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HMRC internal manual

Tax Credits Manual

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HM Revenue & Customs
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Extra information - miscellaneous information: Individual Voluntary Arrangement overpayment calculation - notes relating to example spreadsheet

Guidance

The notes below relate to the information provided in the Example of an IVA worksheet calculation (Excel 33KB). 

Note 1

Mr and Mrs Brown both entered an Individual Voluntary Arrangement (IVA) on 11/08/2009.

Note 2

Checking their awards showed that the tax years 2003-2004, 2004-2005, 2005-2006 and 2007-2008 had all been finalised before the IVA date.

Note 3

You need to check for any outstanding overpayments in each of these four tax years, including any amounts that have previously been remitted as class 2 or class 5b where class 2 was not available. You also need to check for any amounts that have been recovered from other awards on or after the IVA date and any amounts that have been paid in by the customer on or after the IVA date.

Note: If only one of the customers had been in the IVA, you would not need to check for any amounts recovered from other awards or payments in made on or after the IVA date. In those circumstances, you would only need to check for the amount of the outstanding overpayment and any remissions made as class 2 or class 5b where class 2 was not available.

Note 4

You must start with the earliest finalised award, 2003-2004 and go to the ‘View Award Period Summary’ screen in function ‘View Household Account’.

The screen shows that there is still an overpayment outstanding of £356.56 for WTC so you will enter that figure on part 1 of the IVA Worksheet.

Note 5

In this case there are not any adjustments - that is, amounts already remitted to consider - so you will record the total overpayment as £356.56 at part 1 of the IVA Worksheet.

Note 6

A total of £1,561.99 has been recovered from other awards. Although the screen shows this as a breakdown of WTC and CTC, you only need the combined figure and enter that at part 2 of the IVA Worksheet.

Note 7

You now need to look at the later awards to determine whether any of the £1,561.99 has been recovered after the IVA date.

You must go to the ‘View Award Period Summary’ screen for 2004-2005 and this shows that £257.73 has been recovered from CTC. Because the tax credits computer makes recoveries against the earliest overpayment first and there is still an overpayment outstanding for 2003-2004, the £257.73 has been recovered to reduce the 2003-2004 overpayment. You will record this amount at part 2 of the IVA Worksheet and deduct it from the total of £1561.99. This leaves a balance of £1304.26 that you still need to identify.

Repeating this action for tax years 2005-2006, 2006-2007 and 2007-2008 shows that £300.00, £547.50 and £456.76 respectively have been recovered from CTC against the 2003-2004 overpayment. This accounts for the total amount recovered from other awards for 2003-2004.

Because all these awards ended before the IVA date of 11/08/2009, you know that we have not made any recoveries since the IVA date, so you do not need to enter a ‘Recovered from other awards’ figure at part 1 of the IVA Worksheet.

Note 8

In this case, there are not any payments in shown in the ‘View Award Period Summary’ screen. This means that you do not need to check for ‘payments in’ made on or after the IVA date and there is not anything to enter at part 1 of the IVA Worksheet. The total overpayment and recoveries made figure is therefore £356.56 and that is the amount that you need to remit for 2003-2004.

Note: ‘Payments in’ are amounts that the customer has paid by cash, cheque or debit card to reduce their overpayment.

Note 9

You now need to repeat steps 4 to 8 for the later awards that you have identified as finalised before the IVA date. You will determine in function ‘View Household Account’ that there are not any outstanding overpayments in tax years 2004-2005, 2005-2006 and 2006-2007. There have been no adjustments, no recoveries have been made from other awards and there have been no payments in. There is nothing to record for any of these years

Note 10

There’s still an outstanding overpayment of £286.90 CTC in tax year 2007-2008 and you will record this at part 1 of the IVA Worksheet. There are not any adjustments. £144.00 has been recovered from other awards but there have not been any ‘payments in’.

Note 11

You know that the recoveries must have been from the award for 2008-2009 and/or the award for 2009-2010, so you need to check carefully whether we have made any recoveries after the IVA date of 11/08/2009.

Note 12

You will go to the ‘View Award Period Summary’ screen for tax year 2008-2009. This shows that £144.00 has been recovered from this award so you can forget about tax year 2009-2010.

You now need to go to the ‘View Direct Payment Schedule’ screen for 2008-2009. This screen shows the amounts recovered and the due dates. You need to check for any amounts recovered with a due date on or after 11/08/2009. In this case, there have not been any recoveries made on or after the IVA date. Recoveries stopped in July 2009. You can check that the amounts recovered up to July 2009 add up to £144.00, so you do not need to check any further.

If the amounts recovered did not add up to £144.00 - for example, if they had only totalled £100.00, you would have needed to check the ‘View Award Period Postings’ screen to determine if a ‘set off’ of £44.00 had been made on or after the IVA date against this overpayment.

Note: ‘Set offs’ are arrears of tax credits on one year that are used to reduce an outstanding overpayment on another year rather than being issued to the customer.

Note 13

You now know that the only figure you need to include in the overpayment for 2007-2008 is the outstanding amount of £286.90 and that we have not made any recoveries after the IVA date.

So, because both customers are included in the IVA, you will need to remit £356.56 WTC for 2003-2004 and £286.90 CTC for 2007-2008.