Childs Tax Credit overpayment - advice please!

[nooniem]

Hi, am brand to mumsnet, so please forgive my newbie errors!

I have disputed a childs tax credit overpayment for 2013/2014 year, and would just like some advice please.

At the beginning of the 2013 fiscal year, I had 3 children in education and college, and one 4 year old for whom I paid a registered childcare provider. Our joint income was approx. £40k. I paid £800 per month childcare.

One by one during the year to September my 3 in childcare all left education (they are much older than the 4 year old!) and I advised HMRC everytime one left college etc, within 1 month of them leaving, and my award was reduced accordingly.

In the November I was subject to a compliance check from HMRC for my childcare cost, and I received a letter on 19th December confirming that my award was correct and I was in receipt of the correct amount of childs tax credit.

At the beginning of December I secured a new full time position which was a much bigger salary, adding £30k to our income, hence now £70k. I called HMRC on 5th December to advice of my new income. the next correspondence from HMRC was the compliance check on 19th December. I received my last HMRC child tax credit payment on 15th December, and the award was closed. My childcare ceased on 31st December, and again HMRC were notified of this on 2 Jan 2014.

I am now being pursued for the full amount of childs tax credit I received for the full year, however, my dispute is based on that from April - December 2nd I wasn't in receipt of the additional new salary, but was paying £800 per month childcare. and as soon as I advised them of my new salary they ceased child tax credits and then wrote to me to confirm that I had been in receipt of the right amount of childs tax credits as per 19th December. Hence, I do not feel that I should repay the overpayment as I kept them informed all year about all changes in the right timeframe and even after investigation a compliance officer agreed I was receiving the correct amount.

Any advice is greatly received - I now have debt collection agency letters too, which is distressing!!

So during 2013-2014 tax year you earned about 10k more than your claim was originally based upon, would that have taken your household income over the level to have any tax credits?

My income from april - dec was £40k, and then my new work position started mid dec, and made my total income £70k for the full year. So in December when I started my new positon I called HMRC immediately to advise of the additional income. Hope that makes sense!

I thought you meant 30k pa! So you are well above the level for any entitlement during that tax year. It only gets reviewed retrospectively, hence why you now owe hmrc for the entire amount. You've had the benefit of the cash flow in the meantime.

I'm not sure OP, but they are doing something similar with us atm in that they are asking for previous years money back.
have you received a letter fro HMRC asking you for money back? If so call them and explain, they will ask you to call tax credits and speak to a manger.
You then need to insist they look at your case, they will give you a date in February. You then call HMRC back again, who will hopefully suspend the letter of repayment until they hear from tax credits in February.
You then have to hope that bailiffs don't arrive at your door.
Such a crap system and people say that us on tax credits have it easy.
Good luck OP
For goodness sake keep in touch with them at every move.
The fact you have kept good records will be to your advantage and it sounds like it is their problem.

If you have had an overpayment and still entitled to tcs then the most they can take back each month is 40% of your existing award.
If you can't afford essential bills, they have to reduce the amount.
They can only ask for it back all at once if you refuse to pay and it is your fault and you have resisted their communication.

They don't take into account that for part of the year you had an entitlement or that your income changes during the year. They will take the income for the relevant tax year no matter what way it was spread out. There used to be quite generous disregards which basically prevented situations like that. I got caught as I had tempoarily upped my hours and am still treated as if I had an income higher than I have. It is a bizarre system.

They will base it on your entires years earnings, ragardless of how it's broken down.

From April-September of the year in question, you would've been paid based on the 12/13 income.

At the end of tax year 13/14 you will have submitted your actual earnings(regardless of how many jobs) - if those earning exceed the maximum income rates then you will have to pay back what you've received during that whole year.

Do you know, I think they might be right as it's a bit lie tax isn't it? If you worked one month of the year at £70k you'd pay tax for that month at the high rate but at the end of the tax year they'd look at it and see you only earned £5k for the other 11 months of the year and so you'd get a refund (the figures are dodgy, I'm just looking at the principle).

So thus us kind if the reverse isn't it? Your income earned for the whole of that tax year - even though you only earned the higher amount girl a portion of the year - took you over the threshold therefore although you were correctly paid dome tax credits at the start if the year and correctly received none at the end of the year, when they're looking at the year as a whole, they think you should repay the tax credits.

Does that make sense?

My blood ran cold reading this as I was in a very similar situation (household income increased dramatically) but thankfully, it actually happened in April so wouldn't have had the same impact.

