Tax Credits

Treasury written question – answered on 4th March 2005.

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Photo of Mr Bill Tynan Mr Bill Tynan Labour, Hamilton South

To ask the Chancellor of the Exchequer

(1) what safeguards are in place to ensure individuals do not suffer financial hardship through the recovery of overpayment of tax credits by the Inland Revenue;

(2) what factors are taken into account before the Inland Revenue takes a decision on the level of repayment an individual should make towards recovery of overpayment of tax credit;

(3) what steps the Inland Revenue takes to discuss affordability with individuals in advance of imposing deductions to recover overpayments of tax credit.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The Inland Revenue's Code of Practice 26 ("What happens if we have paid you too much tax credit?") sets out their approach to handling overpayments of tax credits. It describes a number of measures the Revenue has put in place to protect against hardship being caused by the recovery of an overpayment, which I can summarise as follows:

Where possible, the Inland Revenue will collect an overpayment from a previous year from a continuing award. There are automatic limits on the amounts that will be deducted from payments and these are designed to prevent hardship.

Where a claimant's circumstances change, the Inland Revenue adjust their payments for the rest of the year with the aim of paying the right amount of tax credits for the year as a whole. The Inland Revenue may make additional tax credits payments to prevent hardship where payments are reduced following the adjustment of an award. The effect of these payments is that only part of an expected overpayment being collected is recovered by the end of the year, leaving the balance to be recovered in later years.

In exceptional cases, where claimants still feel that recovery of an overpayment is causing hardship, the Inland Revenue will consider the facts of the case and may decide not to collect all or part of the overpayment, or allow more time to pay.

Where claimants have no award for the current year, they receive a "Notice to Pay". This advises them to contact the Inland Revenue if they want to arrange to pay back their overpayment in 12 monthly instalments, or to request repayment over a longer period.

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Annotations

tulsi mitra
Posted on 13 Dec 2007 6:00 pm (Report this annotation)

Although safeguards are put in place to ensure that people do not suffer hardship as a result of overpayments, people will inevitably worry that they are actually in debt.

Some of the affected people may never have incurred debt before and this can be a major concern/worry for them, even if they are allowed to pay the money back at an affordable rate.