HMRC internal manual

Debt Management and Banking Manual

DMBM555030 - Debt and return pursuit: tax credits: general: overpayment recovery by the TCO

Finalisation Notice (TC602)

In accordance with section 18 TCA, a Finalisation Notice (FAN) is issued to the claimant(s) identifying the amount of any overpayment. The notice will tell the claimant(s) how the overpayment is to be recovered, that is:

  • from ongoing tax credit payments where claimants have a continuing entitlement; this is managed through NTC, and DMB staff will have no involvement
  • direct from claimants where there is no current entitlement; initial recovery action will be undertaken automatically by NTC commencing with the Notice to Pay (TC610), and the overpayment will then be passed automatically to IDMS.

Statement of Account (TC607)

A Statement of Account (SoA) is issued automatically by the NTC system when a claim has been paid for a particular tax year but there is no entitlement for that year. It is issued to both claimants of a joint claim. It gives a breakdown of the overpaid tax credit and the reason why entitlement has ceased.

Right of appeal

Claimants have a statutory right of appeal against the decision giving rise to an overpayment. The must be made in writing within 30 days after the date on which the FAN/SoA was issued. TCO deals with appeals.

There is no right of appeal against the recovery of the overpayment.

TCO set the appeal signal on NTC on receipt of an appeal and this signal flows to IDMS.

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Notice to Pay (TC610)

Once the 30 days appeal period has expired, NTC will issue a Notice to Pay in accordance with section 29 TCA to each claimant or appointee (see DMBM555020).

The Notice to Pay, which contains a payslip, advises claimants that payment should be made within 42 days of the issue of the notice. The notice advises claimants to contact the Payment Helpline if they have difficulty paying.

Where an overpayment is unpaid 42 days after issue of the Notice to Pay it will be transferred to IDMS for automatic recovery.

Note: Exceptionally, you might discover that a TC610 has not been issued. As the NTC system cannot later issue the form you should issue a S29(3)EWL (giving a 42 day BF) so that recovery can then proceed.

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Cross award recovery

From October 2014, Cross Award Recovery (CAR) will be introduced. When a debt is in scope for CAR the related IDMS work item will be closed down and the debt transferred into the ongoing award.

A joint debt in direct recovery will be out of scope for collection in a new single award. However, a single debt in DMB can be in scope for collection in a new joint award.

CAR can only take place if:

  • no current in-year or cross-year recovery is taking place
  • no recent payments have been received for the direct recovery debt
  • the direct recovery overpayment is not under appeal
  • a previous year is available in the new award.

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Disputed overpayments

The Dispute marker will not normally be set by TCO and DMB should continue to seek payment or an acceptable time to pay arrangement.

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Overpayments working with TCO

The TCO is responsible for the NTC Suspended Overpayment worklist, which details cases where the recovery process has been suspended prior to referral to IDMS. The worklist includes cases where:

  • an appeal has been accepted
  • a claimant’s address (or both addresses in a joint claim) is RLS
  • the overpayment is subject to compliance activity
  • an overpayment has been created because the claimant’s working hours have been reduced
  • there has been a change of circumstances and an overpayment has been remitted.

You are only likely to be involved where an overpayment has been remitted and there has been a change of circumstances. In these cases TCO will contact the office that carried out the remission to review the case.