CCM10040 - Penalties and Interest: Incorrect Claims - Overview

The guidance on penalties in CCM10020-0120 applies only to enquiries or examinations opened on or before 5 April 2008 even if they are closed after this date. It does not apply to enquiries or examinations opened on or after 6 April 2008. For those cases, see CCM10700-10800.

We want people to receive the correct amount of credit at the right time and through our enabling activities we will do our best to achieve this aim. As part of our regulating regime we will consider imposing monetary penalties where people fraudulently or negligently make incorrect statements which lead to them receiving excessive amounts of tax credits. This is to deter claimants in general from making incorrect statements and to penalise those who do so.

Section 31(1)(a) provides for a penalty where a person fraudulently or negligently makes an incorrect statement or declaration in, or in connection with, a claim for tax credits. The maximum penalty is £3,000 per claim or statement regardless of the amounts involved.

A Section 17 declaration is in fact one declaration/statement even though it informs the renewal payment and therefore affects 2 years. There is only one penalty if the information turns out to be incorrect. If, for example, incorrect details have been shown on the S17 notice issued in April 2004 we will only pursue the penalty in respect of the incorrect claim for 2003/2004. We will not seek a penalty for the incorrect new claim incorporated on the same form. In calculating the percentage of over-claimed credits (see CCM10080) you will only look at the 2003/2004 details.

Where, however, there is another incorrect S17 notice at the year end we can charge two penalties of up to £3,000 each. For example the claimant makes an incorrect S17 notice for 2003/2004 which results in excessive credits for 2003/2004 and incorrect provisional payments for 2004/2005. In May 2005 they make another incorrect S17 notice which in turn leads to excessive credits for 2004/2005 and incorrect provisional payments for 2005/2006. We can charge up to £6,000 in penalties.

We can also charge more than one penalty where, in addition to the incorrect S17 declaration, there is a separate additional offence. For example there might be a failure to notify a change of circumstances in the later year or an incorrect notification of a change of circumstances - see CCM10380.