Paula23rd November 2013
Please always check Tax Credit Casualties home page for updated information and guidance first!
Paula23rd November 2013
(Updated 15 July 2014)
The Limitation Act 1980 basically says that most debts that have not been pursued or had repayments made (see note 1 below) on them, within 6 years of the bill first becoming due (see note 2 below), should be considered ‘statute barred’ (i.e. unenforceable). For the Scottish Prescription and Limitation Act 1973, the time frame is only 5 years.
We are having an ongoing, and ever changing, debate with HMRC as to whether the Limitation applies in some or all tax credit cases. HMRCs typical response is to say that ‘limitation does not apply’, and that they ‘can still seek recovery’, however I am very suspicious of their terminology.
We do know that HMRC’s own manual DOES say it applies to TC overpayment (See the HMRC manual regarding the Limitation Act 1980) and that we now have hundreds of cases that have now been dropped despite HMRC trying to insist limitation does not apply.
The Scottish Prescription and Limitation Act 1973 has an extra emphasis that because the debt is statute barred, the creditor (HMRC) are prevented from taking legal action.
The English version is missing this particular emphasis, so this may be what HMRC are trying to utilise (in English cases) when they claim that they can still ‘ask’ for repayment.
Due to vast experience of HMRC deceptive tactics, I am not prepared to accept anything HMRC have to say on the matter, and so I suggest everyone keeps pushing each case through the usual dispute process, until you reach the Adjudicator Office stage, so as to get the AO to comment on each case or across the board on the issue.
I have been advising people to refer their limitation cases to the Adjudicators Office for some time now, and have yet to receive a full response from the AO on any of them. As such, I suspect the AO are either trying to ‘keep out of it’ or are possibly awaiting legal advice themselves.
I hope to force a response eventually, (even just by sheer weight of numbers), not least because having a response to one case should mean we can use that decision as a precedent in other cases, shortening the fight and making it more clear cut for those coming up behind.
You need two rounds of arguing any dispute issue with HMRC before you can address that issue to the AO, and so the following steps are how we suggest invoking Limitation/ Prescription in TC overpayment cases. For Scottish cases, please replace ‘Limitation Act’ with ‘Prescription Act’, and ’6 years’ with ’5 years’, wherever it appears in any of the template letters below:
Use this template letter to first raise the issue of Limitation or Prescription with HMRC: Step 1 Limitation Act Letter Template
Use this template letter if and when HMRC respond with a load of blather that ‘limitation does not apply’, or ‘does not restrict’ them from seeking repayment: Step 2 Limitation 2nd Round Letter Template
When HMRC respond to your step 2 letter it will be in one of two ways:
So once HMRC respond to Step 2, you can refer your case to the AO. Please use both of the following template letters:
Due to how completely swamped the AO are with Tax Credit Overpayment cases these days, this will effectively put your case into stasis until the AO can investigate fully – but don’t forget to see our Harassment page if you do get repayment demands.
We have yet to get a response from the Adjudicators Office (for over 18 months so far). I hope to force a response eventually, which should mean we can use that decision as a precedent in other cases, shortening the fight and making it more clear cut for those coming up behind. I will update this page as soon as we do get our first response. Meanwhile, if you do get a response from the AO that is anything other than an acknowledgment of your letter, please contact me to let me know.
Paula22nd November 2013
(Updated 24 June 2014)
The difference is explained in full below, but in short, an Appeal is for when you feel HMRC’s Tax Credit Office have used the wrong basic facts to calculate an award (or an overpayment). A Dispute is for all other Tax Credit overpayments.
Please also see the section about Notional Entitlement Offsetting & Hardship Assessment, because even if you cannot Dispute or Appeal you might be able to reduce the debt or rate of repayment.
Jump straight down page to:
A dispute is a more informal process, although you do still have the opportunity to eventually take the dispute to independent bodies to judge. Please note you now have only 90 days from the date you received their last decision to start / continue the dispute.
The basic premise of a dispute is that you dispute responsibility for how an overpayment occurred. Note that you are not denying that there was an overpayment. You’re simply stating that you are not at fault for it.
When someone makes a Tax Credit claim they are agreeing to certain ‘obligations’, such as a responsibility to report changes quickly and to check award notices in case they need correcting. HMRC also have obligations to the claimant, such as to act on notifications quickly & effectively and to give correct advice.
Usually an overpayment bill has several smaller, separate causes, some of which snowball. Using the Code of Practice 26 (COP 26), I suggest demanding answers and unpicking the causes and events to challenge that you met your obligations, but HMRC did not meet theirs.
Note that you should focus your letters, etc, on only things relevant to the dispute. i.e obligations. While it is incredibly difficult, distressing and disgusting how badly HMRC’s Tax Credit Office handle our cases, how they have treated you since the overpayment occurred does not actually have any relevance to who filled their obligations to keep the claim correct.
