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HMRC internal manual

Tax Credits Manual

Payment - hardship: referral received by TCO H-ART (Hardship - Adjusting Recovery Team)

Checklist

Before you follow this guidance make sure

  • you follow the guidance in TCM0138020
  • you have the correct user roles to follow this guidance
  • use TCM0322460 for the correct MU number.

Background

If a customer has suffered a reduction in their regular tax credit payments as a result of an adjustment that has been applied to their award, they may feel this reduced amount of tax credits will result in the household being in hardship.

The reduction could have been caused by

  • an in-year adjustment to the customer’s tax credit payments to prevent an overpayment occurring
  • an in-year adjustment to the customer’s tax credit payments to reduce the amount of overpayment that will occur at the end of the year
  • cross-year recovery from the customer’s tax credit payments to recover an overpayment that occurred in a previous year
  • a combination of both an in-year adjustment and a cross year recovery
  • cross-award recovery from the customer’s tax credit payments to recover an overpayment that occurred in a previous claim or previous claims.

For more information about in-year adjustments and cross year recovery, follow the guidance in TCM0232220.

Rates of recovery

Manually adjusting overpayment recovery to avoid hardship does not return the customer’s tax credits payments to the previous level. This is to ensure that some recovery of the overpayment is made during the current year.

When we recover an overpayment from the customer’s ongoing award, the amount we recover will depend on the level of tax credits the customer is entitled to. You will need to explain the rates of recovery to the customer and that these rates are designed not to cause hardship.

To determine how much is to be recovered, the customer’s award is put in to the following categories

Category A

  • 10% if the maximum entitlement is in payment
    Where the customer is entitled to the maximum award for WTC and/or CTC, a payment adjustment will be made which will take the level of tax credits paid to 90% of their current entitlement.

Category B

  • 25% if entitlement has been tapered
    Where the customer is entitled to CTC above the Family element and/or WTC below the maximum limit, a payment adjustment will be made which will take the level of tax credits paid to 75% of their current entitlement.

Category C

  • 50% if entitlement has been tapered
    Where the customer is entitled to CTC above the Family element and/or WTC below the maximum limit, and their total household income is more than £20,000, a payment adjustment will be made which will take the level of tax credits paid to 50% of their current entitlement.
    Note: The recovery of tax credit debt from ongoing awards increased from 25% to 50% from the 6th April 2016 for those customers whose total household income is greater that £20,000. From 10th October 2015, where a change of circumstances is reported and applied, the award notice issued will show the revised provisional payments for 2016/2017 based on the new 50% recovery rate for those customers who fulfil the 50% criteria.

Category D

  • 100% if entitlement has been stopped due to cross year recovery
    Where the customer is receiving the Family element only

Category E

  • 100% if entitlement has been stopped due to in year adjustments.

Any reduction in these rates can only be made in exceptional circumstances. These rates are the same for in year adjustments and cross year recovery.

Additional hardship payments

Additional hardship payments, as part of the hardship process, will only continue to the end of the current tax year. If the customer wants these payments to carry over to the next tax year they must re-submit their hardship claim.

When the payment adjustment has been applied, the customer will have an overpayment of tax credits at the end of the tax year. These overpayments will be recovered from the customer by

  • reducing future payments by cross year recovery
  • recovering the overpayment direct.

Guidance

Note: When sending customer, staff or process data to another individual or team, make sure you follow the latest data security guidelines or contact the Data Guardian or Data Security Team for advice.

Step 1

Note: If an e-form referral from PT Ops is incomplete (for example there is no NINO) or the reason for the referral is unclear, refer back to PT Ops.

If the referral is from B&C Ops-NES, go to Step 2

If you are dealing with a piece of correspondence, go to Step 3

If you have received an Income and Living costs form (TC1133) through Digital Mail Service (DMS), go to Step 3

If you are dealing with a DL-H-ART Referrals in-box item, go to Step 3

If you receive an E-form referral from PT Ops, go to Step 3

If you are dealing with a returned TC1133 or a call back from a NES advisor about an incomplete TC1133, go to Step 12

If you are dealing with a returned TC2036, go to Step 17

If you receive a call back from a NES advisor about the customer’s income/living costs, go to Step 15

If you are dealing with an expired BF date for payment issue, go to Step 23

If you are dealing with an expired BF for an Income and Living costs form (TC1133), go to Step 26

If you are dealing with an expired 14 day BF for the TC2036 or for the return of TC1133, go to Step 27

If you are dealing with an expired 30 day BF for for the TC2036 or for the return of TC1133, go to Step 28

Step 2

Access the NES inbox and check the type of NES referral

Note: A fast-track case is a customer who satisfies certain criteria.

