Tax Credit Overpayments

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  • #19889
    DianeT
    Participant

    Just a new quirk. I phoned tax credits last week about my own personal award & asked what would happen about the overpayment. The reply was that at present it would be deducted from the ongoing award – fair enough. However, the advisor then went on to say that the Inland Revenue are writing to everyone who’s been overpaid in September to ask them how they wish to pay back the overpayment. If preferred, they can settle the overpayment in full & then go on to receive the “proper” payment!
    Just made me wonder how on earth we assess someone who pays it all back, as to include the full award for those people whilst allowing for the overpayment recovery for people who opt to have reduced payments seems unfair. Also, I’ve not heard anything about this previously – have I missed something?

    #1350
    Anonymous
    Guest

    I have had a similar question asked of me, which I cannot find the answer to in any circulars or guidance manuals.
    We have a HB/CTB case, where the claimant was in receipt of WTC only prior to April 04. They continued to receive provisional payments after April, so WTC was included within the HB/CTB claim. Once the tax credit renewal form was calculated, the claimant is no longer entitled to WTC, and has not been entitled since April, so an overpayment has been calculated. There is no other tax credit to recover the money from, so one would think the claimant will be making arrangements to pay it back.
    My Question is this: Do we go back to April and remove the WTC from the claim as this has been overpaid and will be paid back? Do we leave the WTC in, because the claimant has had the money and has not paid it back yet? Or something else – all remedies greatly appreciated.

    #1351
    Anonymous
    Guest

    I have now found the answer to my question. Para 38 in circular A30 has given me the answer. Basically we do not reassess the HB/CTB award because there is no provision in regulations to do so.

    So there you have it!!

    #1352
    peterdelamothe
    Keymaster

    I would be most interested to learn if this is challenged and the result. The idea of the way tax credit income is taken into account is that it is “swings and roundabouts” i.e. we take the amount received whether right or not and this balances over the two years i.e. too much tax credit, less HB and vice versa . But if the person has to pay the IR back AND the income is taken into account in their HB assessment, this does not work and I am sure we can expect some test cases.

    #1353
    nickd
    Participant

    As an added complication, can I ask about a case we are dealing with on appeal? Our customer failed to declare WTC (to which entitlement has now ended) and was subsequently overpaid HB. He was not working, and at interview admitted he knew he was not entitled to WTC. However, WTC was taken into account in adjusting his HB and calculating the overpayment. He now says that he will have to pay the WTC back (although IR haven’t yet decided that) and we should not take it into account as income. I think it should be treated as income for the period it was received, as it did form part of his income at the time – and he spent it. 👿

    #1354
    Anonymous
    Guest

    Hi Nick
    Your question is like mine. Yes I think it should be included as income for the period he received it, but the crucial question is, if he does have to repay it back to IR and it is not recovered from any other tax credits ie ongoing CTC or future awards of TC, because of no entitlement, then should we keep it in the claim or should we remove it?
    I think you are the first authority who has said they are taking a case to appeal, and every other authority in the country is awaiting the decision.
    Please will you post the result of your appeal case once you have the decision, and good luck.

    #1355
    nickd
    Participant

    I’m now wondering whether we have to provisionally exclude WTC from the income calculation until IR give a decision on any overpayment and whether they will recover it. However, you may be disappointed to know that the customer’s CAB adviser has told me that he doesn’t want to continue with the appeal. We may have to wait a bit longer for a resolution. 🙄

    #1356
    Anonymous
    Guest

    Whatever we do, is always going to cause a lot of work, confusion, decisions that make us look fools when we come to explaining them to the customer.
    It’s a shame your appeal will be withdrawn, as this would have provided Local Authorities with more arguments to take to the DWP, to get them to change the system. But hey, roll on April for the next instalment of this ongoing TC saga! 😡

    #1357
    Anonymous
    Guest

    I too have had a case where customer has informed us that he now has to repay Tc which was overpaid, he no longer gets any Tc, has not for some time and is unlikely to for the foreseeable future (his words).

    As you can imagine, customer feels this overpaid Tc should be removed from his assessment of Hb/Ctb, interestingly he has yet to receive an actual bill for this payment, yet.

    Has anybody any evidence to show actual recovery by the Ir that is not through further awards of Tc?

    #1358
    nickd
    Participant

    Our man has now received a WTC notice saying how much he has to pay back, but not how or from when. Until he provides evidence that he is actually repaying a WTC overpayment, I’m reluctant to remove it from his income, expecially as the OP is less than his total previous award.

    #1359
    Anonymous
    Guest

    Nick,

    at the risk of appearing less than on the ball, why are you considering removing the WTC overpayment from the assessment and from what income ? (There is currently no WTC award in payment if I’ve read the previous posts correctly). For any other overpayment of a State Benefit we’d still look to take the gross award into consideration for the assessment so what’s different here ? If you’re looking to reduce earned (or any other) income, on what basis would you be doing this ?

    Cheers.

    #1360
    janish
    Participant

    Nick,

    See the topic entitled ‘Withdrawal of all tax credit’. Apparently the agencies were looking for a test case, they might be interested in yours.

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