How to Dispute: Please see our in-depth guide to Disputing here.
If HMRC harass you with repayment demands whilst you dispute please see this page.
An appeal is a more formal process. It’s actually part of the legal system, because people have a legal right to state benefits if they are eligible for them.
Appeals are for when you disagree with the circumstances on which HMRC have based your Tax Credit award or overpayment bill. For instance if they are using a higher income figure than you accept was correct, or they calculate your award based on you only having 2 eligible children when you feel you have 3, or if HMRC say you were not single when you received a single person award, or HMRC say you did not work enough hours but you feel you did.
Thankfully, the initial stages of appeal have speeded up slightly. There is now an official ‘recommendation’ that the first two reviews of your appeal should happen within 42 days. This only seems to apply to appeals started on or after April 2014 (approx.) unfortunately. If you launched your appeal before then, it may be that you do not get the speedier treatment.
HMRC repeatedly state that you “can’t appeal an overpayment” – while that is technically correct, you can still appeal the award decisions that led to the calculation of the overpayment. So if your Tax Credit overpayment is caused by HMRC using wrong circumstances you would be best served to appeal. But you only have 30 days from being told of the decision (that caused the overpayment), to start an appeal. In rare cases the deadline can be extended, but if you miss it, you need to dispute instead.
When you ‘appeal’ their decision (the calculation decision you think is wrong), the first stage is internal and informal, so you’re dealing with HMRC and the Tax Credit Office. But if you continue to disagree with their decisions you then get to take it to a formal independent appeal hearing.
Because there is a huge backlog for appeals, you will then go into a queue for an independent appeal hearing. This queue gives HMRC one more chance to try to ‘resolve’ the case. They will informally review your case, yet again. But they may try to imply going further will cause you costs etc or go against you. It will not. They may contact you to ask for yet more ‘evidence’. If you have already supplied everything just tell them so.
Once they have made their review decision, you can either accept it if it’s reasonable, or refuse it and continue to wait for your appeal hearing. Do not be bamboozled into dropping the appeal if they imply you have to. You have every right to continue to appeal.
But only about 5% (roughly) of people who demand a Tax Credit appeal ever actually need to get to the appeal hearing stage, in my experience. This is because the case is resolved to the claimants (your) satisfaction. This is because HMRC try to bluff people into giving up their appeal, but when the victim pushes to continue HMRC have to scramble to clean up any ridiculous or unfair cases at the last minute, before they end up in front of an angry appeal panel; who routinely criticize HMRC for the wasting of everyone’s time and resources.
Note that when dealing with an appeal, the only relevant issues are about your eligibility. Who did what to whom, and why, is not relevant. Only whether HMRC’s calculation decision was correct.
To launch an appeal use this form.
Most of it is quick and simple ID questions. But for the date of the decision you are appealing against put the date of this most recent letter you received. And for the last question: ‘Why don’t you agree with our decision‘, write something like … ‘I don’t agree with your decision because my child was not included in the calculation/ was not part of a couple/I was working x amount of hours/ because you have used incorrect circumstances, during the relevant period. As such I intend to appeal to independent hearing. ‘
Then get that sent to the address on the top of the form.
Remember that HMRC will continue to ‘review’ their decision even while you queue for the independent hearing. Just stick with it and refuse all non reasonable ‘settlements’. Don’t be worried about ending up at a tribunal. I know it sounds scary, but it’s not like a court date. You are not on trial, this isn’t legal AGAINST you. You are the one demanding the hearing. HMRC are the ones who have to defend themselves.
Please note that whilst you appeal HMRC cannot ask you to make repayments. See this page if they try.
More info: See this page for a more in-depth explanation of (by far) the most common appeal case type: When HMRC say you were part of a couple when claiming as single, which also explains a lot more about the rest of the appeal process.
Even if you are unable to dispute or appeal (usually due to deadlines expiring) you may be able to reduce the debt, or rate of repayment, by requesting one of the two following assessments, if they are appropriate to your situation.
Please only use these methods as a last resort, making sure to use any of the above processes first if they are appropriate. This is for two reasons
Notional entitlement offsetting is a formula that can be done where HMRC work out what you would have received from a ‘correct’ claim (i.e. usually a Joint claim, if you were mistakenly paid as Single) for that period, and then that figure is deducted from the outstanding debt. So this could significantly reduce the debt amount, but isn’t usually done until you ask for it.
To request this, simply write to HMRC, quoting your NI number and as if notional entitlement offsetting can be applied to the alleged overpayment, and if not why not.
Hardship assessments can mean that HMRC essentially say that your income is too low for them to expect you to make any repayments currently. This can be reviewed if your circumstances change. But if your income is very low, or your outgoings very high (i.e other debts, etc) you may qualify.
