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.
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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.