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HMRC internal manual

Tax Credits Manual

From
HM Revenue & Customs
Updated
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Payment - overpayments (A-C): overpayments (introduction)

Tax credits are based on customers’ household income and personal details for the whole of the tax year.

If the customer tells us about a change in income or circumstances, we work out the revised amount of tax credits for that tax year. If the change results in them being entitled to less tax credits overall, then there may be an overpayment.

To help stop overpayments occurring, we expect customers to

* provide us with accurate and up-to-date information when they make their claim
* tell us promptly about any changes that may affect their award.

For example: an overpayment can happen if

* a customer delays telling us a change in their circumstances
* we delay recording a change of circumstance a customer told us about
* a customer’s income as a whole for 2005-2006 or an earlier year is £2,500.00 more than their income for the previous year
* a customer’s income as a whole for 2006-2007 or a later year is £25,000.00 more than their income for the previous year
* a customer’s income as a whole for 2011-2012 or 2012-2013 is £10,000.00 more than their income for the previous year
* a customer’s income as a whole for 2013-2014 or a later year is £5,000.00 more than their income for the previous year
* a customer’s award was not based on the right details.

However, if a customer receives an overpayment of tax credits we will make every effort to recover the overpayment.

How will we expect customers to pay back an overpayment?

We will collect an overpayment back by one of the following methods

* if a customer is still receiving tax credit payments, as the same household for which the overpayment arose, we will automatically reduce the amount we pay them, at a rate dependent on their personal circumstances
* if a customer is receiving tax credit payments and has an overpayment from a previous award that has ended, we may reduce the amount we pay them at a rate dependant on their personal circumstances
* if a customer is no longer entitled to tax credits, we will ask them to make a direct payment.
* if a customer has migrated to Universal Credit (UC) with an outstanding tax credit debt, the amount will be transferred to the Department for Work and Pensions (DWP) and collected through UC payments.  DWP will write to the customer directly.

In what circumstances will we write off an overpayment?

The decision on whether or not an overpayment is recoverable depends on whether HMRC and the customer have met their individual responsibilities. These are outlined in TCM0224280.

The following sections of the manual, TCM0226000, TCM0228000 and TCM0230000 give guidance on how you should

* calculate the amount of overpayment to be remitted
* explain to the customer that you intend to recover or remit the overpayment.