Let me explain how they do a hardship assessment. They will arrange to have a telephone appointment with you, giving you chance to get figures together. During the appointment they add up all your expenses, including all the obvious, rent etc, shopping, travel etc and include child’s costs, food for work and school, petrol, debts, professional costs, even clothes and birthday presents. They then deduct this figure from your total current household income.
So say just for ease of figures they worked out £15,000 income, minus £13,000 costs equals £2,000 left. They call this £2000 your ‘disposable income’. They can then only take half of your disposable income as the repayment plan, which is £1000 over 12 months. So that would mean £83 a month repayment. Your disposable income would have to be very low for them to agree that you did not need to repay anything currently. So if you have a lot of outgoings and very very little money left over for anything else not on that list above, this may be the way forward. But otherwise, you could still try it, but then just not agree to the repayment plan they come back with.
Paula21st November 2013
(Updated 15 July 2014)
Before our main article about HMRC harassment, (further below), many of you now seem to be getting identical and out-of-sequence demands recently. HMRC seem to be sending practically the same letter to anyone with an outstanding balance, regardless of whether there is an ongoing dispute or appeal. But it can be hard to tell with HMRC, because their letters are so disjointed and confusing.
If the harassing letter that you are here to learn how to respond to looks like this, or you just feel that the following suggested response is more suitable in your situation than the others mentioned further down this page, please reply to the address on that letter to say something like…
‘I received your demand on x date. You are advised that this matter is under ongoing dispute and that HMRC have failed to respond to my previous letter. The demand infringes both HMRC obligations and my legal right to dispute the alleged overpayment. As such HMRC are misrepresenting their power to pursue recovery and your behaviour is therefore harassing and criminal. I demand a response to my previous letter.‘
It’s now become very common for HMRC’s Tax Credit Office to try to push people into repayment while disputing, and even appealing. It did used to be fairly rare to be chased for recovery whilst challenging a Tax Credit overpayment debt. And it’s always been a grey area.
HMRC’s COP26 states that they will hold off recovery during the first round of disputing, which implies that they don’t have to hold off during further ones. But actually that is a legally dodgy position. People have several different rights offering access to disputing bills and debts etc. Until fairly recently it was just a theoretical issue, because HMRC didn’t actually try to chase recovery at any stage of dispute (except when being extra careless/useless).
While HMRC may have now decided to “stop suspending recovery while disputes are ongoing” it does not mean they legally can, or should. Thankfully we do have some laws that protect us and I am currently advising people to invoke debt and harassment laws when the Tax Credit Office, or the Debt Collection Agency that they’ve ‘sold’ your alleged debt to, start getting heavy on them about repayment. HMRC have a habit of not checking if their actions are legal, so it’s not actually surprising that they are breaking the law.
So, if HMRC or a Debt Collection Agency are pursuing you for repayment whilst you wait for responses to your appeals or disputes, please see the following steps:
Please note that usually you will have to send these letters as well as keep up to date with your appeal / dispute, as ‘recovery’ is usually handled by a different department to those that handle appeals/disputes.
If you are Appealing:
In fact, where you are appealing an overpaid award HMRC have absolutely no right to pursue you at all. My suggested response reflects that and so is very blunt and straight forward. Use the Appeal Harassment Complaint template.
If you are currently Disputing:
I feel that demanding repayment while people dispute constituents ‘harassment’, which is actually a criminal act. Basically I am now advising victims to threaten to make a criminal complaint of harassment. We haven’t actually got past the stage of just threatening yet, because so far we haven’t needed to.
Just complete the letter with your details, tweak the red text, and then get it sent in to the address the most recent demand came from.
(See here for more info on the difference between appeals and disputes)
Paula5th February 2013
(Updated 24 June 2014)
Jump straight down page to:
If HMRC are investigating your single claim, or have already said they think you are part of a couple, please read below. This page is a detailed walk-through on how to appeal ‘HMRC say I’m not single’ cases, for when you do not feel you should be considered part of a couple.
(Please note: you usually only have 30 days from the date you received the decision letter to start/continue a decision review request and or appeal. But if you were not informed of your right to appeal or other important reasons prevented you, do still appeal now you know you can, and include a brief explanation for the delay in your next letter/form).
This type of case exploded out of nowhere around winter 2012, when HMRC started using so-called credit reference checks (actually theirs is a poor-mans version of, and it shows) to “investigate compliance” on single claims. Within this group are a several smaller sections of case types. Of them these are the most common:
Usually these cases come about because HMRC have some ‘hints’ that your ex/another adult lived with you (e.g. their post still comes to your address, or old credit files have not been updated) whilst you claimed as single, and are now using this to cancel your award and demand repayment of previously paid awards.
