Government response

Tax credits overpayments fall

The amount of tax credits that is overpaid every year fell in 2012 to 2013, HM Revenue and Customs (HMRC) announced today.


As a result of changes in policy which came into effect in April 2012, tax credits overpayments fell from £1.6 billion (5.4%) in 2011 to 2012 to £1.5 billion (5%) in 2012 to 2013, out of around £30 billion a year paid to 4.5 million families.

The figures published today also reveal that the number of awards that are overpaid fell by 70,000, from 1.62 million in 2011 to 2012 to 1.55 million in 2012 to 2013.

Tax credits are responsive to changes in claimant circumstances, which means payments may go up or down. This can result in an over or underpayment. Many overpayments result from people failing to tell us about a change of circumstances or giving us incorrect information. Claimants are obliged to report certain changes that affect their payments and are urged to do so straight away.

A very small proportion of over and underpayments are caused by HMRC error.

HMRC understands the needs of vulnerable customers and we offer help and advice online, on the phone, and in person for those who need it. We also work closely with debtor representative groups to understand the problems and needs of vulnerable customers.

Where customers have genuine difficulty in repaying an overpayment, we agree for them to pay in instalments, through Time to Pay arrangements, and around two-thirds of tax credits overpayments debt is currently being repaid in this way.

We also use Debt Collection Agencies (DCAs) to collect debts after they have been through HMRC’s internal debt pursuit processes and before more expensive recovery activity is considered. This is an established and cost-effective part of our debt collection operations. DCAs do not make home visits – they issue letters, issue SMS text messages and make phone calls to HMRC customers.

The debt collection agencies we use adhere to highest customer service standards, in line with the Office of Fair Trading’s code of practice and our own customer charter.

HMRC does not sell debt to DCAs: they are appointed to collect debt on our behalf, and at all times the debt remains under HMRC control.

Published 30 May 2014