CCM14120 - Closing the Enquiry: Interest for enquiry cases

Where, in an enquiry case, an overpayment arises as a result of fraud or neglect interest will be charged, under S37(1) if it is not repaid within 30 days of the date of the first specified date, see CCM11045.

In most cases if there is fraud or neglect you will be charging a penalty so you will be seeking a letter of offer. However, in some cases there will be fraud or neglect but you will have decided not to seek a penalty or the claimant will not sign a letter of offer. You can only treat the overpayment as attracting interest where you have established fraud or neglect. The decision to charge interest carries a right of appeal so if you have decided an overpayment will carry interest if it is repaid 30 days after the first specified date, see CCM11045, you must be able to defend your decision on appeal if necessary.

Where you consider there has been fraud or neglect but you will not be charging a penalty or the claimant will not sign a letter of offer you will need to follow the guidance at CCM14155 in addition to the other closure procedures.

There are two particular issues regarding interest of which you need to be aware.

1. No entitlement to tax credits – if you conduct an examination and it establishes there is no entitlement to tax credits, the overpayment is recoverable in-year under S28(6) and interest (if applicable) runs from 30 days after the date of the revised decision notice. However, where you establish no entitlement to tax credits as a result of an enquiry then interest (if applicable) runs from 30 days after the first specified date, see CCM11045 regardless of the date on which you issue the revised award notice.
   
   
2. Enquiry concluded after the first specified date (see CCM11045) – in all enquiry cases where interest is applicable it is calculated from 30 days after the first specified date if any part of the overpayment remains outstanding on that date. In many enquiry cases interest will therefore run from a date prior to when you opened your enquiry. For example, on 1 December 2006 you open an enquiry for 2005/2006 and by 2 February 2007 you have established there is an adjustment needed to the claim. If the overpayment arises as a result of fraud or neglect interest will be charged from 30 September 2006 even though the overpayment was not established until some time after that date. However, the overpayment itself is only repayable 30 days after the revised award notice.