Poorly trained staff will probably tell you that post coming to your address in the other person’s name is solid ‘proof’ and the case is closed and you are a couple. In short; that’s rubbish. Post isn’t even really an issue here, it’s just the indicator that gave HMRC the opportunity to investigate your claim. Or they may tell you that you should have claimed as single despite not living with your ex partner, or that you have to claim as a couple when you share a home with another adult. Again, this is all wrong.
In real, normal, life, post still goes to peoples old address, and many people agreed to let some use their address for post. HMRC are trying to imply that this instead proves you are cheating on your claim. Please don’t let HMRC convince you that you have done anything wrong in letting someone else use your postal address. It is not illegal or in any way wrong. Royal Mail actually say they do not deliver ANYTHING to a person, only to a building! And there are no laws about letting someone use your address for post.
The mortgage issue is another one. HMRC do actually know that people are forced to maintain a joint bank account if they separate, when there is a mortgage involved, but they like to make out this is further proof of cheating on a claim.
And especially where children are involved some financial contribution is allowed (for TC purposes) from an ex, but if you pay the majority of the bills for running your household, then it is reasonable for you to claim as a single person.
There are actually rules (criteria) around how HMRC can decide if you are a couple, and post does not come into it.
If you are not married or civil partnered, the following is HMRC criteria for a couple:
Source and more info here.
If you are married (or CP) but not yet legally separated/divorced, a formal separation agreement would be very useful to provide, but if you don’t have one, your aim is to basically prove the separation is likely to be permanent, that you live as independent people, one is not financial dependent on the other, even if you live in the same house.
In short: where you object to HMRC decision regarding your relationship status you should appeal.
Below is advice regarding the main stages of appealing a decision about your relationship status …
If HMRC are still currently investigating your single claim and asking you to prove you are single, please do supply them with the (reasonable) information they demand. Any decision they make, you can challenge later; just don’t withhold information from them.
If you do not live with a partner or ex-partner and HMRC are asking for proof that your ex lives elsewhere, the following may be useful evidence your ex lives at a different address now:
If you do live in the same property as your ex, can I suggest you supply a basic personal statement from you both declaring your financial arrangements and personal circumstances. Please note, if you are married or in a civil partnership; what HMRC are looking for is slightly different than if you are not married or in a civil partnership. (see the above criteria)
Suggested action: At this stage you are hoping to stave of a ‘request to review’ or appeal by providing as much useful documentation as possible. So please supply anything that helps prove you should not be considered part of a couple.
But please note that I feel HMRC are now automatically refusing a lot of investigations and ‘requests to review’ just to test whether people will have the will to keep on challenging them (this is an admitted ‘dispute handling technique’ used in many other benefit agencies).
This stage can get a bit muddy, and may be difficult to distinguish from the previous one depending on how HMRC first contacted you. But basically, HMRC should first of all investigate a decision, and then review it if the claimant disagrees with it. Hopefully they will do this before effecting any of your current payments, but not always unfortunately.
You can even skip this stage and go straight to appeal from the first investigation decision. But if you missed the chance to supply useful evidence at the previous stage (perhaps because HMRC didn’t even contact you before cancelling your single award) then ‘requesting a review’ of the decision may be get a quicker result than having strong evidence but not getting to show it to anyone before a final appeal hearing.
Suggested action: To request a review, simply respond to being notified of the previous decision (i.e the one that says HMRC still think you were part of a couple’) by saying you continue to disagree and ask that the consider x, y and z as evidence.
If HMRC have already made their decision and said you should not have claimed as single, but you do not agree, then you should now officially start the part of the process that leads to an independent appeal hearing.
To appeal download, complete and return this form asap: Appeal Form.
To complete the form I suggest the following:
HMRC will probably respond in about 4 – 8 weeks. They may imply they have ‘already done an appeal’ and that you have lost. This is not true. The proper appeal is run independently and the queue is can be over 8 months, although these days it can be quicker. If your hearing was heard ‘by letter’ then the tribunal service would write to you to confirm any result, so do not accept anything only HMRC say.
Suggested actions: Respond to say you do not accept their decision and wish to continue to the full independent appeal hearing. You should still be ‘in the queue’ anyway, but I no longer trust HMRC to not somehow let cases drop out of the queue.
Once you demand to continue on to hearing it is still common for HMRC to continue to try to ‘negotiate’ with you as they seek to avoid the tribunal. Especially if you have a strong case (usually one with good evidence documents) do not accept any ‘deals’, unless they are completely in your favour, and make sure not to be tricked out of continuing on with the appeal. Reply to all documents asking if you want to continue with the answer yes.
If you get no reasonable deal offered while you await your hearing date eventually you will go to a hearing (there is an option now being offered to some of appeal ‘by letter’ but this is not being offered consistently and I hesitate to recommend it because there are delays in you seeing the documents HMRC submit)
I actually seriously doubt most of you will ever get to the hearing date. Aprox 90% of cases are resolved whilst still in the queue for a hearing date. HMRC actually have to still try to negotiate with you to avoid the need for a hearing (ostensibly to reduce the drain on the tribunal panels time, but also because they are getting criticised for the amount of plainly wrong cases that end up needing to appeal). So do expect to hear from HMRC again while you wait for the hearing to come up.
