- AN ADVISERS GUIDE -

Transcription

1 Pb37A OVERPAYMENTS OF CHILD TAX CREDIT AND WORKING TAX CREDIT - AN ADVISERS GUIDE - 1. INTRODUCTION This leaflet is intended t prvide infrmatin and guidance fr advisers dealing with clients wh have incurred verpayments f Child Tax Credit and/r Wrking Tax Credit. It lks at the pssible causes f verpayments and the methds used by HM Revenue and Custms (HMRC) t recver them and als prvides sme advice n ways f challenging decisins. This leaflet deals with cases cvered by guidance applicable frm 31 January HOW DO OVERPAYMENTS HAPPEN? The way the Tax Credit system wrks means that under and verpayments are almst inevitable! This is because whilst entitlement is calculated n an annual basis fr the whle tax year, the initial award is a prvisinal decisin nly, based n infrmatin abut the claimant s incme and ther circumstances in the previus tax year. After the end f an award perid, a final assessment is made based n the actual incme and situatin fr the tax year in questin. If there have been any changes in incme r ther circumstances during the year which affect what yu are entitled t, the final award will, f curse, differ frm the initial ne. In additin, althugh initial award ntices have nw been imprved, the methd fr calculating Tax Credits is, in any case, s cmplicated that many advisers wuld struggle t understand it, let alne inexperienced claimants. 1

2 3. WHICH OVERPAYMENTS ARE RECOVERABLE? The law cncerning Tax Credits verpayments is very different frm that which gverns verpayments f ther benefits. If yu are verpaid a benefit by the Department fr Wrk and Pensins (DWP), they can nly ask fr it back if they can shw that it happened because yu misrepresented r failed t disclse a material fact. If yu are paid t much benefit as a result f the DWP s wn mistake, it is nt legally recverable frm yu. Fr Tax Credits, hwever, all verpayments are legally recverable regardless f what caused them. HMRC des nt have t shw that yu have caused r cntributed t the verpayment. HMRC is allwed t recver any amunts paid in excess f the claimant s actual entitlement even if the verpayment has been caused by its wn mistake, (but see paragraph 5 belw). 4. CAN THE CLAIMANT APPEAL? It is nt pssible t appeal t an independent tribunal against a decisin that an verpayment is recverable because, as we have already said, all verpayments are legally recverable. Yu can appeal against the assessment itself if yu believe that yur entitlement has nt been crrectly calculated. Yu can d this when yu receive an initial decisin during the year, r when yu receive the final assessment at the end f the year. Yu have 30 DAYS frm the date shwn n the ntice f the decisin t ldge yur appeal. 5. DOES THE CLAIMANT HAVE TO PAY IT BACK? Althugh all Tax Credit verpayments are recverable, HMRC has discretin nt t recver. Guidance has been issued by HMRC, explaining when they will and will nt, recver an verpayment. The current guidance is effective frm 31 January 2008 and cvers all disputes decided after that date (it als cvers disputes which were already in the system at 31 January 2008, as lng as n decisin had yet been made). Any disputes which had already been decided prir t 31 January, even thse which are being disputed further, will be dealt with under the ld guidance. 5.1 GUIDANCE HMRC might agree nt t recver all r part f an verpayment if: Yu were paid t much because f fficial errr and it was reasnable fr yu t think the award was crrect OR It wuld cause hardship t yu r yur family if yu had t repay the verpayment. 2

3 HMRC has set ut certain respnsibilities which they shuld fulfil when dealing with a claim, and certain respnsibilities which the claimant has. These are as fllws: HMRC s respnsibilities: When yu cntact them fr infrmatin they will give yu the crrect advice based n the infrmatin yu give them. When they receive r renew yur claim they will accurately recrd and use the infrmatin yu give them t wrk ut yur Tax Credits and pay the crrect amunt. When they send yu an award ntice they will include infrmatin yu have given them abut yur family and yur incme. If yu tell them that there is a mistake r smething missing n yur award ntice, they will put it right and send yu a crrected award ntice. When yu cntact them t reprt a change f circumstance they shuld accurately recrd what yu have tld them and send yu a new award ntice within 30 days. This 30 day timeframe des nt begin until they receive all f the infrmatin they need frm yu t make the change. It is therefre imprtant that yu prvide them with full and cmplete infrmatin when yu reprt a change. The claimant s respnsibilities: When yu make r renew yur claim yu give them accurate, cmplete and up t date infrmatin. Yu tell them f any change f circumstance thrughut the year s they have accurate and up t date infrmatin. This means yu nt nly tell them any changes which yu are required t reprt within ne mnth f them happening, but als any changes in incme as sn as pssible t reduce the chance f receiving an verpayment. If yu dn t get an award ntice within ne mnth f telling them abut a change in circumstance cntact them as sn as pssible. Each time yu get an award ntice yu use the checklist that is sent with each award ntice. Yu shuld check all the items listed and tell them if anything is wrng, missing r incmplete. The main details they expect yu t check are: whether the award is fr yu as an individual r as part f a cuple the hurs yu and/r yur partner wrk whether yu receive Incme Supprt r incme-based Jbseekers Allwance incme-related Emplyment and Supprt Allwance r Pensin Credit whether yu, r anyne in yur husehld, is entitled t DLA and if s, which cmpnent and at what rate (this affects entitlement t the disability /severe disability elements ) the number and age f any dependent children in yur husehld childcare csts yur ttal husehld incme fr the perid shwn n the award ntice 3

