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HMRC internal manual

Claimant Compliance Manual

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HM Revenue & Customs
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Closing the Examination: In-Year Recoveries

In the majority of examinations the revised award will not lead to an in-year recovery of overpaid credits. This is because most potential overpayments will be reviewed following the Section 17 end of year declaration and only the net amount overpaid at the year end will be recovered.

However, Section 28(6) Tax Credits Act 2002 allows an overpayment to be recovered in-year where there is no entitlement to either WTC or CTC for the whole period of claim. Overpayments can be recovered in-year in the following circumstances.

No tax credit entitlement

  • The claim was only for WTC and you have established they did not meet the remunerative employment criteria for the period of claim
  • The claim was only for CTC and you have established there was no qualifying child for the period of the claim

Where there was no entitlement to tax credit because the claim was made in the wrong capacity we do not have the right to recover the overpayment in-year but in certain circumstances it can be included in your settlement - see CCM8126.

Entitlement to WTC or CTC

The legislation at Section 28(6) TCA 2002 strictly allows us to recover one element (WTC or CTC) in-year where there is no entitlement for the whole period of claim even though there is entitlement to the other element of tax credits. However, the NTC system does not recognise this and will automatically try to recover any overpaid WTC or CTC from the other tax credit element over the rest of the tax year. See examples at CCM8129.

Overpayments can be recovered in-year where:

  • The claim is for both WTC and CTC although the WTC element is set at nil and the examination established there was no qualifying child for the period of claim - see example 2 at CCM8129.
  • The claim is for both WTC and CTC but the examination established there was no entitlement to one of the elements for the period of claim but the NTC system cannot recover all of the overpayment in-year - see example 3 at CCM8129.

The second bullet point does not include cases where there is a claim for both WTC and CTC but your examination establishes the WTC element should be reduced to £0.00 due to the level of their income. In this situation there is still entitlement to WTC but it has been set at £0.00. Any overpayment will be recoverable after the end of the year. However, if the examination established there was no entitlement to WTC because the customer did not meet the remunerative employment criteria the case will fall within the second bullet point.