Examinations and Enquiries - Frequently Asked Questions

Contents

Q. What is the difference between a tax credit examination and a tax credit enquiry?

A. Examinations are checks of the information you have given when making your claim or notifying a change in your circumstances. We carry out examinations during the year, either before we pay you tax credits or while we are paying you tax credits on a provisional basis. This work is done to check that people are only claiming what they are entitled to.

Enquiries are checks of all the information you have supplied for the year. We carry out enquiries after the end of the year, (5 April) when you have confirmed your income and circumstances for the year just gone. This work is done to ensure that the amount of tax credits we have paid you is correct for that year.

Q. Can a tax credit examination which runs on after 5 April turn into a tax credit enquiry?

A. No. Examinations and enquiries are governed by separate legislation. We aim to close all examinations before 5 April. Claimants are then asked to finalise their awards. If following finalisation we need to ask you questions about your award we can open an enquiry whether or not we examined your claim during the year.

Q. Will there only be one examination of my claim per year?

A. Normally yes, but there may be circumstances where we need to do more than one examination.

Q. How will a Certificate of Disclosure that I have been asked to sign following the end of an examination make it clear that the examination, necessarily, has only looked at aspects of my tax credit claim and other aspects of my tax affairs can still be enquired into?

A. The Certificate of Disclosure will show clearly the purpose for which the information was disclosed and the period of the tax credit claim covered by the examination.

Q. What procedures will be followed in randomly selected tax credit enquiries?

A. Once a randomly selected enquiry has been opened, it will be worked following the guidance in the Claimant Compliance Manual in the same way as any other enquiry.

Q. If the HMRC enquires into my tax credits claim will they tell me why they have started the enquiry?

A. Our opening letter will explain what an enquiry is and the reason that we carry out enquiries in general terms. We do not give any specific reason why we have enquired into your claim at the outset.

Discrepancy examinations/enquiries

Q. What is a discrepancy enquiry?

A. Discrepancy enquiries are carried out after the end of the year to check that claimants have received the correct amount of tax credit that they are entitled to for the year. Discrepancy enquiries will be identified through matching specific claim details provided by the claimant for the year, with HMRC databases. Where there is a clear discrepancy between the claimant's figures and HMRC's, we will open a discrepancy enquiry to make sure that the claim has been finalised using the correct details.

Q. What is a discrepancy examination?

A. Discrepancy examinations are carried out in-year to check that claimants are receiving the correct amount of tax credits in that year. Discrepancy examinations will be identified through matching specific claim details with information held on HMRC databases. Where there is a clear discrepancy between the claimant's figures and HMRC's data, we will open a discrepancy examination to make sure that the claim has been awarded on the correct figures.

Q. How do these discrepancy investigations link with aspect enquiries under Self Assessment?

A. Discrepancy examinations and enquiries are similar to Self Assessment aspect enquiries in that, at the beginning of the examination or enquiry, they focus on one or two specific matters rather than the whole claim.

Q. Can either a discrepancy examination or a discrepancy enquiry turn into a full examination or enquiry?

A. Yes, it is possible that while checking the discrepancies we receive information or identify other aspects, which would cause us to fully examine / enquire into the claim.

Penalties

Q. How will any penalties I have paid in settling a tax credit examination be dealt with if I am also subject to a tax credit enquiry?

A. Any penalties charged at the end of an examination may have an impact on the amount of any penalties charged at the end of a later enquiry. The amount of penalty charged in the enquiry may be higher where there has been an earlier penalty as a result of an examination.

Q. How will any penalties or interest I have paid in settling a tax credit examination be dealt with if it turns out that my actual income was less than my previous year's income? Will any penalties or interest become repayable?

A. No, any penalties and interest that are charged as a result of an examination will not be affected by end of year issues. If it turns out that your actual income was less than your previous year's income and as a result you have been underpaid tax credits, we will revise your award and pay you the additional tax credits that you are owed in a single payment.

Q. How will the provisions of Section 32(2) Tax Credits Act 2002 for penalties for failure to provide information interact with the provisions of Section 97AA Taxes Management Act 1970 if the same information could be pursued under each?

A. Where a S9A enquiry has been opened and information has been requested but not provided, the powers at S97AA may be used. Where a S19 Tax Credits Act enquiry has been opened and information has been requested but not provided, the powers at Section 32(2) may be used. Where both a tax credits enquiry and a Self Assessment enquiry are open at the same time we would normally use the Self Assessment legislation in relation to information relating to Self Assessment income.

Q. My partner refuses to co-operate in providing information to substantiate our joint tax credits claim. The information is held solely in his/her name. Will I be sent formal notices to provide information, or have to pay penalties?