Tax credits are paid on the previous years figures anyway. Why would they reduce the OP award when dc left ft education. Mine remained the same until the following award until it was reviewed?
This doesn't make sense at all.

Sorry for typos!

It's a charming system.
If it helps, you can arrange to repay over 2 or 3 years.

They are definitely right, you can dispute an overpayment but current timescale is approx 6-8months and in my experience they will not suspend recovery during that time nor will they find in your favour at the end of it.

The best thing you can do now is negotiate a repayment plan which you can afford before third party debt collection becomes involved

Thanks everyone, really appreciate the comments, and it seems that the system is pretty useless, I just feel in my particular case, they even investigated my current claim and wrote to me to advise it was being paid correctly after date of my change of circumstances, and are now claiming I have been overpaid. I also totally agree that an income of £70k does not and should not qualify for tax credits assistance!!

I have been calling them constantly for updates and they are now 5 weeks post their 17 week window for investigation, and I have a final demand from the debt management company.

I was also advised that the compliance department look at older information rather than the update information when they look at your case, and I feel this is where the error on the part of HMRC is, if the compliance letter said my claim was correct based on XY and Z information then it would clarify on what information they have agreed was compliant, but as it was sent after all my changed were made, I feel it is a communication error on HMRCs part.

I also posed the question that if an individual earns say £15k from 6th april to 31 march the following year but received a one off bonus on 5th April of say £20k (I work in finance and this does happen!) it would negate the full years tax credit entitlement, even though that bonus wasn't aware during the first 11 months of the claim. The tax credit advisor told me that she knew which one she would prefer - a bonus or to repay £4k! I then had to point out that flippant remarks do not help the situation and how unprofessional of her! She wouldn't speak with me after that!!

On the HMRC COP26 information sheet, it states that if you have fulfilled your obligations and notified them at every change of circumstance, and all your information is accurate and declared in a timely manner, then they cannot take the OP back from you, and as I have fulfilled all my obligations I havent done anything wrong. I just took the opportunity to take employment well in excess of my current income.

Also, on COP26 there is a dubious area called
'official error', whereby if HMRC haven't updated your information in a timely manner then an overpayment can be cancelled, I want to pursue this area re the compliance check!

I am also very old school, and whilst I appreciate making payments towards the overpayment to keep the bailiffs from the door, I also feel making a payment would be viewed as an omission to the debt and an acknowldgement to pay!

Lets hope HMRC review my dispute asap!

I hope everyone else also has luck with HMRC

OP - it all sounds v complicated but I think there are two different things being confused here.

All 'in year' tax credits awards and payments are always provisional until the award for the year in question is finalized. Finalization normally happens in the period Apr-Jul following the financial year in question. Of course, in this case, finalization has happened early due to the closure of your claim.

This isn't about the type of overpayment that might arise from you not informing them of changes in a timely manner, so the rules about those situations are really neither here nor there unless they carried on paying childcare costs that not longer applied or for young people who had left education AFTER you had notified those changes and that has contributed to the overpayment (?)

You don't have to be at fault or to have done anything wrong to rack up a significant overpayment under the TC system. Changes of circs can cause them easily (esp since the disregard was slashed as a pp alluded to) and you have had several changes of circs in a short period.

Do you see what I mean?

What figure are they using for your income for the part-year claim (Apr-Dec)? Do you dispute it?

Thanks for the response Arsenicfacecreah.

I don't dispute my income for april - dec, I am disputing that a compliance officer should not have confirmed that i was in receipt of the right amount of childs tax credit as of 19th December, and that my award did not need amending. Whereas, contra to that decision, they are claiming i have been overpaid, I feel they have contradicted themselves.

I do understand that an award is based on the full years income etc but as they were aware of my income on approx 5th December, and ceased paying me anymore, they should not have confirmed the tax credit award was correct on 19th Dec.

It must seem that i am clutching at straws to avoid the repayment, but its like being offered a mortgage on your current information, and being content and knowing where you stand financially, and then the mortgage being withdrawn because they didn't actually look at the right information and reverse the decision.... maybe a silly analysis but its how i see it!

Thanks for your advice tho :)

a compliance officer should not have confirmed that i was in receipt of the right amount of childs tax credit as of 19th December, and that my award did not need amending. Whereas, contra to that decision, they are claiming i have been overpaid, I feel they have contradicted themselves.

Ah I see. Sorry. So the compliance officer was the one who was confused?

Not sure I fancy the chances of them quietly dropping it.

