Overpayment of tax credits

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    Please help!!!!

    I have a customer where we have used tax credits for a period during his entitlement. However, the Inland Revenue have now told him that he has been overpaid and all of the money will be recovered.

    In this case would we have to remove tax credits for the period they are in use as the customer was not entitled to them or do we continue to use the tax credits.

    Unfortunately, the Inland Revenue have advised this customer that as they are recovering all of the money we should remove the amount from the calculation. If this is the case could someone please point me in the right direction with regards to the regulation that covers this subject.

    Also if it is the case that we would continue using the tax credits in the calculation could you please point me in the direction of the regulation that covers this.

    Thank you


    I’ll have a bash!
    I think the revenue are wrong in their interpretation.
    CTC and WTC both fall to be taken into account in full.
    However, if a o/p of tax credit (from last or previous year) is being recovered, you use the amended amount of current year award, and do not “adjust back”. HB regs 40(6).CTB 30(6) 😉
    Because Hb entitlement is based on the amount of Tax Credits you actually gat paid, we do not treat customer as having been overpaid (or underpaid) for that previous period, so HB / CTB is not revised for that period. 🙄
    So we use the revised amount after adjustmet (what he is being paid for current period). That would normally be award less recovery for overpayment. In this case the award is sweet nothing, but we still don’t adjust back. 😉 Para C3.644 of guidance manual (yes, I know it’s only guidance) 😛

    Harsh, maybe, but true!! 8)

    Hope this helps, Jon

    Kevin D

    This depends on how you view the regs.

    [b:26e84d7725]HBR06 32[/b:26e84d7725] sets a deeming provision as to how Tax Credits [u:26e84d7725]shall[/u:26e84d7725] be calculated. On the face of it, this would appear to suggest that there is nothing that can be done to retrospectively amend Tax Credits previously paid.

    However, if I was the clmt, I’d take issue with the words “[b:26e84d7725]due to be paid[/b:26e84d7725]” (amongst other things). If the amount DUE to be paid is retrospectively found to be zero, I’m wondering if it can be argued that Tax Credits should be reassessed accordingly (for HB). Even if that is correct, do the DAR regs then allow a supersession (or revision) re the beneficial change rules?

    As an aside, the removal of a clmt’s Tax Credits suggests there has been a change in earnings / other income – this will need to be looked at. Ironically, if there has been another change of income that causes an overpayment, I think it can be argued that the underlying entitlement rules REQUIRE that the reduced / nil Tax Credit must be taken into account – the wording of HBR 104 requires that the correct circumstances must be taken into account as if they were known at the time…..

    Hope this helps.

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