Any arrangement will only last until the end of the current tax year. It appears there is no way to challenge a refusal to reduce the percentage recovery rate, but a fresh hardship request can be made. If the cases warrants it, a complaint could also be made. The law says that an overpayment debt for a couple can be collected by HMRC in full but only once!
The stated policy of HMRC where this has happened following a household breakdown is to write to both members of the former couple making every effort to trace any former partner for whom they do not have an up-to-date address. If the claimant believes that there should be a difference in what they and their former partner should pay, then HMRC will take into account the circumstances of both of them and may ask each of them to pay a different amount, or one of them to pay the full amount.
Alternatively, they can agree between them to pay different amounts and inform HMRC of this decision. This often meant the mother with care of the children had to repay the whole joint overpayment debt where the absent partner was difficult to trace. Instead they will pursue the other partner, and if they cannot collect the money will not go back to the engaging partner to collect it.
It is important to note that the law still allows HMRC to pursue either partner for the full amount of the joint debt. Also, this process is not well advertised by HMRC, so you should ensure that you ask Debt Management and Banking if you think it applies to your client.
Notional entitlement Sometimes known as notional offsetting. Sometimes, tax credit claimants who form a couple or who become single, either because they separate or because one partner dies, are slow in reporting the change to HMRC. Yet in many cases, if they had acted promptly they would have continued to be entitled to tax credits, albeit in a different capacity.
Until 18 January , HMRC would recover the whole of any overpayment arising on the old claim, but give no credit for what the claimant would have received had they made a new claim at the right time. From 18 January , HMRC introduced a new policy that means tax credits recipients who start to live together, or who become single after being part of a couple, but are late reporting the change to HMRC or don't report the change and have their award changed as a result of a compliance investigation by HMRC , can ask HMRC to reduce the overpayment on their old claim by whatever they would have been entitled to had they made a new claim promptly.
A new claim must be made for this policy to apply. If this doesn't happen automatically, claimants should contact the tax credit helpline to ask for their case to be referred to the 'notional entitlement or notional offsetting ' team in the Tax Credits. Note that the notional offsetting will not cover the one month previously three months by which the claimant will be able to backdate their new claim.
Notional offsetting is available even if the new claim for tax credits is not possible. We understand that HMRC may ask for information in order to help to calculate what tax credit entitlement would have been if the new tax credit claim was possible. Anyone who thinks notional offsetting should apply should contact HMRC's tax credit helpline. As noted above, HMRC have confirmed they will not apply notional offsetting where the claimant's behaviour was fraudulent.
Prior to Autumn , a similar rule existed that prevented notional offsetting from being applied where the claimant made a 'deliberate error'. The term 'deliberate error' is no longer used. The Claimant Compliance Manual contains some information about the term 'fraudulent' but this seems only to replicate the previous guidance on deliberate error and therefore we continue to seek clarification from the HMRC particularly about cases where there was no financial gain at all from the failure to report to a change.
More information about notional entitlement can be found in the HMRC compliance manual. The manual covers three distinct periods, prior to 17 May , between 17 May and 18 January This is because notional entitlement applied until May when it was withdrawn. See our understanding couples section for more information about how to request notional entitlement. HMRC call this type of off-setting Class 11 remission.
It is not widely known and for that reason can often be overlooked. Further information is available in the tax credit manual. Some people will be paying back two overpayments, one via ongoing recovery and another via direct recovery. This often happens where there is an overpayment on an old claim, and a new overpayment on a current claim. Since August , HMRC have implemented a new policy which means that any direct recovery action should be suspended until the ongoing recovery ends.
Whilst we welcome this policy, HMRC are not proactive in telling claimants about it. If this applies, you should ask Debt Management and Banking to suspend the direct recovery action. HMRC have produced some information for cases involving claimants with mental health issues. The following is reproduced from the intermediaries guidance:. HMRC will deal with mental health cases carefully and sympathetically to avoid distress to the customer. HMRC will need a letter from a health care professional or mental health social worker explaining the mental health problem to enable it to deal with these cases.
The evidence should include the nature of the illness and as far as possible, whether the illness is likely to be long-term for example, schizophrenia or where the prospects for recovery are expected to be good. If the information has not been provided HMRC will need to write to the claimant or third party asking for the documentary evidence. Only in exceptional circumstances will the evidence received be insufficient to relieve the claimant from responsibility for payment.
If the mental health problems existed at the time the overpayment occurred then Benefits and Credits can consider whether exceptional circumstances are such that writing off the overpayment is appropriate. If the mental health problems exist at the time the overpayment is being recovered then DM will review the circumstances:.
