Tax credit questions

Contents

Should the claim form be amended to include a question on estimated/expected income for the current year?

Currently claimants are asked to provide details of their previous year’s income and their current year initial award calculation is based on this figure.

The award notice advises claimants that their award will change if their income falls below the lower income threshold set out in the notice or where their income increases above the higher threshold. For many claimants, variations in income will fall within those thresholds.

We try to keep the number of questions we ask and the length of the claim form to the minimum possible. But we are testing some new methods of reminding claimants to report changes in their income to help prevent overpayments.

When claimants receive notices to pay – can repayments be spread over a period longer than 12 months?

We can, in certain circumstances, allow claimants to repay over a longer period.

We will look at claimants’ income and expenditure to determine the appropriateness of such an arrangement. (Factors we consider are set out more detail in our Code of Practice 26 “What happens if we have paid you too much tax credit?”).

Claimants should call the payments helpline number given on the notice to pay to discuss their circumstances and to agree any payment arrangements.

Can overpayments and repayment matters be dealt with on the Welfare Rights Advisers (WRAs) priority helpline?

The existing Contact Centre priority line for WRAs can handle general enquiries on overpayments. They can also extend to 60 days the 30 day period that claimants have to respond to the TC610 "Notice to Pay".

Where a claimant has been overpaid as a result of HMRC error will HMRC consider writing this off, or only if the claimant contacts them and disputes recovery?

We do not necessarily know that we have made a mistake unless the claimant, or their adviser, contacts us.

There have been instances where we have been able to take proactive action and write off overpayments when we realised that we had made a mistake.

When do you consider that a client could not reasonably know they have been overpaid?

In deciding whether it was reasonable for a claimant to think their award was correct we consider all the circumstances of their case.

Some of the factors that HMRC will look at when considering reasonable belief include:

  • Was the error obvious? (e.g. one partner’s income missing, or 3 children included in the award when there should have been only 2)
  • Was more money being paid to the claimant than their award notice said they were entitled to?
  • Did the problem occur in the early months of the scheme when award notices were issued late and some claimants could not determine what they should have received, or payments had started before the award notice arrived?
  • Was there a delay in the award notice being issued, or multiple award notices, so that it was not clear what level of payments should be expected or when?
  • Were there delays in processing the claim or change of circumstances?
  • Did the claimant contact us several times, and we failed to take the appropriate action, for example, to amend a tax credits award to reflect a change of circumstances that had been reported,

We are currently reviewing our Code of Practice 26 “What happens if we have paid you too much tax credit?” and hoping to clarify this area further.

We understand that new procedures have been introduced to deal with disputed overpayments more quickly. When can people still waiting expect to hear?

It is not possible to provide a definite time scale that will fit every case. But we are now working the cases more quickly as a result of the new procedures and allocating additional staff to this work

Will there be any compensation or redress for people who have had to wait for a decision on their disputed overpayment?

The availability of, and our approach to, redress is outlined in our factsheet C/FS 'Complaints and putting things right’ and we pay redress where appropriate. We can pay for costs incurred as a direct result of our mistake or delay, and we also make payments to claimants to acknowledge any worry or distress our mistake or delay has caused.

The Paymaster General has said that HMRC will look at not recovering overpayments whilst there is a dispute outstanding. When is this change likely to be introduced?

We are testing options for suspending recovery of disputed overpayments.

Why are clients still required to repay the overpayment where the error was due to HMRC and the decision has been challenged?

We are testing options for suspending recovery of disputed overpayments. In the meantime, we can make higher payments, in certain circumstances, to alleviate hardship.

Can you tell us about plans to redesign the award notice?

From April 2006 the award notice will include:

  • a much simpler and clearer summary on the front page that focuses on the most relevant information for the customer – what sort of award notice it is, what it is in response to and how much money they are going to get for the remainder of the year.
  • a playback in Part One of the relevant personal circumstances about the claimants and their children upon which we have based our assessment of their entitlement. Part one also sets out the information about their income in a clearer way, showing a breakdown between different types of income. And we have made it clear which year’s income we have used and how to work out if they need to tell us about a likely change in their current year’s income
  • a clear picture in Part Two of how we have calculated claimants’ entitlement to tax credits. This will show where amounts have changed – for example, if they have had a baby during the year – and the relevant period of time that the entitlement covers. Part Two will also show by how much their entitlement based on each element has been reduced by their annual income
  • an explanation in Part Three of what payments we will make for the remainder of the year and how this relates to the claimant’s entitlement as calculated in Part Two.

Can a calculation sheet be included in with the award notice so that claimants will be able to see how the credits have been calculated?

