CCM7050 - Discrepancy Examinations: Impact of Discrepancy on the Amount of the Award

For 2003/04, the NTC award will be based initially on 2001/02 income. The 2001/02 income on the claim form will be compared with the current year’s income (or an estimate of that income) after the end of the year and revised if appropriate. So if the claimant(s) has understated their 2001/02 income, any amounts overpaid as a result of the understatement will be taken account of in the final reconciliation which will take place after the end of the year. It might be argued that, because of this, there is no point in taking up discrepancies in-year, and that they could be safely left until after the year end.

There are however compelling reasons for carrying out this work in-year:

• a claimant who has understated their income for one year may well continue to understate it in future years, if we don’t draw their attention to the error, so future awards will also be incorrectly based
• if we allow the error to continue to the end of the year, it is likely that the amount of any tax credit overpaid will be higher than it would have been if the claimant had reported the correct figure. We owe it to claimants to help them avoid building up large amounts of debt they may be unable to pay back
• the figure of income on which the initial award is based is important because any income tolerance applied after the end of the year will be based on it. If the tolerance is based on an incorrect figure, the claimant may gain an advantage to which they were not properly entitled
• if a claimant has entered the wrong figure of income on the claim, they have made an incorrect claim, and could be liable for penalties. In accordance with our enabling approach to compliance, we want to help claimants get things right, not to penalise them, wherever possible. Allowing them to continue in their error would make it more likely that they would eventually incur a penalty.