HM Revenue and Customs (HMRC) has published new rules governing the overpayments of tax credits.
There have been continuous problems with overpayments since the system was introduced. Many claimants have received requests that they return money which was paid them in error, even though they thought they had made an accurate and correct claim.
Under the old rules, HMRC would write off overpayments that had occurred through official errors, but only where claimants could reasonably have thought their award was right.
However, criticisms have been made that HMRC’s idea of what may reasonably be expected of claimants is unfair.
In response, HMRC has brought out new guidance known as COP26.
The amended code of practice on overpayments has discarded the ‘reasonableness test’ and replaced it with a number of responsibilities that HMRC expects of claimants and, more importantly, that claimants can expect of HMRC.
Robin Williamson, of the Low Incomes Tax Reform Group, said: “The reasonableness test, about whether you should have realised you were overpaid, is no longer there. There is no longer a tension between what the Revenue thinks you should have spotted and what the tax credit claimant can reasonably expect to spot.”
The responsibilities are set out in a 12-page booklet, the aim of which is to ensure that information about income and circumstances submitted by claimants is accurate and relevant.
HMRC said: “It is clearer, setting out claimants’ and the Revenue's responsibilities - we have consulted widely on this.”
The new rules allow HMRC 30 days in which to implement changes of circumstances reported by claimants and to work out the new payments.
However, should the new payment contain an error, then the responsibility lies with the claimant to identify the mistake and inform HMRC at once.
If the recalculated payment is sent out on time, there will be no recovery for any overpayments identified within a month. If the error is not spotted or not reported within the month, the claimants will be asked to return overpayments up to the point at which they contacted HMRC.
The Low Incomes Tax Reform Group said that the new guidance had positive aspects but that it was still biased in favour of HMRC.
In particular, the Group highlighted the issue of timings: “We are concerned that much of the new test revolves around whether or not a claimant has contacted HMRC by a specific date. Given last year’s revelations about missing recordings of phone calls to the helpline, we question whether HMRC is yet capable of maintaining adequate records of all contacts claimants have with the Tax Credit Office (or other parts of HMRC), or of ensuring that when an overpayment is disputed full evidence of such contacts is properly reviewed.”
Date:4 February 2008
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