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Tax Credit Dispute

Tax Credit Dispute

I have client who a few years ago (they were dealing with their own tax credits then!) did not submit the annual renewal for tax credits by the 31st July deadline.  As a result their claim was suspended and no further information considered.  Tax credits are now threatening legal action to recover the overpaid tax credits, however based on actual income the client was actually underpaid.

Is there any point in pursuing this through the legal system, or does the client have to repay?  According to the legislation they do have to repay, however logically they should not have to repay these tax credits as they were actually entitled to have received a higher level of tax credits if the deadline had not been missed.

Would be interested to find out if there are any similar cases and if it is worth defending the legal action.


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30th Sep 2009 16:11


Have you tried just sending them photocopies of the relevant years' P60s with a covering letter noting that you understand that due to non-submission of the renewal form, outstanding tax credits cannot now be paid to you, but are happy to acknowledge this fact, and could the situation be rectified in the records. You could also submit the form that was not sent in before.

Another approach might be to put in a new claim for tax credits, then ask for the alleged 'overpayment' to be deducted from that ! Claims can be backdated for 3 months.

There is plenty of material with which to make a defence on the HMRC site, e.g. Just appeal through each of the available avenues in turn.

If it came to it, you might also ask them how one should deduct any Tax Credit repayments being made on the Self-Assessment tax return income.

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01st Oct 2009 15:04

Have tried dispute forms - they will not accept them

Thanks for your reply.

The client is self employed and has a very variable income from one year to the next which is why this situation has arisen.

We have sent in dispute forms with details of the relevant income and had numerous letters and phone calls with the tax credits office, have registered complaints, had it lifted to 'Higher Customer Support' and a level 2 complaint, but basically they just keep writing back and saying that the client did not fulfil their responsibilities as they failed to complete the renewal pack.  As a result the claim has been terminated.  They state "There are no grounds for which to claim that your clients were underpaid for these tax years as we based our calculations on the information which was held for your clients at that time".  The fact that this was wrong seems to them to be irrelevant and they will not look at the figures.

Crazily the client had to then reapply for tax credits and is now being paid tax credits under a NEW claim as the old claim is terminated.

They say there is no appeal, this is the legislation and that it that.  I know other accountants who have experienced the same thing.  I am just trying to find out if anyone has taken it a stage further to legal action as that seems the only place left to go now!


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12th Oct 2009 18:53

Integrate with tax

All the more reason for the next incoming administration to properly integrate Tax Credits with the tax system so it gets assessed (say) on a monthly basis, from figures known from the yellow book submissions, and then the PAYE gets adjusted accordingly.

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