These are

  • domestic violence
  • immediate eviction
  • customers who are suicidal
  • children due to go into care and severe mental health.

Note: Fast track cases must be worked within 48 hours of reaching the NES inbox.

If the case is a Fast track case, go to Step 5

If the case is not a Fast track case, go to Step 3

Step 3

Check household notes for PM21. For how to do this, use TCM1000067

If PM21 note is present, go to Step 1[](#step10)

If PM21 note is not present, go to Step 4

Step 4

Check the referral to establish what the customer wants

If you are not authorised to access the claim

  • follow the guidance in TCM0068160
  • complete form TC669
  • take no further action.

If the customer states they are in hardship, go to Step 5

If the customer wants to repay their overpayment back quicker, go to Step 29

If the customer has repaid all their overpayment but recoveries are still being made, go to Step 30

Step 5

Check if a tax credit is in payment. For how to do this, use TCM1000073.

If tax credit is in not payment, go to Step 6

If tax credit is in payment, go to Step 8

Step 6

Check the reason the award is not in payment.

If the award has ceased because the claimant has moved to Universal Credit(UC), or if the debt has been passed to Department for Work and Pensions (DWP), 

  • go to Step 31.  
    Note: For how to check if a debt has been transferred to DWP, use TCM1000630

If CPAC is the reason the award is not in payment,

If CPAC is not the reason the award is not in payment, go to Step 7

Step 7 {#step7}  

Check household notes to see if the claim has been correctly ended (ceased or terminated cases).       

If the claim has not been correctly ended

  • update household notes with PM32 from TCM0168020. For how to do this, use TCM1000001
  • refer the case to the Immediate Payments team.

If the claim has been correctly ended

  • update household notes with PM32 from TCM0168020. For how to do this, use TCM1000001
  • take no further action

Step 8

Check for any tax years that have an account status of Open. For how to do this, use TCM1000026.

If there are any Open years

If there are no Open years

  • update Household Notes with the message PM32 from TCM0168020. For how to do this, use TCM1000001
  • send papers to storage. Follow the guidance in TCM0074140
  • no further action.

Step 9

Check to see if the case is affected by dual recovery.
Note: Check Postings-in on awards with an outstanding overpayment. Check household notes for any relating to the setting up of Time to Pay agreements.

If the case is not affected by dual recovery, go to Step 10

If the case is affected by dual recovery

  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • update household notes with PM33 from TCM0168020, for how to do this, use TCM1000001
  • no further action.

Step 10

Check if any Potential Payment is due. Follow the guidance in TCM0234100.

Note: if you are dealing with a returned manually issued TC1133 (not an i-form) you may already have released any potential payment but a further change may have produced another potential payment.

Note: If the customer requests the release of a potential payment in the renewal period, check CY and PY. If the award has not been finalised any potential payment will not have been released.

If there is no potential entitlement due, go to Step 11

If there is any potential payment due

  • release the potential payment
  • BF the case for 24/48 hours for the potential payment to be released
    Note: If the payment does not release refer the case to your Technical Advice Line Liaison Officer (TALLO) and carry on with your actions.
  • inform the NES advisor of the delay where you are dealing with a fast-track case
  • go to Step 11

Step 11

If you are dealing with a returned Income and Living costs form, go to Step 13

If you are not dealing with a returned Income and Living costs form

  • issue form TC1133 Income and Living costs, using SEES and Central Print Service
  • update household notes with PM21 from TCM0168020. For how to do this, use TCM1000001
  • take no further action unless a NES fast track case
    • BF for 48 hours for NES fast track case

Step 12

Note: The i-form version of the Income and Living costs form can have up to 19 pages. There is a summary sheet at the end which contains all the income and costs details. Scroll to the end of the form and use this summary sheet for your calculations.

