1 TAX CREDITS OVERPAYMENTS Robin Williamson Technical Director Low Incomes Tax Reform Group

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Presentation transcript:

1 TAX CREDITS OVERPAYMENTS Robin Williamson Technical Director Low Incomes Tax Reform Group Tel

2 The Low Incomes Tax Reform Group (LITRG) aims to help people on low incomes to cope with their tax and campaigns for a simpler and more accessible tax and benefits system. 12 Upper Belgrave Street London SW1X 8BB

3 Causes of overpayments – 1 Cycle of award/entitlement Annual nature of tax credit system: Payments in-year provisional in nature Entitlement not known until final award

4 Causes of overpayments – 2 Calculation of entitlement at year-end If current year income (CYI) less than previous year income (PYI), entitlement = CYI Likely result, underpayment If CYI greater than PYI by no more than £2,500, entitlement = PYI If CYI greater than PYI by more than £2,500, entitlement = CYI less £2,500 Likely result, overpayment

5 Causes of overpayments – 3 In-year increase of income by more than £2,500 Eg Fergus & Deirdre (see handout) NB spreading of increased total income figure over whole year Deemed to accrue evenly day by day Can result in overpayment for early part of year

6 Causes of overpayments – 4 Other causes Claimant or Revenue error or delay Adjustment of award following in-year examination or end-of-year enquiry Provisional payments set too high 42 days period of grace for employer to process through payroll

7 RECOVERY OF OVERPAYMENTS Possible methods: In-year adjustment to reduce or eliminate end-of-year overpayment (TCA 2002, s 28(5); COP26) Direct recovery following year end (TCA 2002, s 29(3); COP26) Recovery by deduction from subsequent awards of tax credit (TCA 2002, s 29(4); COP26)

8 In-year adjustment in Additional payments in hardship cases – o/p debt continues into future years Year-end overpayment from Collected from payments including additional payments (see handout)

9 Direct recovery Receivables Management Service (RMS) Payment within 30 days Revenue will agree to collect over 12 months ( and ) (COP26)

10 When will Revenue not seek recovery? Hardship Official error Two limbs 1. Revenue or other departmental error, and claimant could reasonably think their award was right; 2. Revenue delay (30 days or more) in acting on information, and claimant could reasonably think award was right

11 Possible remedies Formal complaint (COP1) Reference to Adjudicator Reference to Ombudsman via MP Judicial review

12 Couples Jointly and severally liable (TCA 2002, s 28(4) But Revenue may decide that each partner is to repay a specified proportion of the amount (COP26) NB same sex couples wef 5 December 2005 (Civil Partnership Act 2004, Sch 24, para 144; SI 2005/828 )