If HMRC ring you, don’t agree to discuss things over the phone, instead insist they put things in writing. And don’t believe any rubbish they give you about you ‘have to drop the appeal’ or having to make repayments while you wait. Just keep insisting they put in writing anything they have to say because you find the calls distressing and harassing, then hang up.
Please don’t panic. I know if sounds scary, but it’s not like a court date or anything I promise you. You are not on trial, this isn’t legal AGAINST you. You are the one demanding the hearing. HMRC are the ones who have to defend themselves. I have a lot of faith in the hearing, and have a lot of good feedback about what they are like to attended too. The tribunal panel know that victims are not experts and are at pains to make sure you understand what is being said and what is happening. They know all the relevant rules and so it’s not like you have to point them out to them, or come up with your own defence or anything. Although the sessions are often held in court buildings it is not an actual court case (they are just borrowing the rooms for ease from the other half of their own department). There are no lawyers, although both sides can bring representatives. HMRC won’t even talk to you directly. They will talk directly to the panel and will have to justify everything they have done, prove they had the proper proof to act, that they did things the right way, and that the final decisions and calculation is correct and justified (do you see why they seek to avoid the hearings now.
As preparation I would do 1 or possibly 2 simple documents.
1) a timeline of your circumstances from where the trouble starts. Just brief bullet points of events or circumstances in date order. With a short summary at the bottom in plain simple English saying how you do not meet the criteria to have been considered a couple at that point.
2) not strictly part of the appeal but I still think it’s important. A document listing HMRC aggressive and underhand tactics. Again date order may be the easiest format to work with, so bullet points regarding the criminal action, interviewing an ill woman etc.
The reason I suggest this documents is so that you have a easy to read format as notes on the day reminding you want the appeal hearing needs to be focusing on, and also so you can submit the documents to the panel as notes for their benefit. So take about 6 copies of each with you.
Usually an appeal hearing is the end of the road. You cannot usually appeal and appeal, unless you believe a ‘point of law/policy was not followed’. If you do believe this you have 30 days from the date of the hearing to request a Statement of Reasons, whereby the panel will have to explain on what basis they came to their decision. You would then seek to use this to prove a point of law/policy had not been followed, but this is very uncommon and you should seek expert legal advice if you feel this is the case.
Suggested action: 10 working days after posting the appeal form in and then involve your MP. Find out who your MP is here then Google their name till you find a constituency telephone number. During office hours ring them and say you need them to act on your tax credit case because HMRC bad decision is causing you poverty, ill health and debt. Your mp has to help so don’t let them fob you off.
Tell them you want them to RING not write to HMRC. The things they need to raise with HMRC are….
Ask them MP’s office to ring you back when they have spoken to HMRC and let you know what’s going on. This HMRC department are usually quite competent so I would at least expect them to acknowledge you can appeal and start an ‘investigation’ into whether they should be reinstating the claim.
Suggested action: See our guide here if you get harassed for repayment during your appeal.
Paula13th May 2012
I’ll freely admit I have no other sources of reference or comment on this, but after spending another couple of hours going through the latest emails, I’m seeing more and more evidence of a pattern in many new TC overpayment cases .
It started with the self employed and now includes claimants who have recently ended a relationship with the parent of their child. So, a lot of people, and two groups who you might not see a connection between just yet.
I’d say there are approximately 10 different types of TC overpayment cases overall, and over the years I have tended to see occasional gluts of one type or another suddenly turn up in little cycles against a background of older ongoing cases of all types.
Just after new year I started getting a glut of cases coming to me, all from people who were self employed plus claiming TC for the past few years, and had all now been told they did not meet the ‘work conditions’ (i.e. did not work enough hours to qualify) for one or several of those previous years. Therefore the award for that year was being withdrawn and the claimant now had an overpayment.
Straight away we challenged HMRC’s decisions re not meeting the work conditions, as without fail every one of the claimants said they had already proved to HMRC they had worked more hours, but that HMRC had disallowed some of hours with no explanation. Because this is a decision about entitlement, people can actually Appeal these cases (as opposed to Dispute) which was what we threaten to do if the decision weren’t overturned.
I was pleased but mildly suspicious when nearly all of the cases were very quickly dropped by HMRC (i.e. we won and HMRC reversed the overpayments).
Then the ‘separated parents’ cases started coming in. Each case is the same. HMRC have suddenly announced they believe the single claimant is (or was) living with their ex partner (as a couple) while claiming as single, all because of some arrangement to do with the children. Every one of the claimants who’ve contacted me completely defend their innocence and protest they have not been living with their ex. Each case involves some sort of semi complex (but life is) arrangement with the ex partner but none that should, or could reasonably, be seen as living together as a couple.
