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HMRC internal manual

Tax Credits Manual

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HM Revenue & Customs
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Payment - overpayments (Q-Z): reconciliation following cross award recovery

Background

From October 2014, if a customer is getting tax credits, we may automatically recover outstanding tax credits overpayments from their ongoing payments. Overpayments we can recover may be from

  • awards that have ended that they or their partner had as single people
  • awards that have ended that they and their partner had together previously

Reconciliation is a process that will happen on all claims if a household breakdown is reported or entitlement ends and full recovery of the debt was not completed. If full recovery has been completed then reconciliation will not occur.

Reconciliation describes how we apportion recoveries between joint and single overpayments where recovery of an old overpayment(s) has been made from a joint award. Reconciliation ensures a fair allocation of recoveries between two customers who may both have Cross Award recovery overpayments.

The Cross Award summary screen will show the amount of overpayment posted back to the originating award(s) along with recoveries made in respect of that overpayment. The recoveries are repaid in a set order. For further information, follow the guidance in TCM0232200.

Guidance

Step 1

Access the Cross Award summary screen. For how to do this follow the guidance in TCM1000561.

If ‘Transfer Reason’ shows reconciled, go to .

If ‘Transfer Reason’ does not show reconciled, take no further action.

Step 2

From the information shown in the Cross Award summary screen, make a note of the amount(s) ‘Transferred Back’ and also the amount shown in ‘Reconciled Cross Award Recovery’.

Note: The total amount(s) transferred back should be the difference between the total overpayment(s) added together less the ‘Reconciled Cross Award Recovery’ amount.

Check for any ‘joint to joint’ overpayments. Any recoveries are made against these overpayments first, and recoveries are allocated in chronological order (oldest first).

For example: Mrs A and Mr B currently have a joint claim that is in payment. This has been in payment since 2009 - 10. Mrs A and Mr B have a previous claim that started on 06/04/03 and ended on 17/05/07. They have an outstanding overpayment of £652.00 for 2006-07 and £258.00 for 2007-8 (total overpayment of £910.00). These are selected for Cross Award recovery and transferred in to their current joint claim.

They report a household breakdown. The Cross Award summary screen will show ‘Reconciled Cross Award Recovery’ and the total recovered, which in this case is £790.00. The 2006-7 overpayment has been recovered in full, and the remaining £138.00 is allocated against the 2007-8 overpayment, leaving £120.00 transferred back to the 2007-08 claim.

If there are recoveries still to be allocated, go to .

If there are no more recoveries to be allocated, go to .

Step 3

Check if any overpayments have arisen since Cross Award recovery started. For how to do this follow the guidance in TCM1000561.

Note: ‘Other Household Overpayment(s) Exist’ will only display if there is an overpayment that arose after Cross Award recovery started.

If there are no other household overpayments, go to .

Step 4

Check for Cross Year or In-Year overpayments and the amounts that have occurred on the current claim. For how to do this follow guidance in TCM1000199. Recoveries will be allocated to the cross year or in-year overpayment.

For example: Mrs C and Mr D currently have a joint claim that has been in payment since 2009-10. Mrs C and Mr D have a previous joint claim that started on 06/04/03 and ended on 17/05/07. They have an outstanding overpayment of £652.00 for 2006-07 and £258.00 for 2007-08 (total overpayment of £910.00). These are selected for Cross Award recovery and transferred in to their current joint claim. They also have a Cross Year overpayment of £700.00.

They report a household breakdown. The Cross Award summary screen will show ‘Reconciled Cross Award Recovery’ and the total recovered that in this case is £1030.00. The 2006-07 and the 2007-08 overpayments have been recovered in full (earliest year first) and the remaining £120.00 is allocated against the Cross Year overpayment, leaving £580.00 still outstanding for the Cross Year overpayment.

If there are recoveries still to be allocated, go to .

If there are any other household overpayments, go to .

Step 5

Check for any single overpayments. Recoveries will be split 50:50 for each customer’s single overpayments. Each single overpayment is paid off in the order of earliest first, and within those years Working Tax Credits overpayments are paid off first and then Child Tax Credits overpayments.

Note: If only one customer has overpayment’s transferred in for Cross Award recovery, or, if one customer’s overpayments have been fully recovered then the rest of the recoveries are used for the remaining overpayment.

For example: Mrs A and Mr B currently have a joint claim that has been in payment since 2009-10 (started on 26/09/09). Mrs A and Mr B have a previous joint claim that started on 06/04/03 and ended on 17/05/07. They have an outstanding overpayment of £652.00 for 2006-07 and £258.00 for 2007-08. These are selected for Cross Award recovery and transferred in to their current joint claim.

Mrs A and Mr B also have outstanding overpayments on their single claims: Mrs A has £556.00 for 2008-09 and Mr B has £356.00 for 2009-10. These have also been selected for Cross Award Recovery and transferred in to their current joint claim. A total of £1822.00 is selected for recovery.

They report a household breakdown. The Cross Award summary screen will show ‘Reconciled Cross Award Recovery’ and the total recovered which in this case is £1626.00 and the remaining £196.00 is transferred back. This is allocated as follows:

  • joint 2006-07 overpayment of £652.00 is recovered in full
  • joint 2007-08 overpayment of £258.00 is recovered in full
  • Mrs A single 2008-09 overpayment of £556.00 has £360.00 recovered and £196.00 transferred back
  • Mr B single 2009-10 overpayment of £356.00 is recovered in full

In this example, all the joint overpayments were recovered in full, but the remaining £716.00 could not be apportioned equally because Mr B’s overpayment was less than half of this amount. The remaining recoveries were allocated to Mrs A’s single overpayment.

  • go to .

Step 6

Access the previous claim to view any remaining and still outstanding overpayments which were not recovered via Cross Award Recovery. For how to do this follow guidance in TCM1000386.