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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
, see all updates

Debt and return pursuit: tax credits overpayments: household breakdown cases: overview of policy and procedure in household breakdown cases

Background

Section 28(4) of the Tax Credits Act 2002 (TCA) provides that for a joint claim, overpayments are recovered jointly and severally; both claimants are responsible for payment of the whole of the overpayment. However, a policy decision implemented on 5 September 2007 modified this joint and several rule so that joint claimants, where there had been a household breakdown (HHBD), could each repay 50% of an overpayment on a provisional basis, but remained liable for any amount unpaid by their ex-partner.

A further important modification to this policy, described below, was implemented on 21 September 2009 but does not affect the legal position as set out in the TCA.

Current policy

Each claimant in a HHBD case is now only required to repay 50% of an overpayment, even if their ex-partner does not pay their share.

For the time being, neither the Tax Credit system (NTC) nor IDMS is to be enhanced to cater for the policy change described above and therefore must be implemented clerically.

Tax Credit Office (TCO) action

The TCO issue an acknowledgement letter to each claimant where a change of circumstance involving a HHBD is reported in writing. The letter informs the claimants that each of them will only be responsible for 50% of any overpayment resulting from finalisation.

Where, however, the HHBD is first notified by telephone, the TCO only tell the claimant making the call about the new policy but do not confirm in writing.

NB: for the foreseeable future, the Finalisation Notice (FAN) and TC610 (Notice to Pay) will continue to indicate joint and several liability for the full overpayment.

Hardship

It is important to bear in mind that after a HHBD one of the claimants may be a lone parent

  • with care of children from the former household, and
  • on Income Support or other DWP benefits.

You should always check the NTC system for any up to date information, including a new single award by viewing the Application (NTC / Application) for details of income / children. If this indicates that a claimant is in receipt of Income Support or other DWP benefits etc they may have little or no ability to repay even small amounts.