How to Dispute a Tax Credit Overpayment: Overpaid & Overseas

Overpaid & Overseas

This is a question I get asked suprisingly often: “I have been overpaid tax credits and now live overseas, what can I do?”

Up to 2 years ago, I would have told you to simply drop all communication with the Tax Credit Office about the overpayment and they will eventually file you under 'unrecoverable'.

But things have changed in the last few years. HMRC have got more determined and aggressive in their usual recovery actions. I still have not been made aware of anyone 'overpaid and overseas' having aggressive action taken against them, but I still want to be a bit more cautious these days, as of course I do not want to cause anyone any harm with my advice.

And so, in this position, what I would say to do is to play it by ear. Because if you have taxable income or property in the UK, technically HMRC may be able to 'attach' an 'earnings order' to it. But to do so, they would have to warn you, which then gives you chance to start responding and negotiating before action is taken.

So what I suggest to do is basically ignore all communications that DON'T warn their next action will be a CCJ, or earnings attachment, or similar.

If they do end up stating that they are about to take action directly, I would then make contact to negotiate repayment (as it would be unlikely they would agree to restart a dispute due to toughening up on the time limits involved) or hardship assessment if appropriate.

So, unfortunately it's not a black and white situation, I know. But one that I feel does offer you scope to continue to resist just to see how far they will take it, without doing yourself damage.

Depending on which country you now live in depends on whether HMRC have a 'reciprocal arrangement' with that country's government about helping HMRC to chase debts, although I have never heard of HMRC involving international governments in the recovery of tax credit overpayment.

See the list of countries with these reciprocal arrangements here:

Historical Information Regarding
HMRC's Previously Stated Position

In 2008, I approached the HMRC policy team about enforcement proceedings against people who are now overseas. This is the reply I got:

Paula, Thank you for your email. Having considered the issues I am able to reply as follows. Clearly if we do not know that someone has gone abroad, we will act on the latest information we have. However, where we know that someone has gone abroad, we issue an application for payment but if no response is received we will take no further action.

I pushed for more detail ... (HMRC's responses in bold)

Can you confirm what ‘take no action’ means? Does it mean:

  • The overpayment is written off?
  • Or that you have 'laid aside' recovery? This is the correct answer – we set aside the amount outstanding.

If it is the latter, in what circumstances can and will you again attempt recovery? Such as if the claimant returns to live in the UK? And is there a time limit on how long you can attempt recovery? When does this time limit extend from and to?

We will attempt to recover any amount outstanding if / when the customer returns to the UK but this is subject to certain time limits. I attach a link to our guidance.

If the claimant still has capital/ property/ possessions in the UK can you attempt to recover the ‘overpayment’ from that?

Currently, we can recover against property but we will not recover against possessions.

Can you, and would you, attempt legal action on someone who no longer resides in the UK?

We can ask other EU countries to pursue for debts but, where the only debt is tax credits, we do not do that. If, however, there are multiple head of duty debts, any tax credits debts would be included if we considered it appropriate to recover the other debts.

Does this extend to all countries outside of the UK?

Please see the previous reply.

So, at the time, we took the line that the best thing to do when the victim is now overseas, and does not maintain regular visits to the UK, is for them to cease all contact.

HMRC says above that they would take no further action if they don’t receive a response, which means they drop the recovery of Tax Credit overpayments unless there were other tax debts (VAT, PAYE, etc) owed by the same person as well.

But as I mentioned at the top of this article HMRC's tougher approach and lack of updated confirmation mean that I do now encourage those 'overpaid and now overseas' to play this by ear.