HMRC replaces tax credits 'reasonableness test'
For four years HMRC has been writing off tax credit overpayments due to official error, but only where claimants could reasonably have thought their award was right. But HMRC’s notion of what may reasonably be expected of claimants has been widely criticised for its harshness and unfairness. Therefore, in the latest version of the code of practice on overpayment recovery published yesterday, HMRC replaces the ‘reasonableness test’. We welcome this, but its replacement is still likely to create d
In the new code of practice (known as COP26 ) we welcome:
- the departure from the reasonableness test, and
- the greater clarity on what HMRC expects of claimants and more importantly what claimants can expect from HMRC, which we hope will result in fairer decisions.
However, we remain concerned about various aspects of the document which still seem to create an unfair balance in favour of HMRC.
- We strongly oppose the 30 days that HMRC have allowed themselves to implement changes of circumstances reported by claimants. However promptly claimants make their report, if HMRC do not process the changes until the end of the 30 day period, any overpayment accrued in the meantime will remain recoverable. We feel that there is no justification for this practice which will hit worst those on the lowest incomes.
- We are concerned that much of the new test revolves around whether or not a claimant has contacted HMRC by a specific date. Given last year’s revelations about missing recordings of phone calls to the helpline, we question whether HMRC is yet capable of maintaining adequate records of all contacts claimants have with the Tax Credit Office (or other parts of HMRC), or of ensuring that when an overpayment is disputed full evidence of such contacts is properly reviewed.
- The new COP 26 places on claimants a range of responsibilities which they must show they have met if they dispute an overpayment. Therefore, they must be informed of those new responsibilities well before any dispute can arise, and preferably when they first receive an award notice. No claimant should have a dispute fail because they did not meet responsibilities that they did not and could not have known about.
The positive aspects and improvements brought about by this new COP 26 will ultimately rely on the processes in place to make sure the guidance is applied in the way intended. We have not seen the latest draft of the operational guidance, so we cannot comment on the likely quality of decision-making under the new code.
Claimants need clear explanations of how overpayments arose in order to invoke COP 26 effectively, and HMRC need to show claimants that COP 26 has been applied by issuing full and detailed explanations of decisions. This does not always happen.
Contact: Robin Williamson (Tel: 0844 579 6700 Fax 0844 579 6701)