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HMRC internal manual

Claimant Compliance Manual

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HM Revenue & Customs
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Undisclosed Partners: Recovery of Overpayments from 18 January 2010 - Failure to notify a change in a previous year - Examples without a penalty

Example 1

Helen was awarded tax credits as a single mother in 2006. On 2 February 2010 following a 2008/2009 enquiry, Helen admits her claim was incorrect as she had been living with Brad since 21 June 2008. Helen did not report this change of circumstances because Brad was a student and thought that because he had no earning it would not affect her claim.

Helen accepts she has made an incorrect claim but you decide not to charge a penalty as you accept Helen has misunderstood the position. Helen and Brad make a new joint claim but much to Helen’s surprise this shows Brad had income from modelling at his art college. He had not revealed this income to her and she had met all of the household expenses. The new joint claim is backdated to 16 November 2009. Helen has two overpayments

2008/2009 (21 June 2008 to 5 April 2009) £6,320

2009/2010 (6 April 2009 to 2 February 2010) £5,270

Helen and Brad have made a new claim so you need to calculate notional entitlement for two periods. Had they made correct claims they would have received

2008/2009 (21 June 2008 to 5 April 2009) £5,145

2009/2010 (6 April 2009 to 15 November 2009) £4,150

The notional entitlement for 2008/2009 is £5,145 and for 2009/2010 it is £4,150. We will recover £1,175 for 2008/2009 and £1,120 for 2009/2010 from Helen.

Example 2

Ami and Luke had been receiving a joint tax credit award since 2003. On 1 March 2010, during a 2008/2009 discrepancy enquiry regarding child care, Ami admitted that Luke left her on 21 September 2008. The child care costs were, in fact, correct but Ami accepted she had failed to notify a change of circumstances and had then finalised incorrectly. Ami said she had hoped Luke would come back and so didn’t want to disturb their payments but also didn’t think it mattered to tell us about a partner leaving because the household earning went down.

Ami accepts she has made an incorrect claim but you decide not to charge a penalty as you accept she misunderstood the position. Ami makes a new single claim and this is backdated to 10 December 2009. Ami has two overpayments

2008/2009 (21 September 2008 to 5 April 2009) £2,300

2009/2010 (6 April to 1 March 2010) £4,100

Ami has made a new claim so you need to calculate notional entitlement for two periods. Had she made correct claims she would have received

2008/2009 (21 September 2008 to 5 April 2009) £3,345

2009/2010 (6 April 2009 to 9 December 2009) £5860

The notional entitlement for 2008/2009 is £3,345 and for 2009/2010 it is £5,860 but as this exceeds the overpayment the notional entitlement is restricted to £2,300 and £4,100 and we remit the full overpayment.