This is not a wind-up, I promise.
Client is separated from her husband and the husband had the three children. One of the children moved back with her so she put in an application for child benefit last month.
I must emphasise she applied for CB for only one child.
She got paid about £1000 on Monday this week.
She was a bit taken aback at the size of the payment but was pleasantly surprised and took most of the money out and spent it, stocked up on food and household essentials and bought some clothes for herself and her daughter.
The next day she got another sum of exactly the same amount. And the day after. Exactly the same amount. She called Child Benefits on Wednesday to tell them there's been some sort of mistake. The person she spoke with said that they couldn't figure out what was going on but they will look into it.
She got another payment yesterday, and one today.
She's now taken out £3,000 out and used it to pay off her credit card debt, like you do! I've advised to not withdraw any more of that money.
1. When HMRC eventually discover this error, if they discover it, how will they go about the recovery and would she get time to repay the £3,000?
2. Is there any way to get the payments to stop? Closing the bank account seems a bit drastic.
3. What else does she need to do at this point?
I think we're being a bit harsh. She's not financially astute and has had problems with debt in the past. The first withdrawal she made and spent was done in the genuine belief that HMRC had paid her in advance for the year. To her, that money was child benefit money so should be spent for the benefit of the child (though she did buy a top for herself that matched the top she bought for her daughter. Apparently, it was on the daughter's request)
The payment to the credit card was because she thought she was being wise with managing money. Her explanation was that as she is being charged interest in that credit card account and not getting any interest on her bank account it made sense to move the funds till HMRC tell her how much to pay back and how. Her intent is to repay any excess - she plans to draw cash from the available balance on the credit card to repay HMRC. She wasn't aware that CC companies charge for cash withdrawals.
My question about how to stop the payments is because she asked about it. She doesn't want to get any more of this money, that's why she called HMRC in the first place. She does have some appreciation that she's not great with handling money so wants the inflows to stop. Thanks for the suggestion on this, Cheshire. She'll call the bank on Tuesday and ask them to refuse any further credits from HMRC.
But I would still appreciate any comments on my original questions #1 and #3.