HMRC are telling the claimants they have to prove they were NOT, when actually the onus is on HMRC to prove they WERE. But then they are ignoring the reasonable and even concrete proof, the claimants supply. Again, as an entitlement decision, this is an appealable issue and so I instructed everyone to ‘apply to appeal’ (i.e. threaten to appeal).
I’m just starting to see some of the results back now, and again so far it seems HMRC are quick to drop the cases when they aren’t going to get a quick repayment out of bamboozling someone with threats, bills and jargon.
I am hearing of so many similar entitlement decision cases suddenly, that I can’t help but think this is a deliberate ploy by HMRC. Some ‘recession special’ attempt to claw back as much money as possible by exploiting personal complexities in the hope the claimants don’t know enough to appeal.
Paula5th September 2011
Two pieces of very interesting news regrading HMRC and tax credits overpayment. In keeping with the apparent cosmic ‘pleasure / pain’ balance (although pleasure is in short supply when dealing with HMRC), we have one piece of bad news and one piece of potentially good news.
Bad first. Recovery (aka repayment) of overpaid tax credits via PAYE tax codes.
The Child Poverty Action Group (CPAG) report that tax rules have been changed to make this method possible since July 2011. To quote CPAG’s recent newsletter…
“Letters will go out to claimants who may have an overpayment suitable for recovery in this way, and tax codes would be altered from April 2012 for the 2012-13 tax year. It is thought that this will be an option to recover tax credit overpayments of between £100 and £2,000. The Revenue stated that there would be safeguards to prevent hardship.“
Over the years I have heard of several shocking HMRC plans to automatically recover overpayments, most of them sneaky and sinister. Until now, it’s never been confirmed they had the right to implement them. But I am now starting to see letters to overpayment victims threatening to add attachments to earnings and / or sell their possessions, and I have heard of plans to access people’s bank accounts, but yet again I can get no confirmation they actually have to power to carry out these threats.
I believe a lot of these threats are an exploitation of their tax collecting powers, which they have wilfully misapplied to their separate and very different tax credit role. TCC and other agencies have intervened before when HMRC have tried to use ‘tax evader penalties’ on TC overpayment victims to not only deny them their rights but force recovery of overpayments that haven’t even been explained, let alone investigated as to cause. Until we intervened, HMRC officials were repeatedly misleading judges and the rest of the judiciary that they were actually allowed to do this when they weren’t. So you’ll understand why I’ve kept a close eye on what HMRC claim they have the power to do. That they have changed tax law to allow themselves this latest method of recovery smacks of HMRC’s arrogance.
My concern is that when HMRC control the method of recovery, as with their ‘automatic recovery’ ( i.e. reducing your current award to repay an overpayment, as opposed to asking you to make payment in cash / direct debit) they abuse the rights of the victim by continually reapplying the recovery method … even when the victim is disputing. When pushed to comment, HMRC will state that they only have to suspend recovery during the first stages of a dispute, but as this means that victims are apparently then expected to repay an overpayment while disputing that they owe it, I always insist at each new stage that recovery should be suspended and HMRC usually quietly drop the recovery issue while the dispute is ongoing.
The only time I ever have trouble with this is when HMRC have direct access to the recovery method, and so far it’s only been with the automatic recovery. Each time it comes up I have to argue in circles with HMRC, the Adjudicator’s Office, the Parliamentary Ombudsman and anyone else unlucky enough to answer the phone to me, until they get so bored with me and so stumped for a reasonable response they end up applying the oh-so-technical measure of typing ‘DO NOT RECOVER DURING DISPUTE’ on the victims case notes. (Which usually gets forgotten about within 6 months and I have to go through the whole farce again).
Unfortunately I doubt HMRC are going to be any more reasonable when it comes to hacking our PAYE accounts!
The other point I wanted to mention, (the potentially good one) has had me scanning new and old reports, loosing count when I run out of fingers and toes, chasing in circles trying to clarify vague terms and gobsmacked at what seems to be blatant obfuscation in making it nigh impossible to compare one year’s figures to another.
What started it was seeing a report ( HM Revenue & Customs 2010-11 Report and Accounts ) that blithely mentions overpayment figures for 2009/10 currently stands at £2.14 billion! I’m almost number blind these days but that one pulled me up sharp. I double-checked our research library figures, spent hours clarifying what was included in the figures I was comparing, then got someone to check my work when all the digits started running off with my faith in myself to keep up. All came back to the same result: That figure is nearly two and half times the figure that’s published on HMRC’s website! In fact once I looked in to it, all the totals for past years overpayments have gone up. Massively.
