Overpaid tax credits
A client, who is self-employed, and his wife have claimed tax credits for several years. As the husband's business has got off the ground, his profits have increased and after filing their Annual Review in July, their tax credits award for the previous year has been reduced, obviously after the end of the tax year. The award for the current year has also been reduced in accordance with the increased income disclosed for the previous year, but no attempt has been made to recover the previous year's overpayment by deduction from the current year's payments. Late in 2011, HMRC sent them Notices to Pay the overpayments for 2004/05, 2005/06 and 2006/07, together with a form TC846 which starts "Please use this form if you think you should not have to pay back your tax credit overpayment because you met your responsibilities but we did not meet ours", which sounds very like ESC A19. This would seem to apply. Almost needless to say, this is not a good time for my clients to face repaying over £5,000 and HMRC have already let the debt collectors off the leash.
I know very little about tax credits, so I have some basic questions for those who have some expertise in this area:
- Is HMRC's failure to recover previous year's overpayments from the current year's payments likely to be regarded as not meeting their responsibilities, which might lead to some reduction of the amounts to be recovered of these old overpayments?
- Does ESC A19 apply to overpaid tax credits?
- Any other advice on how to mitigate or at least, extend the period of recovery of these overpayments?