Child Tax Credit Error - what happens next?

[YBR]

We have been told that we're received overpayments on our Tax Credits last year, but have no idea how to make our own calculations. What we have seen is that after the first payment of 2012-13 they sent different (larger) amounts than they had told us. The total we (alledgedly) owe is over £700.

We accept that they've made a mistake (and we failed to spot it and challenge them sooner). Has anyone had this happen, and did they have to pay the amount back at once?

My attitude is that it's their error so why should I be out of pocket? It happens that we could pay it back, but those savings are ear-marked for moving house, it could wreck our plans. I'd be happy if they just took it of future payments but currently they think we get nothing, but the situation will change as we're expection DC2 this year.

Have you considered appealing the decision? Link here with more information. Could be worth it especially if it's tax credits error www.hmrc.gov.uk/taxcredits/things-go-wrong/complaints-appeals/appealing.htm

I wouldn't know what grounds to appeal on - we've got no idea if the assessment is correct, or how to calculate it for ourselves. DH and I are educated and numerate but this seems to be beyond us! We've written a letter asking them what happened how and why, and if the response is unsatisfactory then we'll consider an appeal.

DH has done so research and tells me that Which? say they can't understand Tax Credit formulae.

That happened to me one year, I paid the over payment back thru the following years tax credits.

The formula is not hard to work out.

There are 3 elements - Working Tax Credits, Child Tax Credits and Childcare element of Working Tax Credits.

Working Tax Credit
1.Basic element £1,920
2.Couple and lone parent element £1,970
3.30 hour element £790
4.Disabled worker element £2,855
5.Severe disability element £1,220

Add up any that apply, write the total down somewhere. We'll call that 'A'.

Child Tax Credits
1.Child Tax Credit Family element £545
2.Child element £2,720
3.Disabled child element £3,015
4.Severely disabled child element £1,220

Each child can qualify for each of elements 2-4, there is only one family element. Disabled child = Gets DLA. Severely disabled child = Gets High Rate Care or is registered Blind.

Add up any of elements 2-4 that apply (one for each child) and add on 1. Write it down - we'll call that 'B'.

Child Care Tax Credits
Maximum eligible cost for one child £175 per week
Maximum eligible cost for two or more children £300 per week
Percentage of eligible costs covered 70%

The care has to be registered providers, but there is no restriction on when the care takes place. So if you want to pay someone to have your child on your day off while you do housework, they will still pay it. To qualify for the Child Care element, you must be either:

Lone Parent - work 16 hours or more
Couple - work 24 hours or more total, with one working at least 16 hours per week.

Disabled people, couples where one person is in prison, hospital or otherwise incapacitated for work, or in receipt of carer's allowance are exempt from the 24 hour rule, and are only required to work 16 hours per week.

Maximum eligible cost for one child £175 per week
Maximum eligible cost for two or more children £300 per week
Percentage of eligible costs covered 70%

So, work out child care costs, then calculate 70% of them. Write that down. We'll call it 'C'.

Add up A,B & C. The total figure is your 'potential tax credit award'.

Next, you have to look at your income.

Income Thresholds
Income threshold £6,420
Withdrawal rate (per cent) 41%
Threshold for those entitled to Child Tax Credit only £15,910
Income rise disregard £5,000
Income fall disregard £2,500

So, they are telling us that the first £6420 of your income is ignored.

Take that away from your income.

Then, after you've taken that away, they will deduct £0.41 for every £1 you earn.

Work out (your income -£6420) x 0.41

That's how much they take off your 'Potential Tax Credits award.'

Thanks so much Lougle.

Working backwards I come to the following:
As a couple, 1 working full time, no disabilities, no childcare costs, the income at which you get no Tax credit at all is:
With 1 child £25,798
With 2 children £32,432

Which at face value means we should not have been awarded Tax Credits, and will still not be due any when DC2 is born.
OTOH there are things like Pension contributions and Gift Aid donations which can be set against that income.

This table from HMRC agrees with you.

I'm paying back at overpayment too, because there was a £3000 difference between our estimated and actual income one year. Am paying it back £50 a month.