CCM8550 - Closing the Examination: Letter explaining settlement proposals
Once you are in a position to invite the letter of offer you should write to the claimant and explain the following points in your letter. It is important you do not delay the issue of your letter.
- Overpaid credits - If, exceptionally, overpaid credits are recoverable immediately following your examination, refer them to any previous letters explaining any overpaid credits (this will often be the revised decision letter). Tell them how much has been overpaid as a result of the incorrect claim and remind them that this is now repayable to HMRC. You should also remind them of the interest position.
- Explain that you can seek a monetary penalty where a person negligently makes an incorrect statement or declaration in connection with a claim for tax credits or fails to notify certain changes of circumstances. Explain that either
- in your opinion the claim was not only incorrect but was made negligently and remind them what it was they did wrong, for example, they overstated their hours, or
- remind them of the change of circumstances, the date by which they should have notified this and that they have failed to do so.
Explain how we calculate the maximum penalty and refer them to the WTC7 leaflet and the date on which you issued this. Go on to explain the amount of penalty which you and your manager consider would be reasonable. Then explain briefly the factors that you have taken into account. For example you might say something like, "This reflects the fact that on challenge you admitted you do not work 16 hours per week. Although the amount of tax credits involved is large it was the first tax credit claim so I am not looking at any previous periods."
Obviously your wording will depend on the individual circumstances.
- Explain that where a penalty is to be claimed our preferred method of settlement is a contract letter of offer in which they offer to repay the overpaid credits (if any) and penalties in consideration of no further proceedings being taken. Attach a draft letter of offer and tell them they can use this if they wish to make their offer. Tell them the amount of the offer is a matter for them to decide on but you can suggest to them that a figure of not less than £XXXX (show amount) would carry your recommendation to the Commissioners for HMRC. Remind them that the amount includes both the overpaid credits, interest and the appropriate penalty.
- Your draft letter of offer will be based on a repayment within 30 days, but tell them that if they are not able to repay the money in the suggested period they should get in touch with you immediately to discuss alternative arrangements. You will also need to tell them that if there is anything they do not understand or wish to discuss they should contact you immediately. Go on to say that if you do not hear from them within 14 days (or a longer period if you feel that is reasonable) you will have no alternative but to assume they are unwilling to make such an offer. Formal proceedings will then begin to recover the overpaid credits and penalties.
Once you have issued this letter BF your papers for 30 days. If the letter of offer is returned - see CCM8560.
If there is no reply you should attempt to telephone the claimant to discuss the settlement. If you cannot contact them or the telephone call does not result in the letter of offer you should issue a further letter to them and say that if you do not hear from them within 14 days you will have no alternative but to assume they are unwilling to make such an offer. Formal proceedings will then begin to recover the overpaid credits (if any) and any interest/penalties. If you do not receive a reply to this letter - see CCM8640. It is important that you do not delay making the submission to the Reviewing Officer - Formal Penalty submissions, via your Claimant Compliance Group Manager.