Note: Use the circumstances declared on the TC1133. For example, if the customer has three children but is only being paid for two of them due to the 2-child limit, take into account the circumstances and income for all three children.

Check the income declared on the TC1133 Income and Living costs form.

Check the relevant tax credit systems (RTI/ADD/NTC) and compare the income on the Income and Living costs form.

  • check that the Tax Credit amounts declared match NTC system and the pay frequency is correct
  • check that earnings correspond with RTI details
  • check that the Child Benefit amount declared is correct and pay frequency is correct
  • check that any Social Security Benefit amounts are correct and the pay frequency is correct

Note: If the customer declares an incorrect pay frequency you will need to calculate the correct weekly or monthly amounts. For example tax credits are paid weekly or four weekly but a customer may declare that they are paid monthly.

Note: If a change of circumstances is going through the system, payments will not be shown in Payment Schedule. You will need to wait until the payment schedule has updated.

If the income and/or household costs are incomplete and it is a NES fast-track case

  • contact the NES advisor for further information. Do not ring the customer. 
  • BF the case for 48 hours

If the income and/or household costs are incomplete

Note: You must try and contact the customer by phone for the details before you consider returning the form. If you speak to the customer you must record details of the conversation on TC648.

  • mark the questions on the form for completion
  • issue free format letter with TC1133
  • BF for 14 days

Note: The customer is allowed 30 days to return the TC1133. Claim BF’d for 14 days to check DMS (Digital Mail Service).

If the income on the Income and Living costs form compares to the income on system, go to Step 13

If the income on the Income and Living costs form does not compare to the income on system,

  • make  a note of the details
  • go to Step 13

Step 13

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 14

Check if the customer is a NES fast track case

If the customer is a NES fast track

  • contact the NES advisor to ask the customer for clarification of their income/costs
  • BF for 30 days for a response if the NES advisor cannot clarify the details over the phone or confirmation is needed
    Note: NES advisor to return any confirmation details as soon as possible by fax or email
  • when the advisor responds go to Step 15

If the customer in not a NES fast track 

  • contact the customer for further information or proof to establish the correct income and/or expenditure
  • make two attempts to contact the customer by phone.
  • discuss with the customer the reason(s) for the differences in the income. This could be because they have expenses not shown on RTI, for example a pension not paid through their employer or gift aid payments.
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • go to Step 15

Step 15

If you accept the customer’s explanation, go to Step 18

If you do not accept the customer’s explanation, go to Step 16

If you have been unable to contact the customer by phone, go to Step 16

Step 16

If the customer is a NES Fast track case

  • issue TC2036
  • issue an e-mail to the NES advisor with details of the information required
  • BF for 14 days
  • update household notes with PM34 from TCM0168020, for how to do this use TCM1000001

If the customer is not a NES fast track case 

  • issue TC2036
  • BF for 14 days
  • update household notes with PM34 from TCM0168020, for how to do this, use TCM1000001
    Note: the customer is allowed 30 days to send in any evidence. Claim BF’d for 14 days to check DMS (Digital Mail Service).

Step 17

Check the TC2036 response

If you accept the customer’s response, go to Step 12

If you do not accept the customer’s response, go to Step 19

Step 18

Calculate the customer’s disposable income. 

  • add up all the income, and deduct the living costs to obtain this figure
  • note this figure on the coversheet

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 19

Hardship referral to be refused

If the hardship request is refused because of disposable income

  • send a TC873 to the customer
  • update Household Notes with message PM24 from TCM0168020. For how to do this, use TCM1000001
  • in NES cases inform the NES advisor of the decision
  • PA casepapers

If the hardship request is refused because the TC1133/TC2036 has not been returned

  • update Household Notes with message PM22 from TCM0168020. For how to do this, use TCM1000001
  • in NES cases inform the NES advisor the TC1133/TC2036 has not been returned
  • PA casepapers.

Step 20

Check the type of recovery and consider adjusting the recovery rate, for how to do this, use TCM1000199

Note: where there is any element of in-year recovery the Payment Adjustment screen should be available.

If recovery is Cross Year or Cross Award only, go to Step 21.

If recovery is in Cross Year (which may be as a result of Cross Award Recovery) and In Year, go to Step 22.

If recovery is In Year only, go to Step 22.

