Tax Credits

Treasury written question – answered on 16th October 2006.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

To ask the Chancellor of the Exchequer

(1) whether his Department plans to change the way that tax credit overpayments are recovered;

(2) whether he has made an assessment of the merits of a system of suspending payments until the overpayment is cleared for dealing with tax credit overpayments.

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

I refer the hon. Member to my remarks and those of my right hon. Friend the Chief Secretary to the House on 7 June 2006, Hansard, column 293 and columns 326-27.

HMRC's policy is set out in CoP26, "What happens if we have paid you too much tax credit." When HMRC seek recovery of an overpayment they seek to do so in a manner which will not put a family in financial difficulty. PBR 2005 announced that from November 2006 HMRC will apply automatic limits on recovery of excess amounts paid where awards are adjusted in-year following a reported change. These limits will be the same as the current limits on cross-year overpayment recovery, and will ensure that no low- to middle-income family faces unexpected reductions in tax credit payments.

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