A. If you and a partner make a joint claim for tax credits then both of you are responsible for the information given on that claim. Formal notices to provide information will be sent to both of you. Penalties will only be chargeable on both of you for any failure to provide the information requested, where you both could reasonably have provided the information required. If the information relates solely to one of you and the other partner could not reasonably have known about it, or had access to it, then any penalty will be charged on that partner alone.

Q. My former partner has now left me and I do not have the information to substantiate his/her parts of our earlier tax credits joint claim. Will I be subject to a penalty?

A. No, penalties will only be chargeable on both partners, where both could reasonably have provided the information required. If the information relates solely to one of you and the other partner could not reasonably have known about it, or had access to it, then the penalty will be charged on that partner alone.

Q. I understand that maximum penalties can be reduced if I co-operate with the examination or enquiry. By how much? And what criteria do HMRC use when deciding whether, and by how much, to reduce them?

A. Penalty in respect of incorrect information - The amount will depend on whether this is the first offence and on the amount of tax credits affected, with a reduction of up to 50 per cent available for disclosure and co-operation. The amount of the reduction depends on the extent to which you disclose details of the irregularity and co-operate with the examination or enquiry. We will look at all the facts and circumstances and decide on a case by case basis.

Penalty for failure to notify a change of circumstances - The amount will depend on whether it is the first time you have failed to notify a change in circumstances and the amount of tax credits that are affected by the change.

Q. If I have made the same mistake in my Self Assessment return and in my tax credits claim, can I be made to pay two penalties?

A. The legislation provides for separate penalties for Self Assessment and tax credits and, in certain situations, we will seek penalties both under Self Assessment and for tax credits.

People who understate their income on their Self Assessment returns evade paying income tax, and possibly National Insurance contributions. If they have acted neglectfully or fraudulently, they may become liable to a penalty under the Taxes Management Act. Likewise, people who understate their income in their tax credits claims may receive more tax credits than they are entitled to and, if they acted negligently or fraudulently, may become liable to a penalty under the Tax Credits Act 2002.

The reason for the repeated mistake, the nature, and its impact would all be taken into account when considering the penalty position.

Appeals

Q. I have received my final award notice for 2005/06 but have appealed against it. Will or can HMRC open an enquiry into my 2005/0 award whilst this appeal is unsettled?

A. In theory we could do this but it is unlikely.We will settle your appeal first and then would consider opening an enquiry.

Q. I have received an amended award for 2006/07 that I have appealed against. Will or can HMRC open an examination into this award whilst this appeal is unsettled?

A. In theory we could do this but it is unlikely. We would normally settle your appeal and only then would consider opening an examination.

Q. How are tax credit appeals dealt with in HMRC Tax Credit Offices? Are there any particular procedures to be followed when submitting an appeal and how quickly can I expect to hear back from an appropriate officer?

A. There is a leaflet WTC/AP How to appeal against a tax credit decision or award. This is available in Enquiry Centres, Citizen Advice Bureaus, Libraries and on request from any HMRC office or through Contact Centres. Electronic versions are also available on the internet.

Claimants must make their appeal in writing. TCO aim to send an acknowledgement within 48 hours of receipt of an appeal.

In most cases we expect to settle the appeal by reaching agreement by correspondence or discussion. Any oral agreement will be confirmed in writing. But, if we cannot agree, you can take your appeal to an independent appeal tribunal.

Providing Information and Evidence

Q. I have not kept any records to substantiate my tax credits claim for 2005/06. I was not asked to do this when I made my claim and understand that the legislation does not specify record retention. What happens if I get an enquiry into my tax credits claim?

A. If you cannot provide some or all of the information requested you should get in touch with the person requesting the information immediately to give your reasons why you find it difficult or impossible to provide the information. We will listen to what you say, and where the information cannot be provided, or does not exist, try and work with you to answer our questions in a different way.

Q. When renewing and reviewing my award for 2005/06 I returned an estimate of my 2005/06 income in May 2006, to avoid a further build-up of tax credit overpayment I returned details of my actual income before 31 August 2006. I understand from the Claimant Compliance Manual (CCM 12060) that this extends my tax credits enquiry window to 31 January 2008, instead of 31 August 2007. Since I only did this to prevent the Exchequer paying me more money than was due, is this fair?

A. Where an estimated figure is provided for 2003/04 the actual figure need only be supplied by 31 January 2005 and the enquiry window is open until 31 January 2006 regardless of when the actual details are returned. The extended date for enquiry is a consequence of the extended date to provide information.

Q. I have appointed an agent to deal with my tax and tax credit affairs. They are sent copies of all my Self Assessment paperwork. Why do they not get copies of my tax credit paperwork, particularly the letters relating to any tax credit enquiry or tax credit examination, especially since these could have important links with Self Assessment?

A. The Tax Credits system does not have any facility to provide for copies of award notices to be sent to agents. However if HMRC holds written authority to deal with an agent, communication will be then carried out through the agent (and the claimant will be copied into the correspondence).

