Tax credit overpayments: claimants still need answers

Published on 28 November 2007

Some take the view (including some parliamentarians) that the introduction of ‘playback’ on tax credit annual renewal forms solves the question for claimants of ‘why did this overpayment occur’. Playback does help sometimes; but HMRC are far from giving claimants what they need.

After the end of each tax year (5 April) claimants receive a renewal pack. Tax credits are paid on the basis of pay now and check later. The payments that you receive during the year are provisional in nature.

The renewals process aims to do two things:

  • to reconcile what you are entitled to for the year just gone with what you have been paid; and
  • to renew your tax credit claim for the coming year.

What is “playback”

For the first time this year the annual review form has included an additional section which “plays back” to you the changes of circumstances that you have reported over the year. It lists the date of the change and a short explanation of the change. For example:

Mrs Rosemary Smith
12/02/2007 Total hours worked in a week changed to: 40

Playback does not tell you:

  • changes in income
  • the history of how the overpayment has arisen
  • how it is to be collected
  • whether reported changes have been processed by HMRC
  • whether a reported change was processed promptly or accurately
  • whether a late reported change is causing an overpayment
  • how an overpayment is attributed among a number of changes

The need for proper overpayment explanations

There is a real need for those with an overpayment to be told:

  • what specific action caused the overpayment to arise
  • when the action happened that caused it to arise
  • the arithmetic of the overpayment
  • how it is to be collected

In order to have an overpayment written off under Code of Practice 26 a claimant must meet the reasonableness test (see section 5.2.1). It is impossible for a claimant to challenge an overpayment properly if they cannot identify how it arose.

We therefore call on the government to provide funding to HMRC to enable them to:

  • introduce systems that tell claimants earlier that an overpayment may be accruing;
  • provide full explanations as to how an overpayment arose;
  • respond to claimants quickly when they dispute overpayments;
  • carry out work, as recommended by the Treasury Sub-Committee’s 6th Report of 2005-06 (Administration of Tax Credits), paras 29 and 35 so that HMRC are clear in their own minds about the cause of overpayments.


Contact: Robin Williamson (Tel: 0844 579 6700 Fax 0844 579 6701)