Tax Credit debts from 2004-06
We have been made aware of a person who has TC overpayments from 2004-06 (through admitted HMRC error) but the person has recently been notified of recovery through deduction from wages.
It’s not yet clear what happened about notification, any disputes that may have been lodged at the time of the decision, or any payment arrangements prior to the recent notification.
Has anyone else noticed very old TC debts resurfacing like this?
I am far from an expert on tax credits Andrew but the HMRC annual report and accounts 2011/12 states at para 9.10 on page 58 -
A key aspect of the tax credit Debt Strategy for 2011-12 was to address the older inactive debts that were not in a Time-to-Pay arrangement. Earlier in the year, and following consultation with the NAO, we conducted an extensive exercise to test how successful we might be in pursuing inactive debts and to identify the associated costs. This resulted in a recommendation to remit all inactive debts over 3 years old. The exercise resulted in remissions totalling £1.22 billion involving over 1 million aged and inactive overpayments.
So it might be worth checking if your client’s debt was written off back then?
Not as earnings attachments but we have started coming across old debts like this being recovered from new UC claims.
A colleague wrote to query 3 debts on behalf of a client and has just received a reply explaining 2 of them (client recalls and accepts liability). The 3rd (& largest - around 20 years old) could not be explained as ‘all relevant paperwork been destroyed’ but of course DWP maintain the debt stands.
I was just going to start a thread about transfer of TC debts to DWP and then I saw Andrew’s thread.
My clients have a recent Tax Credit debt but are no longer on TCs and don’t receive UC. And I was wondering whether their debt has now been transferred to DWP, who do have the power to use direct earnings attachment. From Andrew’s post, it looks as if this has happened now.
On Revenue Benefits, the latest is “ This transfer has been delayed to at least October 2018” https://revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt/.
The government website says : Your debt may be passed to the Department for Work and Pensions (DWP) if HMRC cannot get the money you owe. You’ll get a letter called a ‘TC1131 (non-UC)’ when this happens. https://www.gov.uk/tax-credits-overpayments/not-repay-hmrc
Does anyone know when this transfer has started?
In May this year, the Benefits & Credits Consultation Group received a message titled: “Tax Credit Debt Project (Non-UC)” saying:
“From 13/05/19 a segment of Tax Credits debt will start to transfer from HMRC to DWP or, where applicable, the Northern Ireland Department for Communities (NI DfC). This was announced by the Secretary of State in a written Ministerial Statement in February 2017. Approx. 600,000 debts are expected to transfer over a 3 year period.
This move will allow DWP & NI DfC to recover the debt using their suite of powers, including directly from an individual’s earnings where a customer fails to repay the debt voluntarily. The customers impacted will be those whose Tax Credits claim has ended, are in PAYE employment, but have failed to engage with HMRC to establish a repayment plan.
HMRC will write to all customers whose debt is moving to DWP or NI DfC. This letter will provide customers with details of their outstanding debt balance as well as a clear explanation of what will happen next. We have tested these letters with customers to ensure that the information they contain is easily understood. Further information will be available on gov.uk or nidirect.gov.uk, where applicable, from 13/05/19.”
Followed by a message a couple of weeks later which said:
“To note this will not be going live as planned on 13/05. Will let you know as soon as the go-live is confirmed.”
All quiet since then - I’ve asked for an update and will let you know anything further.
Further to Mark’s email, we contacted HMRC via BCCG a few weeks ago as we were alerted that they had started to transfer cases. HMRC confirmed this went live in June. We then replied asking for clarification on a number of outstanding questions.
I will get something posted on Rev Ben to confirm while we wait for further information.
Thanks for your help, Mark and Victoria. I will check Rev Ben for updates
Andrea - we have added a new page to Rev Ben covering this https://revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt/dwp-and-tax-credits-debt-non-uc
Thanks for the update, very helpful.
The Revenue benefits article states if the client disputes the debt they should contact the tax credits helpline.
Do we know if they will be told the usual things such as late disputes, late mandatory reconsiderations, complaints or is there anything different the client would be expected to do?
Do we think the DWP would put things on hold whilst its being disputed?
For disputes, according to the statement in the Government response to the Committee of Public Accounts on the Twelfth to the Nineteenth reports from Session 2017-19 in March 2018 (page 12):
7.4 “When claimants move to UC, the Department sends them a summary of any outstanding debts, advising that these will be transferred to DWP. Debts are only transferred when they are not subject to ongoing disputes or appeals.”
Once it has been transferred, it seems very difficult to get the DWP to put recovery on hold (but may be possible due to hardship). If the client contacts HMRC and says it should not have been transferred because it is disputed, then they are likely to be told it is too late to dispute the decision to recover (3 months, although a late dispute can be accepted by discretion, COP26 guidance refers to exceptional circumstances), and/or out of time to request a MR/appeal of the entitlement decision that caused the overpayment (but late application can be accepted up to 13 months and if HMRC refuse a late MR still arguable have a right of appeal).