It must seem that i am clutching at straws to avoid the repayment, but its like being offered a mortgage on your current information, and being content and knowing where you stand financially, and then the mortgage being withdrawn because they didn't actually look at the right information and reverse the decision.... maybe a silly analysis but its how i see it!

No, I understand the irritation. The system is deeply flawed/clunky/problematic and causes these issues all the time.

"I also totally agree that an income of £70k does not and should not qualify for tax credits assistance!!"

Well, obviously you don't agree or you would pay back the money that presumably you're not entitled to, having earned over the threshold for the current year.

But as at that point in December you may not have been overpai d, it is your earnings beyond then that push you over the limit. You agree you weren't entitled , presumably confirmed last summer when you had to give 2013-14 figures, therefore should be able to pay it back if you still earning at that level.

The tax credits you receive are based on what you estimate you will earn over the year, as for a lot of people this may not change dramatically. When I recently informed them of a promotion, I explained to them i could receive a significant bonus yearly and what would happen, as obviously my earnings would be a lot more than what I said I would earn. They informed me that I would have to repay any tax credits given to me over the year.

It's not rocket science though, as someone said earlier it works on the same principles of taxation ie based on annual income rather than an amount month per month. This isn't some hidden little loophole.

I'm just staggered that someone earning 70k is moaning about (and using spurious grounds to avoid) paying back money that they fully accept they're not entitled to!

I had a similar experience when my income went op for a number of months, a little bit over the amount of the disregard. This triggered off an overpayment. Any tax credit award is provisional and is adjusted once your income for the relevant tax year is established. When they told you the award was correct that was because ay that point it was. The overpayment arose after. Even if you informed them of your new income, you could have theoretically lost the new job the following year. I found it hard to get my head round but it is the way the tax credit system works.

So despite OP having provided details of the income on the 5th, the claim hadn't been finalized by the 19th when the compliance officer looked at it madwoman? Sounds feasible, timescale-wise.

This sounds like a text-book example for senior HMRC staff to grapple with in training, doesn't it?

Yesididmeantobesotudeactually - I think you misread my posts title, it asked for advice and not personal opinion....

and madwomanacrosstheroad, thank you for your comments, I am finding the way the system works hard to my head round too! But not so much because of the financial values, but how vulnerable it makes the claimant because we advice HMRC when our money increases but it only comes into play months later at the year end, when they do an annual round up! Maybe they could do quarterly or half yearly awards, so they are confirmed in a smaller timeframe! :)

My advice would be pay back what you owe. Awards are provisional and you earned way over the threshold. It is also perfectly reasonable that the 19th of December was not enough time to finalise the award. Also as pp says you may not have earned enough to take you over the threshold at that point.
I really do not understand why you would dispute the over payment.

Yes Arsenicfacecream, I was told by HMRC that Compliance looked at historic data when confirming my claim and not upto date information, but my compliance letter states that as of 19th December (2013) my award was correct and did not need amending. They advised me of this when I called them last august (2014) after being advised of the Overpayment.

They provided me with the relevant paperwork to dispute the overpayment, and this was completed very quickly, and its now 5 weeks past the 17 week window for them to investigate, that's why I thought mumsnet might be able to share any personal experience etc,

Ironically I work with various HMRC compliance officers for VAT inspections etc, and I know that when they investigate my clients VAT etc, if they wrote to them to advise that their VAT compliance check was found to contain accurate information, I would defiantely fight back if they then wrote after 6 months saying, actually you have to pay some VAT back!

Okay, my advice is to pay back what you know you owe and count your blessings!

The award can be adjusted within the yearly time frame, but I agree disregards can make this a bit of a minefield in certain cases. Yours isn't one of them though, it's straightforward, you earned over the threshold, you advised them and they stopped the award and requested an overpayment - all within a fairly quick timeframe. The compliance is a bit of a red herring as it referred to an earlier time period, but if you look at the paperwork it should make this clear.

For context and to show I'm not just having a pop at you, within this financial year I have lost my job, we had a period of no employment and I became entitled to disability benefits, then my DH commenced employment at a much lower income than mine. Now that was an absolute nightmare to sort out with tax credits and the "disregard" really fucked us over. It was hell on wheels. My post isn't meant in a "well I lived in a cardbox box" three Yorkshiremen way but just to illustrate the complex situations the tax credit system has to accommodate and yours genuinely seems straightforward.

I probably am a bit jealous of the 70k though so I do apologise if I sounded snippy. Congratulations on the job.