TCM0216120 - Payment - hardship (manually adjusting): Manually adjusting payments to avoid hardship

Checklist

Before you follow this guidance make sure

  • you follow the guidance in TCM0138020 
  • you have the correct user roles to follow this guidance. Use the B&C Roles and Access Catalogue. You can find this by going to the Benefits & Credits homepage, selecting ‘R’ on the B&C A-Z index, selecting ‘Roles and Access Process’, selecting ‘Roles & Access Catalogue’ from the Related links menu
  • you are in the correct MU. Use TCM0322460 for the correct MU number.

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Background

You may receive a referral to adjust in year payments from

  • an Enquiry Centre

or

  • a Contact Centre.

You may also receive a letter from the customer informing you that a reduction in their tax credits payment is causing them hardship.

The reduction could have been caused by

  • an in year adjustment to the customer’s tax credit payments to prevent an overpayment occurring
  • an in year adjustment to the customer’s tax credit payments to reduce the amount of overpayment that will occur at the end of the year
  • cross year recovery from the customer’s tax credit payment to recover an overpayment that occurred in a previous year
  • a combination of both an in year adjustment and a cross year recovery.

For more information about in year adjustments and cross year recovery follow the guidance in TCM0232200.

An adjustment to increase the amount of tax credits paid will not normally be made if

  • the customer’s award is only made up of the Family element of Child Tax Credit (CTC)

or

  • tax credits payments have been reduced following an investigation that has established deliberate error or fraud.

Note: A manual adjustment will only be applied in the above instances if there is evidence of exceptional personal circumstances provided by the customer to support their hardship claim.

Rates of recovery

Manually adjusting payments to avoid hardship does not return the customer’s tax credits payments to the previous level. This is to ensure that some recovery of the overpayment is made during the current year.

When we recover an overpayment from the customer’s ongoing award, the amount we recover will depend on the level of tax credits the customer is entitled to. You will need to explain the rates of recovery to the customer and that these rates are designed not to cause hardship.

To determine how much is to be recovered, the customer’s award is put in to the following categories

Category A

  • 10% if the maximum entitlement is in payment

Where the customer is entitled to the maximum award for WTC and/or CTC, a payment adjustment will be made which will take the level of tax credits paid to 90% of their current entitlement.

Category B

  • 25% if entitlement has been tapered

Where the customer is entitled to CTC above the Family element and/or WTC below the maximum limit, a payment adjustment will be made which will take the level of tax credits paid to 75% of their current entitlement.

Category C

  • 100% if the Family element only is in payment

Where the customer is entitled to the Family element only, no payments of tax credits will be made as we will recover their overpayment at 100%.

These rates are the same for in year adjustments and cross year recovery.

Any reduction in these rates can only be made in exceptional circumstances. If the customer is still claiming they are in financial difficulties we will refer their claim to the specialist team in TCO for further consideration.

Additional hardship payments

Additional hardship payments, as part of the secondary hardship process, will only continue to the end of the current tax year. If the customer wants these payments to carry over to the next tax year they must re-submit their hardship claim.

When the payment adjustment has been applied, the customer will have an overpayment of tax credits at the end of the tax year. These overpayments will be recovered from the customer by

  • reducing future payments by cross year recovery
  • recovering the overpayment direct.

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Guidance

Note: When sending customer, staff or process data to another individual or team, make sure you follow the latest data security guidelines or contact the Data Guardian or Data Security Team for advice.

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Step 1

Note: If you can continue to process the claim, complete the MAPTH proforma (referred to as ‘the proforma’ in the remainder of the guidance) as you work through this guidance.

Check Household Notes for a message to indicate if this is the first or second request from the customer to consider hardship. For how to do this, use TCM1000067.

If you are dealing with a returned form TC996, go to Step 15.

If you are dealing with an expired BF and you have received a form TC996, go to Step 15.

If you are dealing with an expired BF and you have not received a form TC996, go to Step 24.

If this is the customer’s first request to consider hardship, go to Step 4.

If this is the customer’s second request to consider hardship, go to Step 9.

If there is a message that indicates that Compliance action is being undertaken, go to Step 2.

