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    Today we have received our first customer who has had their entitlement to Child Tax Credit removed due to the fact that she has been overpaid Working Tax Credit.

    On contacting the Inland Revenue they have confirmed that our customer will no longer be entitled to any further payments.

    I am assuming that we must remove from our HB calculation the Working Tax Credit and Child Tax Credit awards and request from the customer further information with regard to her income, in order to recalculate.

    My questions are, is this how other Local Authorities are going to treat this type of case? If not how?

    I have also heard that there are hardship payments to be made available? How are we to treat these?

    Wishing everyone a Merry Xmas & a Happy New Year.
    Hoping for a resolution to the Tax Credits asap.
    Grateful for any help………


    I don’t think you’re wrong on removing Tax Credit if none is in payment, I think that’s what I’ve been doing; I didn’t know that it would be possible to recover overpaid Working Tax Credit from Childrens Tax Credit but have seen this too unless I’ve misinterpreted something.

    I hope we get a little info soon on the hardship payments because it sounds like there could be quite a few takers! At least according to the newspapers and tv/radio reports anyway.


    Highlighted today at http://news.bbc.co.uk/1/hi/uk/3339313.stm

    Yes it must be correct to recalc without the tax credit. However, I do not think DWP realised this cross-recovery would happen either and I am told a draft Circular is due that changes the “golden rule” that we take the net amount of tax credit into account. I shall certainly be interested in the statutory backing for such a change. Ho hum.


    I contacted the Adephi regarding this because we had claimants who were having their overpaid WTC clawed back from their CTC. I asked if we should amend CTC as it seems unfair not to, when you know they are receiving less than stated on the award letter. Adephi’s reply came today. If the annual amount on the award letter has not changed, you do not amend the weekly amount, even if this if more than they are actually getting because they are repaying overpaid WTC. So when WTC has ended, we end it, but leave CTC running same as before. Hope this makes sense and is helpful.


    So when customers appeal, which regulation are u going to quote in support of your decision – you wil not be able to just rely on advice from DWP.


    I know I sound like a broken record sometimes but what the hell – DWP advice to LA’s is just that – “advice”. Sometimes their advice is excellent, thought out and well researched – other times it is nonsense and any sensible LA will ignore it. I’ll let you guess which particular category this little nugget falls into!


    I hope the ‘draft’ circular re TC OPs arrives soon. In my experience the only way of knowing that the IR are offsetting WTC against CTC is by comparing the amount due to be paid for the remainder of the tax year and the weekly/4 week payment. If they don’t add up – phone the IR.
    As has been the case from day one, the TC decision letters are less than clear!!


    I am very alarmed by the DWP advice quoted by Linda. Here is what the Regs say at Reg 33(2B):

    [i:6fc988473f]”Subject to paragraph (2), where the claimant receives payment of a child tax credit or working tax credit in respect of a particular week, the amount to be taken into account under paragraph (1) shall be the actual amount of such payment received.”[/i:6fc988473f]

    [The “subject to paragraph (2)” bit just means that you disregard anything in Schedule 4, like surplus earnings disregard in a 30-hour case]

    The reason why the Regs are carefully drafted like this is precisely, totally and utterly so that you [b:6fc988473f]don’t[/b:6fc988473f] take into account the headline rate of TC entitlement in a case where the actual payment is reduced to claw back an overpayment. I would not suggest following the quoted DWP advice on this point.

    There are two issues arising from Tax Credit overpayments:

    – In HB & CTB, the council doesn’t care how or why the amount of TC actually paid was arrived at: you just take into account the cash received, and any adjustments at the IR end are irrelevant
    – But lump sum clawbacks, equivalent in principle to stopping all HB payments until you have recovered an overpayment, obviously cause hardship by severely disrupting the claimant’s income stream. It seems to me that these hardship payments are equivalent in principle to reducing the rate of recovery in an HB case to £8.40 or whatever. But the IR won’t see it that way because they think in terms of whole tax years, rather than week-by-week entitlement. They will say: how can someone receive further payments of TC this year when they have already had their full whack? So the hardship payments are not described as TC payments. The DWP will have to decide how to deal with them in HB.

    Huw Jones

    Whilst agreeing with Peter’s argument in favour of following the Regulations – all the guidance supplied by the DWP points in the other direction.

