What happens if overpaid tax credits

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England This advice applies to England: England home Advice can vary depending on where you live. Paying back a working or child tax credits overpayment This advice applies to England Print. Did this advice help? Yes No. Why wasn't this advice helpful? It isn't relevant to my situation. It doesn't have enough detail. I can't work out what I should do next. I don't understand. You've reached the character limit.

Thank you, your feedback has been submitted. In this section. Often in tax credit cases the amount due can be several thousands and most claimants will not be able to pay it immediately. The TC informs claimants that the debt can be repaid over a longer period, but does not set out any specific timescales or options. Instead it encourages claimants to contact the payment helpline. Our understanding is that this will not be considered in stand-alone tax credit debt cases but may be considered if there is another HMRC tax debt as well.

The final step in the direct recovery process involves HMRC commencing legal proceedings, normally in the county court, to obtain judgement for the debt or trying to take control of goods distraint which involves the seizing of goods where HMRC believe the person has the means to repay but refuses.

It is rare for HMRC to take a tax credit claimant to county court. It should still be possible to negotiate a time to pay arrangement right up until the very last stage of the recovery process, although it is advisable that claimants make some attempt to discuss their case with HMRC rather than ignore the demands.

If the claimant thinks they should not have to repay, a dispute can be lodged, but it may be necessary to liaise with DM to ensure they know what is happening and negotiate suspension of recovery directly with them. Although official policy by TCO is not to suspend recovery when a dispute is received policy implemented 15 July , it is still worth asking DM directly if they will suspend recovery. Note that there is no obligation on them to suspend recovery and if they refuse, then it is crucial that the claimant set up a time to pay arrangement otherwise DM will continue with their recovery action.

This is especially important if taking control of goods distraint is the next step in the process. Even at this stage it is possible that HMRC have given an incorrect explanation or have made a mistake in dealing with the overpayment.

Some judges treated tax credit cases in the same way as ordinary tax debt, which meant that if HMRC produced a certificate of debt that was enough to gain judgement against the claimant. This approach is incorrect.

Critically CPRPD7D does not apply to tax credits overpayments which basically means that the claim should follow the normal court processes including allowing the claimant to raise a defence and requiring HMRC to answer the points of that defence.

A full explanation of the importance of this can be found in an article we wrote in which explains the procedure. Alternative arrangements are in place in Scotland and Northern Ireland. Once the debt is passed to the DCA the same time to pay guidance should be followed as outlined in this section. Financial hardship in direct recovery cases. The information in this sub-section applies to direct recovery cases. Information about hardship in ongoing recovery cases can be found below.

If that is the case, there are two potential options available. Debts remitted due to hardship remain recoverable but may be pursued until later review of financial circumstances. In such cases, HMRC should suspend recovery for 12 months. At the end of that period, the case should be reviewed and if there is no likelihood that circumstances will improve, consideration should be given to remitting the overpayment or, at the very least, suspending it for a further 12 months.

If circumstances have improved, HMRC will seek a time to pay arrangement see above for more details. If a claimant becomes entitled to universal credit then the tax credit debt can be collected by DWP from the UC award.

Where a claimant is in receipt of a sickness benefit such as employment and support allowance, cannot afford to offer any repayment to HMRC and there is little prospect of them ever gaining employment, HMRC should remit the outstanding overpayment. If there is some prospect that the claimant may be able to enter employment in the future, recovery should be suspended for 12 months and the situation reviewed at the end of that period.

If the claimant becomes entitled to universal credit then the tax credit debt can be collected by DWP from the UC award. In situations where a claimant cannot meet essential living expenses such as water, gas and electricity, they should request that the overpayment recovery be suspended until their circumstances improve.

Where there is no likelihood that this will happen, a request for the overpayment to be remitted on financial hardship grounds should be made. In our experience this is most likely to succeed where evidence of their current situation is given to HMRC. For those in the direct recovery process, DM are tasked with recovering the debt and it is with them that initial contact should be made to discuss financial hardship.