Now, I am aware that due to the “annualised nature of the system” (as the smug gits put it), HMRC actually have up to 2 years to fart about with the figures on peoples awards, therefore early report figures will be inaccurate, but that’s quite some margin of error they have going there! HMRC’s own figures said that in 08/09 £0.917 billion had been overpaid, yet the Auditor Generals 2011 report says that £2.27 billion was. Which is interesting, because the lower figure represented nearly 15% of all claims being overpaid, so does this mean it was actually nearer 40% I wonder? There weren’t enough of the same figures in each of the many reports I looked at to compare all of what I wanted to, but I did spot repeated statements in summaries like “90% of errors are claimant fault” which is not just sloppy mathematically, but also pretty shocking when you consider HMRC is the un-adjudicated source of this so called statistic (therefore very resistant to admitting it may have been their fault).
It’s worth just mentioning that included in these ‘overpayments’ are fraud. It’s an insidiously little trick HMRC have always done that swiftly puts the genuine victims of this farce in the same category as the crime gangs , benefits thieves and jailed insiders who have exploited the system. Sympathy is hard to come by when we’re rubbing shoulders with this lot.
Anyway, the point I’m getting to is that it seems realisation is slowly dawning is that this farce can’t go on. Already they have calculated that £300million MORE THAN EXPECTED was overpaid in 2010 – 11 (total so far £1.5billion, so going on the scale of the previous estimates expected the final total to be around 3 to 4 billion), and that currently an exercise is underway to “assess the value for money of collecting £1.7 billion of tax credit debt not under active recovery”. (Translated; work out if financially it’s worth chasing this debt)
Whisper it; AMNESTY!
Between the upcoming swap to the newly planned benefit; Universal Credit (due in 2013 but expected to take up till 2017 to complete), and a perhaps naive hope of sanity prevailing, I have long hoped that I wouldn’t be the only suggesting this as the only reasonable solution. I don’t expect everyone to understand, just those who have been overpaid by a terrifying amount!
TCC worked out long ago that purely on a fiscal level chasing recovery of overpayments of less than £2000 was uneconomical. And that’s without factoring in the distress, hardship and workload caused to the victims and their family.
I’ve never advocated the rights of swindlers to get away with it, nor aimed to reduce the treasury’s coffers, all I have ever wanted was compassion for the position HMRC put us in and as much justice as possible in resolving it. We were told the money was ours to spend on life’s essentials and we did just that. If HMRC had told me this was actually a 4 figure loan they were going to bully me about for over 6 years, I would never have accepted it and I know many thousands of you have said the same.
TCC have long encouraged victims to keep their dispute ongoing, therefore resisting active recovery, even in the face of the many brick walls and automatons.
So I aim to keep you updated on developments and will end (finally) on that sweet little refrain … Not under active recovery … Not under active recovery … Not under active recovery!
Mark5th January 2011
Dealing with tax credit overpayments in bankruptcy is not as black and white as it may first appear. This article provides you with an insight to how tax credit overpayments are dealt with in bankruptcy.
Please be aware that bankruptcy law relies on case law and HMRC policy can change so it is extremely important that you seek professional advice on how to deal with your debts before you go bankrupt. This article is not a statement of the law.
If you are considering bankruptcy to deal with your debts then you will obviously want any tax credit overpayments included. The good news is that they can be provided that the decision to recover the overpayment is issued to you prior to the date of the bankruptcy order. If it is issued after the date of the bankruptcy order then unfortunately the overpayment is not classed as a bankruptcy debt and remains payable. Further to this any overpayment due to fraud on your part cannot be included in the bankruptcy and will remain payable. The timing of your bankruptcy petition may therefore be important.
HMRC can recover the overpayment
Where, at the date of the bankruptcy order, it is the intention of HMRC to recover the overpayment from ongoing awards then HMRC will continue to do so up until the date of your discharge from bankruptcy. This will usually happen on the first anniversary of your bankruptcy or sooner if you are given early discharge. If it was intended to be taken by direct collection then the overpayment will be dealt with in the bankruptcy and you will not be expected to pay anything.
Where tax credits have been claimed jointly, HMRC will pursue any non bankrupt claimant. This is because the debt is considered joint and several.
As you can read, it is possible for a tax credit overpayment debt to remain payable after your bankruptcy. For this reason it is important that you seek advice prior to going bankrupt. For further information on how to seek advice with bankruptcy please visit the bankruptcy advice section of my website.
Mark22nd October 2010
The previous post gave an overview of bankruptcy. I will now explain the main benefits and consequences of bankruptcy. Please note that before you decide on bankruptcy it is important that you seek bankruptcy advice.
Clearly the biggest benefit of bankruptcy is that it will discharge you of your obligation to repay your bankruptcy debts. Bankruptcy debts are defined as those that can be legally discharged in the bankruptcy. There are certain debts, such as student loans, that cannot be included. That is one reason why bankruptcy advice is important. Although tax credit overpayments can be included it is important that you time this correctly. Please read my next post for information about bankruptcy and tax credit overpayments.
