Clause 27 - Overpayments
Tax Credits Bill
5:00 pm
Professor Steve Webb (Northavon, Liberal Democrat)
The amendments are a pair. They deal with overpayments and recovery of overpayment of tax credits. They would clarify the scope of recovery and the circumstances in which overpayment would be recovered.
Under social security legislation, overpayments can be recovered if someone is found to have failed to disclose or to have misrepresented a material fact. We wonder whether similar provisions—which we cannot see in the Bill—will apply to tax credits.
Amendment No. 67 would define a category of excess payments that are recoverable by reference to a new subsection (2A), which is introduced in amendment No. 68. It determines that overpayments are recoverable, whether there has been fraud or—I hesitate to use the word ''wilful''—misrepresentation or deliberate failure to disclose. The genesis of the amendments is the problem of people who have to forecast their incomes. When someone's income from a previous year is recorded on a P60, there should not be problem. At the end of year, no reassessment
should be necessary, because that person's income in the previous year is historical fact, and will be known to the Revenue through the P60. However, if the person had to estimate his income in the current year, or if a change of circumstance has affected his entitlement, resulting in overpayment, what will be the scope for recovery of overpayment?
One case that springs to mind, for the purposes of the working tax credit, is of someone who is on the border of 29 or 30 hours, or 15 or 16 hours. Given that such matters will be determined on the basis of an annual average of hours worked, or the weekly equivalent of the annual average, it would be extraordinarily easy for someone to incur an overpayment, through no fault of his own, because he did not average his hours accurately. Consequently, he would find that a substantial overpayment could arise. For a single person who has to work 30 hours to get anything, who is in low-paid work and who therefore receives a generous tax credit, the amount of overpayment could easily be in excess of £1,000 for a year.
The amendments establish the circumstances in which there will be an attempt to recover overpayment. Will recovery be sought only when there has been fraud and deliberate misrepresentation, or will the Government try to recover money when there has been an accidental failure, or when someone's estimate of annual income is incorrect? The amendments are intended to mirror the social security provisions for recovery of overpayments. We hope that the Government will accept the amendments on that basis. Alternatively, will the Minister clarify any differences in the principles that will be applied to overpayments of tax credits?