Step 21

Cross Year recovery or Cross Award recovery

  • print out the payment schedule for the current year
  • transfer payment information on to the Hardship Top-up Sheet. For how to do this, use TCM1000088
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • transfer the payment dates onto the Hardship Top-up Sheet
  • calculate the first payment due 
  • refer to Manual Payments Team for payment using the SEES Manual payment referral form. For how to do this use TCM1000110.
    Note: If the customer has a Post Office Card Account (POCA) ensure that the Manual Payment Referral is noted
  • update Household Notes with the appropriate household note PM25, PM26 or PM27 from TCM0168020. For how to do this use TCM1000001.
  • issue TC872
  • BF for two weeks before next payment is due.

Step 22

In-year recovery only or in-year and cross year recovery

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  • access Adjust In Year Payments screen and reduce the recovery rate in 5% increments adjust recovery in 5% increments until we  give the customer the required “Top up to pay amount” adjustment, for how to do this use TCM1000523
  • issue TC868
  • update Household Notes with message PM29, if recovery has been adjusted on system (no manual adjustment was made prior to this) OR update Household Notes with message PM28, if adjustment can now be made on system (but recovery was previously adjusted manually) from TCM0168020. For how to do this use TCM1000001.
  • PA casepapers

Step 23

Check claim to see if there has been any changes to the award amount.

If the award amount has not changed

If the award amount has changed, the award adjustment will have to be recalculated 

Step 24

Check to see if the Payment adjustment screen is active

If the Payment Adjustment screen is active, go to Step 22

If the Payment Adjustment screen is not active, go to Step 25

Step 25

  • update coversheet and the Hardship Top-up sheet
  • refer to Manual Payment Team for payment using the SEES Manual payment referral form. For how to do this use TCM1000110
  • BF for two weeks before the next payment is due
  • no further action.

Step 26 {#step26} 

Check if the Income and Living costs form has been returned

If the Income and Living costs form has been returned, go to Step 10

If the Income and Living costs form has not been returned,

  • update Household Notes with message PM22 from TCM0168020. For how to do this, use TCM1000001.
  • PA casepapers.

Step 27

At the 14 day BF expiry, check DMS queue and household notes to see if correspondence has been returned

If no correspondence has been returned, BF the case for the remainder of the 30 day BF period
Note: contact the NES advisor for NES fast track customers to chase up the reply

If evidence has been returned, go to Step 18

Step 28

At the 30 day BF expiry, check DMS queue and household notes to see if correspondence has been returned

If correspondence has not been returned, go to Step 19

If evidence has been returned, go to Step 12

Step 29

  • issue TC1129 advising the customer
    • we cannot increase overpayment deductions but they can make extra payments if they want to pay back their overpayment more quickly by contacting the Tax Credit Payment Helpline
  • update household notes with PM31 from TCM0168020, for how to do this use TCM1000001
  • take no further action

Step 30

Where we are still recovering an overpayment that has been fully recovered, the action you take will depend on whether the overpayment is in cross award recovery or cross year/in year recovery.

If recovery is by Cross award recovery (CAR)

  • return the overpayment to the original year by using the appeal/manual as detailed in Newsboard Message: 016/15
  • update household notes with PM35 from TCM0168020, for how to do this use TCM1000001

If recovery is in-year or cross year recovery apply the 1p workaround.

In function Change of Circs

  • input 0.01 in the ‘other income’ field for BOTH the PY (where the OP originated) and CY
  • in function Amend Finish select Cancel
  • remove the penny from ‘other income’ field for BOTH the PY and CY tax years,
  • select ‘OK’
  • complete the Amend Finish screen
  • update household notes with PM36 from TCM0168020, for how to do this use TCM1000001
  • BF the case for 48 hours to check the workaround has gone through.

Step 31

  • issue TC873A advising the customer
    •  Department of Work and Pensions (DWP) are now responsible for collecting their debt.
  • update household notes with PM32 from TCM0168020, for how to do this, use TCM1000001
  • take no further action
    Note: If the customer is unhappy with the closing down of their claim due to moving to Universal Credit or are experiencing problems because of the close down, refer the correspondence to the STC Joint Enquiry Team (This content has been withheld because of exemptions in the Freedom of Information Act 2000) . Note PM32 that the case has been referred to JET.