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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: tax credits: general: recovery action in DTO

Pre-enforcement activity

Establishing if an overpayment is legally recoverable

It is very important that you establish if an overpayment is legally recoverable before pursuing a claimant for recovery and especially before commencing enforcement proceedings.

The Initial Review checklist (Word 55KB) (previously known as the Pre-enforcement checklist) asks you to establish if a Finalisation Notice (FAN) or Statement of Account (SOA) has been issued to the claimant(s) for a particular award period.

For detailed guidance on how to establish legality see DMBM555055.

Information is provided below about ‘auto renewals’ and ‘Statement Like Award Notice (SLAN)’

Auto renewals

‘Auto renewal’ applies to awards where claimants receive the family element only (for the whole year). During the end of year renewal process, claimants in this group are issued with an Annual Review form, which tells them that they do not need to finalise and supply an income figure, unless either:

  • their income falls outside certain limits
  • they have had a change of circumstances.

If nothing is received from the claimants, the TCO will assume the details already held are correct and will therefore finalise and renew the claim based on this.

Overpayments arising from auto renewals have a decision made on them (Section 18 Tax Credits Act 2002 (TCA)) and are legally recoverable like any other overpayment. Sections 28 and 29 of the TCA apply to establishing and recovering an overpayment.

Statement Like Award Notice

Occasionally, you will come across an award type of Statement Like Award Notice (SLAN). Except in very unusual circumstances, an overpayment arising as a result of a SLAN will not be recoverable until the claim becomes finalised and a FAN has been issued.

If you discover a SLAN where a FAN has not been issued, you should forward the details for advice to TAL, Referrals (B&C).

Checking Household Notes on NTC

For direct recovery overpayments dealt with by DMB, TCO will put an entry in Household Notes on the tax credit system when a dispute is received for which they have suspended overpayment recovery. It is therefore essential that you check Household Notes before you work any IDMS case.

If a note is present you must take no further action and B/F two months on IDMS (or longer if necessary) for a further entry on Household Notes saying that the dispute has been resolved and recovery can recommence.

Contacting the claimant(s)

It is important that every effort is made to contact the claimant(s) before enforcement action is considered. If DMTC has made contact then further attempts to contact the claimant (for example, by phone) are not necessary.

Enforcement signal

It is essential when you start enforcement proceedings to set the enforcement signal on NTC using the NTC ‘Maintain Overpayments’ function. The signal can be unset in the same way.

Establishing the correct amount of the overpayment

The correct figure is shown on the NTC View Household Accounts screen.

Enforcement methods

The main methods of enforcement to be used, depending on the amount unpaid, are:

  • summary proceedings in England, Wales, Scotland and Northern Ireland
  • county court proceedings in England and Wales
  • summary warrant in Scotland.

Distraint in Northern Ireland and Taking Control of Goods (TCoG) in England and Wales

Distraint or TCoG should not be considered as a method of enforcement without first making a personal call in an attempt to:

  • establish residence
  • make contact
  • obtain payment
  • assess effects.

If distraint or TCoG is used as a method of enforcement, and the overpayment is the result of a joint claim that is not affected by a household breakdown, you should distrain or take control of goods:

  • firstly on goods that are owned jointly
  • secondly (if the goods owned jointly are insufficient to satisfy the debt), on those owned individually by either member of a couple (household).

With effect from 21 September 2009, in a household breakdown case each debtor is now only responsible for repaying 50% of the original overpayment (see DMBM555410 for the policy before 21 September 2009). However, in some cases one debtor may have agreed to repay an amount greater than 50%, sometimes up to 100% of the debt. Where that is the case and the arrangement has been met, or is being adhered to, you should only distrain on or take control of goods to the value not covered in the compliant debtor’s time to pay arrangement.

County court proceedings

You should use the County Court Bulk Centre (CCBC) facility to start proceedings. If, exceptionally, the CCBC process is not suitable, you should start proceedings clerically.

You should not enforce county court judgments by the following means until further notice:

  • warrant of execution
  • writ of fi fa
  • charging order (except on a second property or on financial products).

However, where the tax credits debt has arisen following a compliance review, or there are non-tax credits debts included in the county court judgment, you can enforce the judgment by any method including third party debt orders, judgment summonses and orders to obtain information (see below).

Where the county court judgment is solely for a tax credits debt that did not arise following a compliance review, you should not enforce such a judgment by the use of a third party debt order (TPDO). However, if you have very good evidence that a TPDO would fully satisfy the judgment and would not cause the judgment debtor hardship, then you should contact the EIS Bradford CCP Technical Team for advice.

Although not enforcement methods you should not apply to the court for a judgment summons or an order to obtain information until further notice where the county court judgment is solely for a tax credits debt that did not arise following a compliance review.

Summary proceedings

In Northern Ireland, cases not suitable for summary proceedings should be referred to EIS Edinburgh (Belfast Team OU ID 362700).

Recording a Household Note on NTC

When recording in Household Notes details of action taken, particularly when dealing with time to pay, any recovery queries, or disputed overpayments, include the claimant’s name in any note.

Do not identify claimants using only applicant 1/2 or claimant 1/2.

Description of debt

For both individual and joint debtors describe the debt as: ‘Overpayment of tax credits [and interest] recoverable under Section 29(3) of the Tax Credits Act 2002’.

In Scotland follow the styles contained in the disk of styles issued by Recovery Group Scotland.

Certificates of debt

If you need a certificate of debt, follow the example in the Certificate of Debt table in the Letters and forms section of the DMB Guidance Gateway.

Court orders following divorce proceedings

Occasionally you may receive a copy of a court order following a divorce between tax credit claimants which states that each claimant must pay half the overpayment or that one person is responsible for the full amount.

Such orders in a divorce settlement do not override HMRC’s legal right to recover from both claimants under Section 28(4) of the Tax Credits Act 2002.

You can agree, however, to recovery on the basis of what is said in the court order but if payment is not received on that basis, you should implement the policy as in DMBM555410.