Issue briefing: tax credits overpayments
Published 10 February 2014
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We pay tax credits to support nearly five million households with eight million children. The amount of tax credits an eligible household receives depends upon its individual circumstances. To avoid overpayments, penalties and debt, tax credits claimants need to tell us about changes to their circumstances. This briefing explains how overpayments occur, how they can be avoided and what to do if a claimant has been paid money they are not entitled to.
Claimants can call the Tax Credit Helpline on 0345 300 3900 or write to us at Tax Credit Office, Preston, PR1 4AT. Those who want to apply for more time to pay should contact our Payments Helpline on 0845 302 1429.
More information is also available at www.hmrc.gov.uk.
1. How overpayments happen
There are two types of tax credits: Child Tax Credit helps people bringing up children, while Working Tax Credit helps those working on low pay, regardless of whether they have children.
Overpayments can happen if:
- claimants don’t tell us about a change to their personal circumstances that would affect their payments
- the claimant gave us the wrong information
- claimants have not renewed their tax credits on time
- we made a mistake and recorded the wrong information about a claimant or did not act on the information given to us
2. Avoiding overpayments
Claimants should take steps to avoid building up an overpayment, such as:
- reporting any changes to their circumstances. Claimants have a legal responsibility to report certain changes of circumstances within one month of the date when the change happened. The type of changes you should report, and when and how you should report them, can be found on the HMRC website.
- carefully checking any award notice we send them. Claimants should tell us within a month if something is missing, wrong or incomplete, or if there is anything they don’t understand
- telling us about any payments they receive that do not match the amount on their award notice
- renewing their tax credits each year by 31 July, if required to do so. We send out renewal packs between April and June. The pack tells claimants what they need to do to renew their claim
Claimants must renew their claims on time to avoid being overpaid tax credits. Failure to renew by the deadline will mean that their payments will stop and they will have to repay any money they have received since the start of the new tax year.
3. Checking claims
We may check the information that claimants have already given us to make sure we are paying them the correct amount. We can do this by asking them to supply evidence to confirm their details and we will ask them to respond to us within 30 days. If they have any questions or concerns about this, they can contact us by post or by phone. Our contact details are provided on the letter we send to them.
4. When someone has been overpaid
Claimants must pay back any money that has been overpaid. We do this by reducing their ongoing payments or by requiring them to make a direct payment, depending upon whether they are still claiming tax credits. There are limits on the amount by which we can reduce ongoing payments.
5. Limits for reducing ongoing payments
| Claimants who get the maximum tax credits with no reduction due to income | All other tax credits claimants |
|---|---|
| up to 10% (maximum) | up to 25% |
Any customer experiencing hardship as a result of this type of recovery can contact the Tax Credit Office to discuss their circumstances.
Where someone is no longer receiving tax credits, we will send them a Notice to Pay requiring them to repay the full amount within 30 days. If they are unable to meet this requirement, they should contact the Tax Credit Office.
6. Disputes
If a claimant feels that they have met their responsibilities and that we have made a mistake or given them incorrect advice, they can ask us to look at our decision on their overpayment again. This is called a ‘dispute’ and it must be made within three months of receiving a final decision notice.
To make a dispute the claimant can fill out and return form TC846, which they can request from us or download from our website. We will continue to recover repayment from the claimant while the overpayment is being disputed and reviewed.
Claimants who have received a decision on their dispute and still disagree with the outcome can ask for it to be reviewed. They can only ask for one review and they will have 30 days to provide further evidence to support their case.