Transcript Document

TAX CREDITS OVERPAYMENTS
Robin Williamson
Technical Director
Low Incomes Tax Reform Group
www.litrg.org.uk
e-mail [email protected]
Tel. 01732 779124
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The Low Incomes Tax Reform Group
(LITRG) aims to help people on low incomes
to cope with their tax and campaigns for a
simpler and more accessible tax and benefits
system.
12 Upper Belgrave Street
London
SW1X 8BB
www.litrg.org.uk
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Causes of overpayments – 1
Cycle of award/entitlement
Annual nature of tax credit system:
•Payments in-year provisional in
nature
•Entitlement not known until final
award
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Causes of overpayments – 2
Calculation of entitlement at year-end
•If current year income (CYI) less than previous
year income (PYI), entitlement = CYI
•Likely result, underpayment
•If CYI greater than PYI by no more than £2,500,
entitlement = PYI
•If CYI greater than PYI by more than £2,500,
entitlement = CYI less £2,500
•Likely result, overpayment
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Causes of overpayments – 3
In-year increase of income by more than
£2,500
Eg Fergus & Deirdre (see handout)
•NB spreading of increased total income
figure over whole year
•Deemed to accrue evenly day by day
•Can result in overpayment for early part of
year
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Causes of overpayments – 4
Other causes
•Claimant or Revenue error or delay
•Adjustment of award following in-year
examination or end-of-year enquiry
•Provisional payments set too high
•42 days period of grace for employer to
process through payroll
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RECOVERY OF OVERPAYMENTS
Possible methods:
•In-year adjustment to reduce or eliminate
end-of-year overpayment
(TCA 2002, s 28(5); COP26)
•Direct recovery following year end
(TCA 2002, s 29(3); COP26)
•Recovery by deduction from subsequent
awards of tax credit
(TCA 2002, s 29(4); COP26)
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In-year adjustment in 2005-06
•Additional payments in hardship cases – o/p
debt continues into future years
Year-end overpayment from 2004-05
•Collected from 2005-06 payments including
additional payments (see handout)
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Direct recovery
•Receivables Management Service
(RMS)
•Payment within 30 days
•Revenue will agree to collect over
12 months (2003-4 and 2004-5)
(COP26)
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When will Revenue not seek recovery?
Hardship
Official error
Two limbs
1. Revenue or other departmental error, and
claimant could reasonably think their
award was right;
2. Revenue delay (30 days or more) in acting
on information, and claimant could
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reasonably think award was right
Possible remedies
•Formal complaint (COP1)
•Reference to Adjudicator
•Reference to Ombudsman via MP
•Judicial review
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Couples
•Jointly and severally liable (TCA 2002, s
28(4)
•But Revenue may decide that each partner
is to repay a specified proportion of the
amount (COP26)
•NB same sex couples wef 5 December
2005 (Civil Partnership Act 2004, Sch 24,
para 144; SI 2005/828 )
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