  He was therefore overpaid for 5 months.

He still has two children at home with him so has an entitlement of around £117pw.  HMRC are only paying him £60pw as they are recovering both an end of year overpayment and an in year overpayment.

The local council has also raised overpayments based on the actual Tax Credits paid (which I know is correct in law) but as he’s entitled to full HB and CTS support now anyway this means that the overpayment is effectively being recovered twice.

We’ve tried asking for the Tax Credit recovery to be reduced based on hardship (even with debt advice his outgoings are still significantly more than his income) but this has been refused.

I know the decision can’t be appealed, but is there anything else that can be tried?  He’s now got rent arrears and the Council is about to taken action for his council tax debt (they are currently asking for £75pcm).  His situation really is dire.

     
bristol_1
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WRAMAS Bristol City Council

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Hello

CPAG WBH p1498 - There is a maximum deduction to recover end-of-year OPs which is set at 10% if max CTC in payment with no adjustment for income; this a maximum and if you request a hardship form they should send out an income and expenditure form in order to request reduction of the recovery rate. In-year recovery can also be adjusted on hardship grounds (p.1499)

On a related note, there used to be an entry in the tax credits online debt management manual which said:

“DMBM555630 - Debt and return pursuit: Tax Credits: mental health cases: evidence obtained
Only in exceptional circumstances will the evidence received be insufficient to relieve the claimant from responsibility for payment.” [i.e. where there’s evidence of mental health then you have a good chance of writing off the OP]

Today I went to copy this phrase into a letter to ask for a TC OP to be written off on account of my client’s MH, and found that this now seems to have been replaced with -

“Debt and return pursuit: Tax Credits: mental health cases: evidence obtained
If the evidence satisfies you that the customer should not be pursued for payment of the overpayment(s), you should take the following action.”
(https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm555630)

Any ideas when this changed??? Quite a big change in the wording.

You could use evidence of his LD to ask for a debt write off of the OP, additionally citing hardship, using the above guidance.

     
bristol_1
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Hi, also worth looking at the COP26 guidance
https://www.gov.uk/government/publications/tax-credits-what-happens-if-youve-been-paid-too-much-cop26

“Financial hardship

If you need to discuss financial hardship with us, phone us to explain this. When you phone we may ask you about any family circumstances that may lead to extra living costs. For example, if you’re looking after someone who is chronically ill or disabled. In some exceptional circumstances, we may cancel an overpayment altogether.

If you can’t pay for your essential living expenses

If you can’t pay for your essential living expenses such as your rent, gas or electricity and:
• you’re paying back an overpayment directly
• we’ve asked you to pay back an overpayment
phone the Payment Helpline on 0345 302 1429. We’ll ask you about your circumstances in more detail. If we’ve reduced your ongoing payments so you can pay back an overpayment you can find more information at ww.gov.uk/taxcredits-overpayments or you can phone us on 0345 300 3900.
You may be asked for more information regarding your income and living costs. Once we have this information we aim to make a decision within two working days.”

Council tax and rent arrears are essential living costs, so it seems to me that your client fits into the COP criteria for having OP recovery reduced. Esp if placing him at risk of homelessness/prison for nonpayment of rent/CT.

     
JayKay
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Hi

The end of year recovery is at the 10% rate, and we have already gone down the hardship route following the COP26 guidance.  However HMRC have refused to reduced the recovery rate - even though we informed them about the risk to his tenancy and council tax arrears, so I wanted to know if there was anything else we can try.

His learning difficulties are obvious to anyone that works with him, but he doesn’t really acknowledge them himself and he has no evidence of them -so we can’t go down the write off route.

JK

     
bristol_1
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That’s tough if you can’t evidence his difficulties for the write off option ... regarding the refusal of HMRC to reduce the reduction rate, even though he can’t pay essential bills - perhaps you could complain via his MP? I know that TCO are reluctant to reduce the in-year overpayment as they do this on order for the claimant not to be overpaid by the end of this tax year, but it might be possible to say that these are exceptional circs. On the revenuebenefits site they say
“The first involves getting HMRC to suspend recovery of the overpayment until the financial situation improves or, in cases where there is unlikely to be any improvement in the claimant’s financial situation, the second option is to ask HMRC to remit the debt on financial hardship grounds. Debts remitted due to hardship remain recoverable but may be pursued until later review of financial circumstances.”
https://revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt

     
Mark Willis
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Hi JayKay

Just to add, the decision on entitlement can be appealed of course, so if there is any argument that the two children were normally living with him up to a later date, this could be worthwhile, i.e. until some later point at which it became clear it was not a temporary absence. Recovery is still suspended during the mandatory reconsideration and appeal process (COP26 p.1) so this could at least buy some time. Other than that, I agree hardship route, involve MP and stress how much the other children are left to live on - £60 a week for two children is virtual insanity and inevitably going to cause severe hardship - possibly also judicial review of refusal to adjust in-year recovery on hardship grounds.

Mark

     
Jon (CHDCA)
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JayKay - 05 October 2018 10:22 AM

We’ve tried asking for the Tax Credit recovery to be reduced based on hardship (even with debt advice his outgoings are still significantly more than his income) but this has been refused.

I know the decision can’t be appealed, but is there anything else that can be tried?  He’s now got rent arrears and the Council is about to taken action for his council tax debt (they are currently asking for £75pcm).  His situation really is dire.

Does “debt advice” = budgeting advice, or was there also advice on any appropriate debt options? If benefit options are being exhausted, insolvency or other debt solutions could help.