Further guidance for cases involving claimants with mental health issues can be found in the tax credit section of the DM manual. Further information about the manual can be found in section 5. In exceptional circumstances, for example where a claimant is seriously ill or a close family member is ill, a request can be made to HMRC to suspend recovery of the overpayment until such time as the claimant is able to discuss their financial situation fully with HMRC. Claimants or their advisers should phone the debt management payment helpline to explain the situation if this applies.
Your continued use of revenuebenefits indicates your consent to our use of cookies. Please read our privacy policy , about the use we make of the information you provide to us. Web design by MID. Legislation vs practice Making a claim How to claim Backdating Protective claims Entitlement WTC elements CTC elements 2 child limit policy Payments What is income The four steps Disregarded income Calculating tax credits income Employment income Pension income Income from self-employment or trading income Social security income Student income Investment income Property income Foreign income Notional income Miscellaneous income Real Time Information and tax credits Changes of circumstances Changes that must be reported to HMRC Bereavement Other changes How to notify changes Understanding the disregards Understanding childcare Who can claim Calculating costs Understanding disability Understanding couples Understanding self-employment Special circumstances Foster carers Domestic violence Overpayments and underpayments How much can your client get?
Capital rules Self-employment What counts as self-employment for UC? How much is the National Minimum Wage? Who is an eligible person? How much is Tax-Free Childcare worth? What are qualifying childcare costs? What does the law mean? How do tax credits work? How much can your client get? Tax Credits: Dealing with overpayment debt This section of the site provides advisers with information about repaying tax credit debt. Recovery of old tax credit debts Claimants may contact you with very old tax credit debts, often they will say that they have not heard from HMRC for many years.
The direct recovery process The following table gives an overview of the direct recovery process. Process Explanation Step 1 Notification of overpayment — TC When a claim ends, for whatever reason, and any overpayment is outstanding, the tax credit system will issue a TC notice to pay form once any appeal period has passed normally 30 days.
Step 3 DM checks. The claimant will need to speak to the DCA directly — they will arrange a time to pay and consider hardship requests which are then referred back to HMRC — see below Step 5 Case passed back to HMRC Eventually, after at least 12 months, if there has been no contact with the claimant the debt will be passed back to HMRC.
Step 6 Legal proceedings If no contact can be made, or the claimant refuses to make a payment arrangement, HMRC may consider using one of their enforcement powers such as taking control of goods distraint or county court action to recovery the debt.
Direct repayment Claimants can repay HMRC by various banking services, including on-line banking, Faster Payments, payment at a bank or building society or sending a cheque by post. Time to pay arrangements The TC see Step 1 in the table above normally gives claimants 42 days to pay the amount stated.
The following time to pay options are available: 12 months HMRC should readily accept an offer to repay the debt in twelve monthly instalments. No additional questions should be necessary.
Over 12 months up to 10 years Claimants can ask HMRC to repay over any period up to 10 years without providing full income and expenditure details. Difficult conversations, talking to teenagers, older people and partners.
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Our free and flexible Couch to Financial Fitness plan will help you build confidence to manage your money. Step by step we can help you cut your spending, develop core saving muscles, and create better habits for the future. Are you already claiming Working Tax Credit? Then how and when you move to Universal Credit depends on if you have to make a new claim because of a change in circumstances. You must tell HMRC the government department that issues Tax Credits within 30 days if you have a change of circumstances.
This could be:. Find out more in our guide Help to Save explained. HMRC will tell you what you need to do. Call the Tax Credit Helpline on to let them know about any changes to your circumstances. They can help you:. For more details, go to Citizens Advice. Or, in England, call In Wales, call Visit Citizens Advice Scotland or call Universal Credit works differently. Find out more at nidirect. Are you getting Working Tax Credit, work at least 16 hours a week and pay for childcare?
For instant money guidance based on your circumstances, get started with our Money Navigator tool. In most cases, you must use registered or approved childcare. This can include childminders, playgroups and nurseries.
This is up to certain maximum weekly limits. Find out more on the GOV. UK website. The furlough scheme ended on 30 September Find out more about how your tax credits can be affected by coronavirus and what you need to do on the Low Income Tax Reform Group website. If your circumstances change at any time during the year, call HMRC on to let them know. For example, if your income changes, your child leaves home or you move house. Changes in your circumstances can affect the amount of money you get, or mean you have to make a new claim for Universal Credit.
There are other changes of circumstances you might need to report to HMRC other than income changes. This is called the income disregard. This will be either by reducing your future tax credits or by direct payments if your tax credits have stopped. Find out about extra sources of income and support available to help you manage your household bills and save money in our guide What benefits you can claim and other ways to increase your income.
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