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HMRC internal manual

Tax Credits Manual

Payment - overpayments (D-E): Overpayments - death of a customer

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At the end of each tax year the tax credits computer looks at every award and decides if there is an overpayment. If there is

  • a continuing award - the overpayment will be recovered from the customer’s new award at a rate of 10%, 25%, 50% or 100%. This is called cross-year recovery
  • no continuing award - the recovery method will be direct. This means that 30 days after the Finalised Award Notice has been issued, a form TC610 Notice to Pay (with a payslip) will be issued to the customer for them to use to make the repayment within 42 days. Once 42 days have passed, if the overpayment has not been repaid the tax credits computer will automatically refer the details to Debt Management and Banking (DMB) through the Integrated Debt Management System (IDMS). DMB will then deal with all recovery action for that overpayment.

If at any time we receive notification of the death of a customer, the tax credits award is ended and recorded as a household breakdown.

Function ‘Review Household Account’ will then run and decide if the ended award was balanced, overpaid or underpaid. If the award has been

  • underpaid - any outstanding payment of tax credits will be made automatically by the tax credits computer to the estate of the deceased
  • overpaid - the tax credits computer will forward the details of the overpayment automatically to DMB. DMB will deal with any recovery that needs to take place.

If notification has been received about the death of one customer in a joint household, DMB will seek to recover the overpayment from the surviving partner. This is because both customers are jointly and severally liable for the overpayment. However where a couple had separated prior to the death of a former partner, DMB will seek to recover 50% of the original overpayment from the surviving ex-partner and 50% from the deceased estate.

If notification has been received about the death of both customers in a joint household or the death of the only customer in a household, DMB will seek to recover the overpayment from the estate of the deceased. If this is not possible, the overpayment may be remitted to balance the claim. DMB will deal directly with the executor.

If recovery action is already taking place on an overpayment when notification is received of the death of one or both of the customers, then if the overpayment is in

  • cross-year recovery - payments will be stopped and the remaining overpayment amount will be immediately forwarded to DMB
  • direct recovery, but notification of the customers death hasn’t been forwarded to DMB - no matter what stage in the cycle the recovery is at, the details will be forwarded to DMB
  • direct recovery and notification of the customers death has been forwarded to DMB - the tax credits computer will send an update to DMB informing them of the notification of death.

If a customer has migrated to Universal Credit (UC) with an outstanding debt, this will be transferred to the Department for Work and Pensions (DWP) or the Department for Communities (DfC) in Northern Ireland. Following the transfer debts will be automatically apportioned equally between customers unless business rules dictates 100% should be allocated to one customer, namely:

  • the non UC customer is deceased and the household was together on the date of death (assign 100% to the UC customer)
  • both customers are deceased and the date of death is the same for both (assign 100% to the youngest customer)

For how to do this, follow TCM0040020.