Another benefit of bankruptcy is that it offers you some legal protection. A creditor will need the permission of the court to commence legal proceedings against you. Further to this existing proceedings can be stayed or allowed to continue as the court sees fit. There is however some creditors, such as a landlord, who can continue with some forms of recovery action. Again, this is where good advice will help you to understand bankruptcy better.
Compared to other solutions bankruptcy is short and assured (providing you meet your obligations). It lasts a maximum of 12 months and your bankruptcy debts will be cleared. Compare this to other debt solutions where you could be repaying your debts for a significant period of time. Upon receiving advice you should be able to determine which solution is most appropriate for yourself.
Unfortunately the number of consequences of bankruptcy outweigh the number of benefits, however, that does not mean that the impact of those consequences outweigh the relief that bankruptcy brings. The following paragraphs provide an overview of the consequences.
The most common knowledge consequence of bankruptcy is that you lose control of your assets. Any that are not exempt from the bankruptcy estate are at risk. It is important for you to establish how your assets are likely to be affected before you go bankrupt.
Following bankruptcy your credit worthiness will be extremely poor. Bankruptcy remains on your credit report for a period of six years. This will affect you in the future, when you apply for a mortgage for example.
Once the bankruptcy order is made your bank will be notified of your bankruptcy. As such your bank account will be frozen and it may be closed.
If you run your own business then it may be closed and any employees dismissed. There is nothing from stopping you set up another business providing you adhere to the bankruptcy restrictions.
Some professions prohibit you from practising as a bankrupt.
Bankruptcy restrictions will apply from the date of the bankruptcy order. There are three stated restrictions which prohibit you from certain actions. It is important to know what they are.
One of the more serious consequences of bankruptcy is known as bankruptcy offences, which are punishable by imprisonment or fine. Although they are uncommon it is important that you understand them to ensure you do not commit one. An example of a bankruptcy offence is concealment of property.
A bankruptcy restrictions order may apply if the investigation into your affairs determines that you are somewhat blameworthy for your bankruptcy. Such an order has the effect of prolonging the restrictions of your bankruptcy for a period of between 2 and 15 years.
If during your bankruptcy you have enough of a disposable income then you will be expected to contribute to your bankruptcy estate for a period of 3 years. This will involve making payments to the equivalent of between 50% and 70% of your disposable income.
Previous transactions that you have entered into may be reversed. An example of this could be repaying a family member in preference of other creditors before your bankruptcy. Another example could be selling assets for less than their market value before your bankruptcy.
The above information provides an overview of the benefits and consequences of bankruptcy only. In reality bankruptcy can become complex and it can benefit you enormously to seek bankruptcy advice. This will help you understand the consequences in relation to your personal circumstances and also remove any uncertainty of the bankruptcy process. In turn this will help you to minimise the consequences.
Graham21st October 2010
Here at Tax Credit Casualties, we’ve been saying for a long, long time that somebody, somewhere, must take responsibility for the vast number of mistakes that are made at the Tax Credit Office.
To the Treasury Suits, these mistakes are simply figures in an undesirable spreadsheet column, not the life-changing events experienced by the victims. Well, a spreadsheet just can’t record what happens to real people – families and children – when they discover the debt that the out-of-control Tax Credit machine has dumped on them.
We have also always objected to the HMRC bean-counters using the phrase ‘fraud and error’ and lumping together figures under that group heading. Very cleverly and conveniently, ‘fraud’ and ‘error’ have come to mean the same thing; the implication being that any claimant who has made an error must also be a fraudster by default. It also implies that all errors are made by the claimant (in the course of their fraudulent claim, of course).
It’s good news, then, that we’ve indirectly received some support from both the LITRG and The Guardian newspaper this week!
Firstly, the LITRG, taking off gloves and rolling up sleeves, published their article Error and Fraud – Physician Heal Thyself . It’s refreshing to see LITRG taking a firmer stance in their articles; one of our team can be quoted as saying, “… it is one of the strongest worded LITRG articles I have read, usually they seem to tone down criticism but this is strong stuff”, while another commented, “Good stuff and about time LITRG started throwing their weight around a bit!”. Well done for a great article, John Andrews, and let’s see more of it!
The second supporting article was written by journalist Zoe Williams and published in Wednesday’s Guardian newspaper. Have a good read of This Talk Of ‘Benefit Cheats’ Is Not Only Stigmatising, It Is Slanderous, Too. We agree, and it’s wonderful to find a journalist who actually sees it as it is, so thank you, Zoe!
Do you think the Government, Treasury Suits and HMRC bean-counters will finally correct their ‘errors’, or stop committing mass ‘fraud’ upon it’s unsuspecting citizens? Answers on the back of a 2nd class postage stamp, please …