CCM14268 - Closing the Enquiry: Penalty cases: Use of Make Remission

In enquiry cases (and certain examinations) Make Remission will be used to remit overpayments which will be recovered in a contract settlement. If we did not do this it would lead to double recovery; once in the contract settlement and once by a cross-year recovery on the tax credit system.

We do not normally include the overpayment arising as a result of the Section 18 decision in the contract settlement. This is because all or part of the overpayment will normally have been recovered by the time you come to conclude your enquiry. The exception to this is where your enquiry has established there is no continuing entitlement to tax credits for that household. The tax credit system will normally have tried to recover part of the overpayment from the award for the following year but if the award is also reduced to no entitlement then we have not recovered any of the previous overpayment. All of the overpayment (both the part relating to the Section 18 decision and the part relating to the compliance activity) can be recovered in your contract settlement unless Receivables have already started enforcement proceedings to recover the earlier overpayment

If you do decide to include the Section 18 overpayment in your offer this will not attract interest and should normally be left out of any penalty calculation.

Some examples of calculating the amount to remit are as follows.

Example 1

The finalised position for 2003/2004 following the Section 18 decision is a tax credit award of £5,163.70. The amount paid in the year was £5,749.35 resulting in an overpayment of £585.65 which is being recovered in 2004/2005.

The revised award for 2003/2004 following the amendment as a result of the compliance activity is £3,763.70. The amount paid out is still £5,749.35 so the overpayment now totals £1,985.65.

The overpayment has increased by £1,400 as a result of the enquiry so Make Remission is used to remit £1,400.00 and the £1,400 will be included in the contract settlement.

Example 2

The finalised position for 2003/2004 following the Section 18 decision is a tax credit award of £2,615.00. The amount paid in the year was £3,425.00 resulting in an overpayment of £810.00. The claimant was asked to make a direct payment for this amount since there was no continuing award for 2004/2005.

The revised award for 2003/2004 following the amendment as a result of the compliance activity is £940.00. The amount paid out is still £3,425.00 so the overpayment now totals £2,485.00.

The overpayment has increased by £1,675.00 as a result of the enquiry so Make Remission is used to remit £1,675.00 and the £1,675.00 will be included in the contract settlement.

If the claimant has not repaid the £810, Receivables will normally be taking enforcement action to recover this sum. This could mean you are seeking a contract settlement to include the £1,675 at the same time that other action is being taken regarding the £810. If the claimant wants to settle all debts under one contract or there are particular problems with the recoveries please speak to your local Receivables Recovery team.

Example 3

The finalised position for 2003/2004 following the Section 18 decision is a tax credit award of £4,785.00. The amount paid in the year was £4,150.00 resulting in an underpayment of £635. A lump sum payment of £635 is made at the end of the year.

The award for 2003/2004 following the amendment after the compliance activity is £2,600.00. The amount paid out is £4,785 (£4,150 + £635) so there is an overpayment of £2,185. The overpayment as a result of the enquiry is £2,185 so Make Remission is used to remit £2,185.00 and the £2,185.00 will be included in the contract settlement.

Example 4

The finalised position for 2007/2008 following the S18 decision is a tax credit award of £6,160.57. The amount paid in the year was £7,625.56 resulting in an overpayment of £1,464.99 which is being recovered in 2008/2009.

The revised award for 2007/2008 following the amendment as a result of compliance activity is no entitlement. The overpayment now totals £7,625.56.

You should include the full overpayment of £7,625.56 in a contract settlement. You will need to Make Remission for the full overpayment to avoid DMB taking recovery action at the same time.