4 If yu are unable t check an award ntice due, fr example, t family crisis, let HMRC knw straightaway After yu receive any award ntice yu shuld check that the payments yu receive frm them every week r every fur weeks match the amunt they said yu shuld receive n the award ntice. Yu are expected t tell them if yu have received any payments that did nt match what was shwn n the award ntices during the perid that the verpayment arse. If yu spt an errr n yur award ntice yu shuld tell them within ne mnth f receiving yur award ntice. (Make a nte f the date yu received yur award ntice and the date yu cntacted them. They may ask yu t prvide this infrmatin t shw that yu acted within ne mnth) WHAT IF YOU OR THEY FAIL TO FULFIL THE RESPONSIBILITIES? If yu fulfil all yur respnsibilities but HMRC fail in theirs, they wn t recver the verpayment which arse frm their failure. If yu tell them abut an errr, they wn t cllect any verpayment that may build up because f their failure t crrect the errr frm that time. NB: HMRC has 30 days t act n a ntificatin f a change in yur circumstances. They will recver any verpayment which builds up during this first 30 days as it is nt due t any failure n their part t fulfil their respnsibilites. If HMRC fulfil all their respnsibilities but yu fail in yurs, they will nrmally recver all the verpayment which resulted frm yur failure. This means that if yu ntify them f an errr mre than ne mnth after yu received the award ntice, yu will be asked t repay any verpayment which accrued up t the date yu did ntify them (i.e. yu still shuld nt have t repay any verpayment which ccurred after yu ntified them because that wuld be due t their failure). If yu fail t ntify HMRC f a change r an errr whithin ne mnth, but there is a gd reasn fr the delay, e.g. yu r smene n yur family was seriusly ill, explain this t HMRC. If yu bth fail t meet yur respnsibilities, HMRC may agree nt t recver part f the verpayment, depending n the circumstances. 5.3 HOW TO DISPUTE AN OVERPAYMENT If, lking at the abve guidance, yu dn t agree that yu shuld have t pay back the verpayment yu can dispute the decisin by cmpleting frm TC846. Recvery f the verpayment will stp while the dispute is reslved. 5.4 HARDSHIP If yu are having difficulty meeting essential living expenses because yu are having t repay a Tax Credit verpayment, HMRC can give yu lnger t repay. In exceptinal circumstances, fr example where there is serius illness r severe hardship, they may agree nt t recver the verpayment at all. 4

5 6. HOW ARE OVERPAYMENTS RECOVERED? Overpayments can be recvered in three ways: i. By reducing an nging award f Tax Credit. This will be used where the claimant is still entitled t Tax Credits and the claimant(s) are the same as when the verpayment ccurred. Deductins are made at the fllwing rates: 10% fr claimants receiving the maximum award, r 100% if receiving nly the family element f Child Tax Credit, r 25% fr all ther claimants These limits mean that an verpayment may have t be recvered ver several years. If an verpayment frm a previus year is being recvered in this way and then a new verpayment is discvered during the year, recvery f the ld verpayment is suspended and the new verpayment is recvered first. The claimant can ask fr a reductin in the recvery rate if it is causing hardship, but it will take lnger t repay the verpayment. Any underpayments which are discvered during the year are retained until the end f the year and then used t reduce any verpayment. ii. Direct frm the claimant. This is used where the claimant is n lnger entitled t Tax Credits, r where the husehld has changed since the verpayment ccurred, e.g. a cuple has separated r ne partner has died. If a cuple separate, HMRC shuld try t recver 50% frm each party. A request can be made fr HMRC t apprtin recvery differently, e.g. if ne party says the ther caused the verpayment. HMRC shuld make every effrt t lcate bth parties but if ne party cannt be lcated, HMRC will ask the ther t pay the full verpayment. iii. Via PAYE. This methd has nt been used t date. 7. WHAT SHOULD ADVISERS DO TO HELP THEIR CLIENTS? 7.1 First lk at the award ntice with the client t see if it is accurate in terms f incme, number f children, hurs wrked etc. Then check whether the calculatins are crrect. If yu believe that the assessment is wrng, advise the client abut hw t appeal. HMRC prduces a leaflet - WTC/AP: Hw t appeal against a Tax Credit decisin r award. Clients can be referred t WWRAS in the usual way fr help with appeals, which will be heard by a Scial Security Appeal Tribunal. As with all appeals, yu can phne WWRAS Benefits Enquiry Line (details belw) t check whether a referral is apprpriate r fr assistance with wrding [see WWRAS guidance In Time Pb23]. 5

