PTP's Tax Tip No.23 ' Refund of overpaid tax credits

Q: A single mother with two children submitted a claim for 2005-06 tax credits on the basis of her 2004-05 income of £7,000. She worked part-time and has childcare costs of £300 a week. Her tax credit award for 2005-06 was therefore £17,401.40. As it transpired, her job became full time and her salary rose to £30,000.

Does she have to advise the Revenue of her change in circumstances and refund any overpaid tax credits immediately to avoid penalty?

A: No. Even though her actual entitlement to tax credits has fallen to £10,476.40 and an overpayment amounts to £6,925.

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