CCM10790 – Penalties and Interest: Incorrect Claims – Amount of the Penalty - Enquiries or Examinations Opened on or after 6 April 2008

Once you have established that the claimant has made an incorrect claim or declaration, or supplied incorrect information, and they did this negligently (see CCM10060), the penalty is calculated using the following process for each year covered by an examination or enquiry.

Step 1 – Establish the behaviour which gave rise to the overpayment and the amount of the over-claim, see CCM10710.

Step 2 – Multiply the tax credits over-claimed by the penalty percentage for that behaviour category, see CCM10710.

Step 3 – If the claimant made an unprompted voluntary disclosure, reduce the penalty as per CCM10780.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 6 – If an error arising from a Failure to Take Reasonable Care or a Serious Error is identified during a pre-award examination (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 7 – If the penalty calculated is more than £3,000 then the penalty is capped at £3,000 (the maximum penalty for tax credits). (This text has been withheld because of exemptions in the Freedom of Information Act 2000)
You should repeat Steps 1-7 for each year of an examination or enquiry.

Example 1

Step 1 – A claimant put down their income as £10,000 because they misread their P60 – income was £20,000. As this was clearly not a realistic figure for income, this was a Serious Error (25% penalty) which resulted in an over-claim of £2517.

Step 2 – Multiply the over-claim by the penalty percentage: £2,517 x 25% = £604.25.

Step 3 – The claimant did not make an unprompted voluntary disclosure.

Step 4 – Round the amount down to the nearest £10 - £600.00

Step 5 – (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 6 – The error was not identified pre-award (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 7 – The tax credits maximum penalty of £3,000 has not been exceeded.

The penalty chargeable is therefore £600.00.

Example 2

Step 1 – A claimant put down childcare costs when actually they did not pay for childcare. This was a Deliberate Error (25% penalty) which resulted in an over-claim of £5,000.

Step 2 – Multiply the over-claim by the penalty percentage: £5,000 x 25% = £1,250.

Step 3 – The enquiry was opened because the claimant made an unprompted voluntary disclosure following a crisis of conscience. As the over-claim came from a Deliberate Error, the penalty is reduced by 50% to £625.

Step 4 – Round the amount down to the nearest £10 - £620.

Step 5 – (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 6 – The error was not identified pre-award (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Step 7 – The tax credits maximum penalty of £3,000 has not been exceeded.

The penalty chargeable is therefore £620.