6 7.2 If the assessment is crrect and an verpayment has ccurred, cnsider whether the claimant has fulfilled all their respnsibilities (see 5. abve). If the claimant cnsiders that they have, r they agree that they have nt but they believe HMRC failed t fulfil their respnsibilities als, advise the claimant t dispute recvery f the verpayment. There is a frm fr this purpse - TC 846: Request t recnsider recvery f verpaid Tax Credits. If yu are asking HMRC nt t recver n the grunds f hardship, make sure yu prvide as much infrmatin as pssible abut the client and her/his family circumstances t supprt the argument and include a financial statement f incme and expenditure (this is always requested). Yu can telephne the WWRAS Benefits Enquiry Line fr advice n hw t cmplete frm TC 846, r n what t d if the dispute is unsuccessful. 7.3 If an verpayment has ccurred which cannt be put dwn t fficial errr and yu cannt argue fr nn-recvery n that grund r n grunds f hardship, then the client will have t repay the mney. There may be sme scpe t negtiate the rate f repayment. 7.4 Clients shuld be advised that it can be helpful t seek the assistance f their MPs when having any prblems with Tax Credits. It is nt always easy t cmmunicate with HMRC and getting the MP invlved can smetimes help when trying t get mre infrmatin (fr example abut the cause f an verpayment) r t negtiate rates f recvery. Keeping MPs invlved abut the difficulties faced by claimants is als the best way t ensure that Parliament is made aware f the prblem. Warwickshire Welfare Rights Advice Service BENEFITS ENQUIRY LINE is fr Warwickshire Advisers nly Tel: Time: 10am 1pm Days: Mnday - Friday 6

7 TAX CREDIT OVERPAYMENTS A SIMPLE GUIDE FOR ADVISERS HAS THE AWARD BEEN CORRECTLY CALCULATED? NO APPEAL YES CALL WWRAS BEL TO SEE IF REFERRAL IS APPROPRIATE - USE FORM WTC/APP - REFER TO WWRAS HAS CLAIMANT FULFILLED ALL THEIR RESPONSIBILITIES? YES DISPUTE RECOVERY ON FORM TC846 NO DID HMRC FULFIL ALL ITS RESPONSIBILITIES? NO DISPUTE FULL RECOVERY ON FORM TC846 YES EXCEPTIONAL CIRCUMSTANCES? YES ASK HMRC TO USE DISCRETION NOT TO RECOVER NO WILL HAVE TO REPAY BUT MAY BE POSSIBLE TO HAVE REPAYMENT RATE REDUCED 7

8 WHERE TO GO FOR HELP Fr advice/assistance see belw: Citizens Advice Bureaux Old Market Tavern,25 Cngreve Walk BEDWORTH, CV12 8LX (Cvers Nuneatn and Bedwrth) The Parish Rms, Welcme Street ATHERSTONE, CV9 1DU 1 st Flr, Chestnut Huse 32 Nrth St RUGBY, CV21 2AQ 10 Hamiltn Terrace LEAMINGTON SPA, CV32 4LY 25 Meer Street STRATFORD, CV37 6QB Tele N: Disablement Infrmatin & Advice Line, New Ramsden Centre, Schl Walk, Attlebrugh (Nuneatn & Bedwrth nly) The Rwan Organisatin, Elit Park Innvatin Centre, Barling Way Other Useful Agencies Tele N: NUNEATON, CV11 4PJ NUNEATON, CV10 7RH Mill Huse, Mill Walk Jbcentre Plus NUNEATON, CV11 4DL Brandn Huse, Hlly Walk LEAMINGTON SPA, Kingsfrth Huse, 44 Albert Street RUGBY, CV21 2JD Martin Raff Huse, Alcester Rad STRATFORD, CV37 9DA St Stephen's Huse, Prspect Hill REDDITCH Tele N: (switchbard) The infrmatin in this factsheet is crrect as f April 2011 NB: This item may nt be reprduced withut prir agreement r acknwledgement Prduced by: Warwickshire Welfare Rights Advice Service Funded by: Warwickshire Cunty Cuncil Charity Registratin N Cmpany N