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Step 2

  • phone the Compliance Officer. For how to do this, use TCM1000022 
  • explain to the Compliance Officer that you are dealing with a tax credits customer who has requested a payment adjustment, but there is evidence of Compliance activity on the case
  • give them the customer’s details and ask if the customer’s entitlement has been reduced because of deliberate error or fraud.

If entitlement has been reduced, because of deliberate error or fraud, go to Step 3.

If entitlement has not been reduced, because of deliberate error or fraud, go to Step 4.

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Step 3

  • prepare and issue TC869
  • update the proforma

then

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Step 4

Check Household Notes and the reason for the referral to consider hardship. For how to do this, use TCM1000067.

If you have received a referral because the customer wants to pay their overpayment back quicker, go to Step 10.

If you have received a referral because the customer is unhappy with the amount of adjustment, go to Step 6.

If you are not authorised to access the claim, go to Step 5.

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Step 5

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Step 6

Check for any tax years that have an account status of Open. For how to do this, use TCM1000026.

If there are any Open years, go to Step 7.

If there are no Open years, go to Step 8.

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Step 7

  • make a note on the proforma of any open tax years

then

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Step 8

then

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Step 9

  • follow the guidance in TCM0218020 
  • take no further action.

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Step 10

If the customer no longer requires a payment adjustment, go to Step 11.

If the customer still requires a payment adjustment but wants to increase their rate of recovery, go to Step 12.

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Step 11

  • update the proforma

then

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Step 12

Check if the customer has an in year recovery. For how to do this, use TCM1000522.

If the customer has an in year recovery only, go to Step 13.

If the customer does not have an in year recovery only, go to Step 14.

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Step 13

  • update the proforma
  • prepare BF cover sheet
  • issue form TC996 to the customer
  • bf for 14 days
  • update Household Notes with the message PM13 from TCM0168020. For how to do this use TCM1000001 
  • take no further action.

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Step 14

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Step 15

  • adjust the in year payments to increase the percentage as agreed by the customer. For how to do this, use TCM1000523 
  • prepare and issue increase recovery free format letter
  • update the proforma
  • update Household Notes with the message PM14 from TCM0168020. For how to do this, use TCM1000001 
  • go to Step 23.

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Step 16

  • adjust the in year payments and amend the percentage so a full recovery is made. For how to do this, use TCM1000523 
  • prepare and issue form TC991
  • update the proforma
  • update Household Notes with the message PM15 from TCM0168020. For how to do this, use TCM1000001 
  • go to Step 23.

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Step 17

Check the award to determine the category of the award. For how to do this, use TCM1000524 

  • update the proforma.

Note: The customer is entitled to a payment adjustment if their award is Category A or B. They will not get a payment adjustment if their award is Category C or if there is Compliance activity.

If the customer is entitled to a payment adjustment, go to Step 19.

If the customer is not entitled to a payment adjustment, go to Step 18.

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Step 18

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Step 19

Check if the correct in year percentage has been applied. For how to do this, use TCM1000537.

If the correct in year percentage has been applied and there are no Open years, go to Step 20.

If the correct in year percentage has been applied and there are any Open years, go to Step 21.

If the correct in year percentage has not been applied, go to Step 22.

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Step 20

Where recovery rates have been set so that the customer is not caused hardship and no further adjustments are appropriate

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Step 21

Check if the correct cross year percentage has been applied for each open year. For how to do this, use TCM1000537.

If the correct cross year percentage has been applied and there are no other open years, go back to Step 20.

If the correct cross year percentage has not been applied, go to Step 22.

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Step 22

  • check the date of the initial requests, follow the guidance in TCM0214100 then return to this guidance
  • adjust the in year payments and enter the correct percentage. For how to do this, use TCM1000523 
  • prepare and issue form TC868 (Word 121KB) 
  • complete the proforma
  • update Household Notes with the message PM03 from TCM0168020. For how to do this, use TCM1000001 
  • go to Step 23.

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Step 23

  • send papers to storage. Follow the guidance in TCM0074140 
  • take no further action.

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Step 24

  • send papers to storage. Follow the guidance in TCM0074140 
  • update Household Notes with the message PM05 or PM19. For how to do this use TCM1000001 
  • take no further action.