Overview Of Hardship Claims And Overpayment Recovery (Info)
Background
In year adjustment
Cross year recovery
In year adjustment and cross year recovery
Direct recovery
Exceptional circumstances
- When dealing with cases where hardship is claimed, you must first check whether the claimant has made any reference to appeal against a decision
Or
- Disputing an overpayment
If so, these cases must be sent to the relevant area for action.
If the claimant claims hardship and an overpayment is being recovered directly from the claimant (there is no ongoing award for that household or family) then the case must be forwarded to Debt Management and Banking (DMB) for their action.
If the claimant has previously claimed hardship and their payments have already been adjusted, unless there have been any further changes to their entitlement, there is no further provision to alleviate hardship and nothing further we can do. In order to claim hardship, a claimant has to have an ongoing recovery of an overpayment on their award. This is because the only action the department can take to alleviate hardship is to alter the level of recovery.
Note: There is no provision to award hardship payments to any claimant who simply says that the amount of tax credits awarded to them is not enough and they are in hardship as a result.
Tax credits overpayments are recovered in three ways
- In year adjustment
- Cross year recovery
- Direct recovery
Note: It is possible to have both in year adjustment and cross year recovery on one award
An in year adjustment is applied whenever a tax credits award is revised in the current tax year. For more information on how this is applied see the Revised award section of How Payments Are Profiled
As a result of this adjustment to recover the overpayment, payments can be reduced to zero, which may cause hardship to the claimant. Any remaining overpayment that has not been recovered by in year adjustment at the end of the tax year is carried over to the following year’s award and recovered by cross year recovery.
In year adjustments are recovered at set rates to avoid hardship. The rates of recovery are set by the computer and are automatically applied to any in year adjustment following these rules
-
10% if the maximum entitlement has been payable
-
25% if the entitlement amounts have been tapered
- 100% if the Family or Family and Baby elements only were payable
The rules governing cross year recovery are the same as those governing in year adjustment. Payment amounts can only be reduced by 10%, 25% or 100% dependent on the individual’s circumstances
- 10% if the maximum entitlement has been payable
- 25% if the entitlement amounts have been tapered
- 100% if the Family or Family and Baby elements only were payable
These levels are set so as to avoid placing claimants into hardship.
For more information in how this is applied see the cross year recovery section of How Payments Are Profiled
The decision as to whether hardship is being caused by cross year recovery only is based on certain factors laid out by departmental policy. DMB will decide whether the claimant’s hardship is sufficient to justify remitting the overpayment, or whether the claimant has cause for us to reduce the amount of cross year recovery, by increasing their current payments.
Where there is cross year recovery only and no in year adjustment, initially explain the reason and rates for the cross year recovery. If, in exceptional circumstances, the claimant is still claiming hardship, then the case must be referred to DMB for investigation. Follow the guidance in Secondary Hardship Referral Received By TCO
In year adjustment and cross year
recovery
It is possible that an award could have both in year adjustment and cross year recovery taking place at the same time.
If a claimant is subject to both in year adjustment and cross year recovery, and Function ADJUST IN YEAR PAYMENTS is used to adjust in year payments, cross year recovery is automatically stopped by the computer. This does not remit the overpayment, merely postpones the repayment of the overpayment.
Direct recovery is the method of overpayment recovery where there is no ongoing award of tax credits to make cross year recovery from. When entitlement ends the claimant is advised of the overpayment in an award notice or Statement Of Account (SOA).
If the debt is greater than £32 the claimant is automatically sent a form TC610 Notice To Pay 30 days later. If the debt is £32 or less the overpayment is automatically remitted.
If the claimant cannot pay the direct recovery amounts due to hardship they can contact the Payment Helpline at DMB and request a time to pay arrangement. This is where DMB will agree an amount the claimant can afford over a realistic time scale so as not to cause hardship.
If the debt is greater than £100 and DMB cannot agree an arrangement with the claimant, then DMB will pursue the claimant for recovery, taking court action if required.
Any severe hardship claims are considered and dealt with by DMB after obtaining full income and expenditure details from the claimant.
If we have exhausted the hardship routes outlined above, and have explained fully the recovery rates that have been applied to the claimant’s case, and the claimant still maintains the amounts we are recovering are causing hardship we can only then consider exceptional circumstances. In all cases exceptional circumstances must be documented and agreed by at least a Band D manager
All details of why the claimant still believes they are suffering hardship and has exceptional circumstances must be forwarded to DMB for investigation.
Upon investigation DMB may decide
- To remit all of the overpayment
Or
- To further increase the claimant’s payments
Or
- That exceptional circumstances do not apply and that no further assistance is available