The new award notice for April 2006 will provide this. For now, pages 16-18 of the award notice notes are designed to help claimants understand the various elements of the payments page of the award notice.

Additionally, Helpline advisers can send claimants a detailed calculation of their award on request.

What is your approach to overpayment recovery and preventing hardship?

Where there is an overpayment, the award notice sent to claimants shows the amount and how it will be recovered. Page 12 of the accompanying notes tell claimants that our approach to overpayments is outlined in Code of Practice 26 “What happens if we have paid you too much tax credit?” and advises: "if your payments are reduced to a level that causes financial hardship, please contact us".

Additional tax credits payments – or “top-up” payments - are available and can be made to claimants who experience hardship when their entitlement falls as a result of a change in circumstances and their payments are reduced .

We have restrictions that limit the amount by which we will reduce a claimant’s current award to recover an overpayment brought over from the previous year.

This is to avoid causing hardship when we recover an overpayment and to help claimants maintain a balanced budget.

The maximum amounts by which we would reduce payments to recover an overpayment from a previous year are:

10% for claimants receiving the maximum award
100% for claimants receiving only the family element of Child Tax Credit
25% for all other claimants.

We are reviewing our guidance in the context of the work being done to take forward the Paymaster General’s six measures for improving the administration of tax credits and we are considering how we can improve the information we give claimants about overpayments.

How quickly can people expect replies to their letters?

We aim to reply to 80% of correspondence within 15 working days and 95% within 40 working days.

If I send an authorisation to act on behalf of a claimant, how long will this last?

You can specify a time limit in the letter or form for how long you want the authorisation to last or if it is to cover a certain action, such as an appeal. If you send a TC689 with no date specified, the authorisation will lapse after 4 months.

Can you outline the improvements that are being made to the quality of administration?

The six measures for improving the administration of tax credits are set out in the statement made by the Paymaster General on 26 May

What are you doing to ensure quick responses to reported changes of circumstances, and that accurate assessments are made?

Changes are dealt with by amending a claimant’s records on the tax credits computer system. Most changes of circumstances are reported over the telephone to tax credits Helpline advisers and details are noted on the claimants’ records at the time of the call.

We have worked very hard to improve our processing accuracy since the introduction of tax credits and significant improvements have led to much better performance. Details of our performance are reported in the Department’s Spring and Annual Reports.

Why are awards still being miscalculated and claimants overpaid?

We make every effort to minimise mistakes but, given the number of families benefiting, there will, unfortunately, be cases where errors occur. Where they do, it is important people tell us quickly, so that we can put things right.

The tax credits Helpline and the Tax Credit Office are continuing to work to improve processing accuracy.

Overpayments are a feature of the tax credits system however and the majority of are not due to miscalculation or error. For example, some claimants wait to report changes in income until after the end of the year when they send in their Annual Declaration.

We have seen cases where lump sums have been paid in error but claimants have been told that the payments are correct. Has this been resolved?

Some of these overpayments were the result of an isolated system problem. When the problem was identified, we took immediate steps to prevent any further such incorrect calculations.

When deciding whether to write off an overpayment, we do take into consideration incorrect advice given to claimants.

Can you explain what helpline advisers have meant when they have said that claimants’ payments have ‘fallen off the schedule’ and what you have done to prevent it?

In early April 2005 we carried out a routine upgrade of the tax credits computer system. During this time payments were made as normal but where claimants told us about a change in their circumstances, there was a short delay in the change being processed and their payments being adjusted to take account of the change and details of the payments were not visible to Helpline advisers.

In the majority of cases claimants received their payments in around a week and their revised award notice in around 10 days. In cases where claimants experienced a delay in receiving their tax credits payments and told us they were suffering hardship, we made arrangements for them to receive an interim payment.

Why are there sometimes discrepancies between the amounts overpaid on award notices and the amounts given by helpline advisers?

Where recovery is ongoing the amount of overpayment will change from week to week.

When a client is owed monies but can’t be paid directly into their bank account when are they offered giro payments?

Where we have difficulty in making automated payments to a claimant, and any delay is likely to cause a claimant hardship, we will look to pay their tax credits by cash cheque until we can resume automated payments.

How long do claimants have to wait for their appeals to be heard?

Most appeals do not need a hearing – we aim to settle them by agreement with the claimant wherever possible.

It can take around a month to settle more straightforward appeals, but it may take longer where we have difficulty in contacting the claimant, or need to obtain additional information from them. The time it takes can also depend on the number of appeals we receive in a particular month; intake can vary significantly.