Tax Credits: Challenging overpayments
Most advisers who deal with tax credits are likely to have dealt with a claimant who has been overpaid. The nature of the tax credits system means that overpayments are a natural part of it and can arise without fault by either the claimant or HMRC. However, many overpayments occur as a result of an error by HMRC or a mistake by the claimant.
The information below was written by the Low Incomes Tax Reform Group.
There are six options that must be considered when challenging an overpayment. The options are not mutually exclusive, therefore it may be appropriate to pursue one, two, three or all of them, depending on the circumstances of each case.
LITRG have produced a very detailed 46 page guide for advisers which explains each of these options in detail. You can also click on each of the options below to go to the relevant sections of this site.
The options are:
Accompanying this guide is a shorter guide, written by LITRG in partnership with Advicenow, which helps claimants navigate the system to challenge their own overpayment.
In order to exercise any of these options, it is generally necessary to understand why the overpayment has occurred. You can find out more about understanding the cause of an overpayment in our overpayments section . Some readers of this website may wonder why ‘explanations’ are missing from the list of actions above. Based on our experience, if we can’t identify the cause of an overpayment we generally don’t formally ask HMRC for an explanation. The reason for this is that such requests do not suspend recovery action, whereas disputes do. On that basis we think it is preferable to send in a dispute, which as well as suspending recovery, also acts as a way of getting further information. That said, it is open to advisers to write to HMRC and ask for an explanation as to how an overpayment arose or phone the helpline and make a request, but attention must then be given to the recovery action to ensure it does not go any further in the interim. This often involves either asking Debt Management and Banking for a suspension of recovery or negotiating a time to pay whilst the explanation is sought. More about repaying overpayments can be found in our dealing with debt section.
Updated 8 May 2012