The DTO should then assess the case based on the information received or by contacting the claimant for further information. Any letter sent to the claimant should include a phone number for the DTO dealing with the case.

The claimant should be informed by letter of the outcome, regardless of whether the decision is to temporarily suspend recovery or to remit the overpayment in full. The legislation states that in this respect tax credit overpayments are to be treated the same as underpayments of tax.

However, they are continuing to use it in cases where it is unlikely the person will be moving to UC - for example because they are over state pension age and a single claimant. HMRC's tax credit operations is responsible for ongoing recovery cases. Ongoing recovery is used where there is an ongoing claim still in payment following the claim which gave rise to the overpayment. In the legislation, there are certain limits on the amount by which payments of tax credits can be reduced in order to recover an overpayment which arose in the previous year cross-year overpayment.

Those limits depend upon household income. From April , the limits are as follows:. This could be a current year estimated figure or the previous year income figure. This may not be the same figure as the claim is based on. Sometimes HMRC adjust an award during the award period to try to prevent or reduce an overpayment from accruing by the end of the tax year. Potential overpayments that are identified during the award period in this way are loosely termed in-year overpayments. In such cases, the limits above should also generally apply.

This is to prevent a build-up of overpayments by the end of the year. Previously, HMRC continued to make payments to claimants in this situation unless they specifically asked HMRC not to all of which became recoverable overpayments at the end of the year.

Ongoing recovery of old tax credits debt cross-claim recovery. This change was introduced from October Essentially, it means that any households with outstanding overpayments from ended claims that include the same household member s will have those old debts recovered from the new ongoing award.

Cross claim recovery will only take place when there is a suitable ongoing claim. This is one where:. Where an old debt is already being repaid directly, it will not be included in this ongoing recovery. Where there are a number of old overpayments from different years, awards or households, these will all be moved to the ongoing award and collated as one single overpayment amount.

But if the ongoing award ends before the total overpayment is repaid, the outstanding debts will be returned to their original awards.

HMRC have produced a more detailed note about recovering old tax credits from ongoing awards, including full details of how the payments will be reconciled. More information can also be found in the Tax Credits Technical Manual. Financial hardship in ongoing recovery cases. In certain circumstances, HMRC will agree to reduce the recovery percentages from the figures set out above.

Any financial hardship in ongoing recovery cases is dealt with by HMRC's tax credit operational processing teams. This form is used to ask HMRC to reduce recovery rate where it is causing financial difficulty. The form asks for various details about the claimant and their partner, their household and their income and expenditure.

Claimants will need to log in to their personal tax account. To do this they will need to use the Government Gateway for verification. If they do not have an account, they can set one-up and if they do have an account they will need to sign-in. Each time someone signs in to their PTA, they will need their mobile phone to receive an access code.

Once in the PTA, claimants will need to click on tax credits and on the first page there is a list of tax credit forms that can be filled in and submitted through the PTA. After the form has been submitted, it can be tracked via the PTA which is again accessed from the account home page. The first step is for the claimant to contact the tax credit helpline to ask that the recovery percentage is reduced.

Once a referral is received by the hardship team, they will send out an income and expenditure form TC Once the form is returned, HMRC will compare the income and expenditure figures against figures they hold for various household expenses and make a decision.

You may be able to negotiate a suspension of recovery, reduction of the amount to be recovered or for the overpayment to be written off. UK's Tax Credit Overpayments information If you have been overpaid, you can make a complaint if you are unable to reach an agreement on recovery.

See GOV. UK's Tax Credit complaints information If you can't afford to repay an overpayment, we recommend that you get advice from a benefits adviser. If you would like to tell us more please visit our contact page. Donate Your Situation Back Your Situation In this section you will find information about benefits and grants relevant to your situation. Back Get Support In this section, you will find the Benefits Calculator; Grants Search; details about Turn2us' direct grant-giving funds; and links to other sources of information and help.

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Back About Us Turn2us helps people in financial need gain access to welfare benefits, charitable grants and other financial help — online, by phone and face to face through our partner organisations. What is an overpayment? How would I know if I have been overpaid? What should I do if I think that I am being overpaid?