Tax Credits overpayment

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    Wonder if anyone can help us with a case. We have a customer whose benefit claim has stopped in september as has moved out of our area and is not claiming benefit at his new property – he has written to us asking us to relook at his benefit for the year 2010 -2011 as he has been advised by tax credits that his tax credits have been cancelled for that period and he now has an overpayment that he has to pay back. He has various overpayments with us for last year that are still outstanding and he feels penalised that we are taking his tax credits into account last year asking him to pay back overpayments that have occurred for various reasons and then his tax credits have been cancelled and he is now having to pay that back too.

    I have looked through different posts and note this one http://hbinfo.local/forums/topics/withdrawal-of-all-tax-credit
    and understand that we would only take the net payment whilst the overpayment is being recovered but as this person is no longer on benefit should we readjust it for the period they have cancelled tax credits for or are we right to continue paying based on the amounts they received at the time.

    Hope this makes sense and thank you in advance for your help

    Kevin D

    This depends on your interpretation of the legislation and existing case law.

    In CH/1450/2005 & CIS/0647/2007, it was found that retrospective reductions in tax credits could not be taken into account for HB/CTB. At the time, I thought both decisions were correctly decided. However, another CD and the passage of time has left rather more doubt in my mind. The basis of the two CDs was that HBR 32 dictated the amounts that must be taken into account and the period over which payments must be attributed. BUT, in CH/0653/2009, Judge Rowley suggested, without making any firm finding, that HBR 32 only covered the calculation of tax credits as income, not the effective date of changes in circumstances as driven by HBR 79 (& the HB/CTB Decisions & Appeals Regs).

    It might therefore be open to argument that retrospective reductions of tax credits *should* in fact be taken into account for HB/CTB (subject to the beneficial change rules) and any other benefits for which the structure of the relevant provisions is the same.

    For cases where Tax Credits continued to be paid after the claimant had made repeated attempts to stop payment, it has also been found that Tax Credits could count as voluntary payments (and therefore be disregarded) – see CIS/1813/2007 but also look at CH/4371/2006 by the same (then) Commissioner who somewhat qualified “1813”. It *may* be arguable that this principle extends to other errors by HMRC.

    Also see an earlier thread on the issue of effective dates for Tax Credits:

    CH 653 2009

    John Boxall

    The whole position with tax Credits is completley at odds with the treatment of other arrears/retrospective adjustments of income – why?

    Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and—and in short you are for ever floored.

    Wilkins Micawber, Ch12 David Copperfield


    So can we go back and change the tax credit awards then?

    Otherwise this customer appears to be paying back HMRC for an overpayment of tax credits but also to us as well for an HBOP for the same period?

    Forgive me but i have tried to get my head around the explanation above and am struggling somewhat! But thank you for replying


    Kevin D


    John: From memory, wasn’t the idea to take retro HB/CTB overpayments out of the equation given the “whole year” nature of TCs? Trouble is, if Judge Ramsay’s observations are correct, it could be that TC’s should have been dealt with retrospectively all along….

    Al-mo: It’s up to how your LA interprets the law. Most LAs (I suspect) will be continuing to refuse to make retro changes to HB/CTB where TCs have been retrospectively changed. As cited in my earlier post, CH/1450/2005 supports that view. However, in my view, an alternative approach is arguable which *may* be supported by CH/0653/2009. In short, it will probably need a further UTD to “definitively” deal with this argument. In the meantime, LAs will have to decide what they think is the correct interpretation of the effect, or otherwise, of HBR 32 / HBR 79 in relation to TCs.



    Cheers – that explanation is more easily digestible into my tiny little mind lol.

    Thanks again.


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