Tax Credits Overpayments - What Can You Do?
Tax credits are a form of government benefit paid out to working people who are responsible for children, or who are in work but receive low pay. The amount paid varies according to income, the number of children involved, and other factors.
The benefit is calculated once a year, and this calculation can be very complex, and mistakes are sometimes made. Also, if circumstances change during the year, the amount you're entitled to can also change. This can lead to a very unfortunate situation: you've been paid too much (a tax credits overpayment), and you're being asked by the tax man to repay the debt.
This can be a very stressful situation to suddenly find you owe money and are receiving recovery letters, so is there anything you can do?
Be Told How the Overpayment Happened
Once HMRC have told you by letter that you owe them money because of an overpayment, you can ask them to explain in writing how this situation came about. Be aware, though, that this doesn't change the fact that you owe the money, and if you don't pay, recovery proceedings will still go on.
Appeal the Overpayment
If you think the tax credit office have made a mistake and that the overpayment decision is incorrect, you can appeal it. For example, if the calculation was based on an incorrect income, you can give the tax office the correct figures and ask for the decision to be looked at again. Overpayments which are being appealed will not be recovered until the appeal process is finished.
Dispute the Overpayment
Even if you agree that the overpayment decision is correct, and that you were paid too much money for your circumstances, you can still dispute the overpayment if you believe that it arose through the tax office's mistake, and wasn't your fault. If the dispute is successful, you won't have to repay the money, even though the overpayment will still be recorded and not cancelled.
You can also use the dispute route if you can show that making the repayment will cause serious hardship for you and your familiy - in this case, HMRC may agree not to pursue repayment.
Ask for Time to Pay
Finally, if all else fails and you have to repay the debt, you can ask for time to repay or to repay a smaller amount. HMRC will generally be flexible when it comes to repayment, given the complexity of the system and the amount of mistakes that have been made.
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