Clause 28 - Recovery of overpayments
Tax Credits Bill
5:30 pm
Mr Paul Boateng (Financial Secretary, HM Treasury; Brent South, Labour)
The clause provides for the mechanisms by which an overpayment of tax credits may be recovered after provisions in clause 27 have established that that is due. There are three ways to do that, which the hon. Member for Northavon touched on. Money may be deducted from future payments of tax credits, obtained direct from the claimant as if the money were a tax debt—the ordinary law of debt recovery and judgment will apply—or by adjustment to the PAYE coding.
In practice, the first avenue used to collect overpayments would be deduction from future tax credits. The Revenue will establish guidelines under the code of practice to which I referred the hon. Gentleman earlier for the maximum amount by which a future award could be reduced to allow the recovery of an overpayment. That is necessary to avoid people experiencing undue hardship while the recovery is being made. That experience would be self-defeating within a measure that is designed to combat poverty and its effects, particularly if that relates to children.
Further recovery methods may be used if deduction from future payments is impossible. For example, as the hon. Gentleman mentioned, there may no continuing entitlement to tax credits. A debt would exist and a range of measures would be available to those who are entitled to enforce a debt. The ordinary range of measures, which would be available to any of us who are owed debts, will be available to the Revenue. I have already made it clear that the aim is to minimise incidents of overpayment, but the clause provides a variety of means of recovering money in a fair and cost-effective way when such incidents occur.
The hon. Gentleman asks whether we will try to recover everything in the following year. The answer is a categorical no for the reasons that I have described. That would be self-defeating. The time scale for recoveries will and must depend on the claimant's
resources and the amount of the overpayment. Those are the deciding factors.
It is important to consider whether a non-PAYE person or someone who is not in receipt of tax credits should be required to pay the sum at once. Again, the answer is no. The clause simply provides for direct repayment to become due and payable after 30 days. That does not mean that after 30 days a demand for the full amount will arrive for people on low incomes. However, repayment is then due, and one would require the Revenue to exercise proper discretion when considering the claimant's resources—again, the guidance is important—and to bear in mind the amount of the overpayment. The Revenue should proceed accordingly.