    If we accept that the amount of TC to be used is that net of recovery of any overpayment – how does one go about this when the starting point of any calculation is the annual award of TC or the ‘balance to be paid figure’.

    for instance:

    date of notification 04.12.2003

    CTC balance to be paid £1179.72

    weekly CTC to be taken into account = £66.60

    However the claimant is actually receiving instalments of £42.33 per week.

    So in this case what method do we use to establish the weekly amount to be used for HB purposes – bearing in mind the already convluted guidance that currently exisits?

    It appears that the DWP did not foresee this method of recovery by TC.


    Castle Point Council’s policy team has produced a superb tax credits practice note, and the following metaphor is a direct steal from it so credit where it’s due.

    In the case under discussion here, the claimant was given a sack of 100 apples at the start of the year. 75 were Granny Smiths and 25 were Cox’s. In February, the Inland Revenue decided that they had given her too many Cox’s: she should only have had 5 of those. Unfortunately, she only had one Cox’s apple left in the sack, as well as 25 Granny Smiths. So the IR took back the one remaining Cox’s and 19 of the 25 remaining Granny Smiths, leaving the claimant with just 6 Granny Smiths to eat until the end of the year.

    The claimant cannot survive on 6 apples, so as a temporary stop-gap the IR will give her 10 pears to keep her going until the end of the year.

    The simple and straightforward task for HB and CTB assessors is this: calculate exactly, to the nanogram, how many bananas per week the claimant now has in her sack.


    I have just received this reply from DWP which seems to contradict the advice Linda got! I am going back to them!

    “Where an award is still in place you should continue to take it into account even if it is overpaid and likely to be recalled. This is because while the credit is being received it will be income. There are two types of recovery, one of which is being made in-year, the other is being recovered from the following tax year.

    If the overpayment is being recovered from the tax credit that is still in payment, eg WTC overpaid and recovered from CTC, then you need to deduct the overpaid amount (WTC) from the balance left to pay (CTC) and apportion this over the relevant period. This period will be from the date of the award letter (date of change) to the end of the tax year.

    If there is only one tax credit in payment and the amount being paid is reduced because of the recovery of the overpayment, you need to know what the overpaid amount is or the new balance of the annual award that is actually to be paid. The principle is the same as above in which you are taking the amount actually paid into account. This will mean that HB increases because of a reduced income. However, this should balance out as previously a higher tax credit income was taken into account which meant less HB.

    Just for your information, regulations are currently in the process of being laid where an overpayment of a tax credit in the previous tax year is recovered from a tax credit made in the following tax year. A circular will be issued to local authorities as soon as the regs have been laid”


    I pointed out to the DWP the other day that they were creating a ludicrous situation where a HB claimant with an in-year Tax Credit overpayment recovery would be much worse off in both financial years than one with an identical overpayment and Tax Credit entitlement where recovery commenced in the new financial year. I wonder whether this has led to a change of heart. It is a matter of some regret though that I was unable to convince them that the entire Tax Credit system lacks any useable legislative framework in HB/CTB.


    Who said this?

    “Sadly I don’t think they are just teething problems. The fundamental question is whether the Inland Revenue with its culture and its way of collecting tax on an annual basis from more affluent people is really capable of delivering social security benefits on a reliable weekly basis to people with very low incomes.”

    Sums it up perfectly doesn’t it?


    My LA has adopted the ‘Amount paid … period paid’ philosophy – in other words you take into account what they are being paid for the period it is paid – you take the net amount where an overpayment is being recovered.

    What has stuck me – and forgive me if I am going off the original point to this thread – is that if the IR are recovering monies within a Tax Year, anyone who is following this philosophy will be overpaying people from April 2004 – unless they have somehow flagged cases where an overpayment is being recovered. This is because they will start getting the gross rate / the amount they are actually entitled to again from Apriil 2004 (IF they have recovered it in the same tax year) because your computer systems will go through year end and calculate new year entitlements on reduced amounts of Tax Credit. Or can these be ignored under the 30 week rule (change to Tax)?

    Are we the only LA not to flag these cases? If not, I would feel slightly better (but not by much!!).

    Huw Jones

    I have just received a reply from the DWP re hardship payments which reads:

    “these payments are not part of the award but are payments of income and should be treated as such. All I can advise is to treat them as income over the period they are paid for… this advice is subject to change as we are still in discussion with the IR”

    I don’t think that last line was entirely necessary — we’d already worked that out.

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