Q. I have asked someone to help me reply to a letter from HMRC about my tax credit award, but they have no written authority from me as yet. If they want to talk to HMRC by phone, and I am there in the room while they do so, is that sufficient?

A. The Tax Credits Helpline has full voice recording equipment so can speak to a third party representative by phone provided:

  • All claimants and their representative are present at the time of the call, and
  • Claimants identities have been satisfactorily verified before the call is handed over to the representative.

Q. What is the position on Crown Servants notifying a change of circumstance details when going abroad? How does the guidance make clear the fact that it affects their award differently from others?

A. HMRC provides a range of information and advice to inform people of their entitlement to tax credits, including Crown Servants posted outside the UK. Comprehensive guidance is provided with the claim form, on the website, in guides produced by HMRC and other Government departments, and of course everyone has access to the Helpline whether they are in the UK or abroad.

Most Government departments, as good employers, also provide a range of advice to their officials being posted overseas, including advice on tax credits and Child Benefit.

Q. Following a 'reasonable excuse' for delay by the customer in providing information, please confirm that HMRC will allow a reasonable period (and at least 30 days) to provide the outstanding information (i.e. after the reasonable excuse has ended)?

A. We look at the facts and circumstances of each case in deciding whether an excuse is reasonable. Where we accept there is a reasonable excuse we expect the claimant to meet their obligations as soon as possible after the reason for the delay is finished. We will work out what we feel is a reasonable time period for the claimant to meet their obligations on a case by case basis taking into account all relevant circumstances.

Q. How do I obtain a record of a telephone conversation I have had with the Helpline?

A. This is quite straight forward. The customer can make an informal request to the Helpline. The Helpline will send a Compact Disc directly to the customer. Alternatively, a formal request made under the Data Protection Act (DPA), called a Subject Access Request (SAR) has to be made in writing. The customer should contact the Data Protection Unit (DPU) with their request at:

Data Protection (SAR) Unit
Business Services
Room BP4302
Benton Park View
Longbenton
Newcastle Under Tyne
NE98 1ZZ
Telephone: 0191 2257575
Fax: 0191 2253098

Q. How do tax credit examinations and enquiries link with Self Assessment enquiries?

A. Where the points at issue relate to personal circumstances and not income then there will be no link and no need to look at Self Assessment. Where the risk is that income has been understated on the Self Assessment return which may indirectly affect the tax credit award, a Self Assessment enquiry could be opened. Once it became clear that an adjustment was necessary and this could affect the tax credits award a tax credits examination/enquiry would also be opened.

Q. Will an income investigation for a self-employed claimant only ever take place as part of a tax credit enquiry, and never as part of a tax credit examination?

A. An examination might be carried out where there is a discrepancy between the figure of profits shown on the tax credits claim and the figure reported for Self Assessment (SA) purposes. The income figure for the previous year shown on the tax credits claim should be the same as the figure on the SA return and the examination will seek to correct any mismatch.
Any concern regarding the accuracy of the figure of profits will be worked as an ITSA enquiry with any consequential adjustments to the tax credits award considered in due course. Such an ITSA enquiry will normally involve joint working with tax credits colleagues.

Q. My partner runs a business and HMRC have started an enquiry into his Self Assessment return. I am worried that whatever is decided will affect the money I get for our children. I need to know what is happening so that I can budget if we have to manage on less, but my partner is reticent about it. Who in the HMRC can I talk to?

A. The results of a Self Assessment (SA) enquiry may affect the level of the tax credit award but we cannot disclose to you, without their written consent, information which relates to your partner's business and any enquiries we have made. Any impact on the tax credit award will be discussed with you as part of a Tax Credit enquiry or examination. The Claimant Compliance Officer will have written to you when they opened their Tax Credit enquiry (often at the same time or shortly after the SA enquiry was opened). You should contact this person to discuss with them the likely impact on your family finances.

Q. Will HMRC confirm that information already submitted as part of an Self Assessment Return (for example, white space entries or in the additional information box) or enquiry will not be requested again as part of a Tax Credit examination or enquiry?

A. The information submitted on a Self Assessment return or during an enquiry is made available to the Claimant Compliance Officer prior to the commencement of their enquiry. There should be no reason for this to be requested again although the information provided may be enquired into.

Q. Please confirm that HMRC will always arrange for an interpreter at meetings with customers who experience difficulty in speaking and understanding English, and not just when required to do so by Human Rights Act 1996, Sch1, part 6, para 3(a) (e)

A. An interpreter will always be arranged if requested. Where possible this will be a serving officer, but if not, alternatives will be sought through the police, local universities, libraries or ethnic communities.

When a private interpreter is used

  • It will be explained to the customer that the interpreter is not an HMRC Officer.
  • We will ensure the customer has no objections to the interpreter
  • We will ensure the interpreter understands that the interview is strictly confidential.