Unusual TC payment method?
I have a client who is a single parent with two young children. Having done the calculations she should be entitled to maximum CTC and WTC totalling around £180 pw. I have seen the HMRC TC award letter showing her entitlement to be £180 pw however it appears HMRC have paid the client £244 pw for the first 7 months of the tax year leaving her with payments of only £67 pw for the remaining 5 months as there is a small over payment being recovered. She has not been over or underpaid but instead paid in this unusual way which has made her financial position worse. Has anyone had any experience of this happening and if so is there any redress?
Thanks in advance.
Laura[ Edited: 25 Jan 2019 at 11:59 am by Auslau ]
HMRC may explain this as an unusual payment method but I think it sounds like an in-year overpayment being deducted at a rate that leaves children in hardship. If the award had ended after 7 months then presumably there would have been an overpayment, but the in-year adjustment is made to prevent an overpayment at the end of the tax year. It is probably worth trying to find out why they paid too much for the first 7 months and if HMRC error or failure to act on information can dispute recovery on TC846.
However, it looks like around 65% of her on-going award is being deducted to repay the amount(or prevent an overpayment building up over the whole tax year). If she is entitled to maximum tax credits, a limit of 10% of on-going award would be reasonable - this is the legal limit that applies to end of year overpayments in this case. See CPAG handbook p1498 also HMRC guidance: https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0214120#IDAPZXEE and request adjustment to recovery at 10% – this can be adjusted to avoid hardship now, but will mean she has more to repay in future years.
Thanks for your thoughts on this! I was not aware I had received a reply. We will get in touch with HMRC to see what they say re the first 7 months. Will let you know if anything interesting comes of this!
Thanks again, Laura