Toolkit

Reference materials: Tax credits 'Inside track'

Recovery and debt management issues

  • Contacting the hardship team: HMRC confirmed that calls made to the Debt Management telephone centre number can be put through to the team looking at hardship, if appropriate, and if the circumstances are explained during the call. Additionally, correspondence sent out by the hardship team should include their Direct Dial telephone numbers for any follow-up.

[Katie Lane, CAB, response 1 May 2009]

  • Time to pay arrangements: Representatives raised many debt recovery issues at dedicated sub group meetings throughout 2008. HMRC confirmed that they will no longer seek income and expenditure details in time to pay arrangements of up to 3 years. They will still need to know about other debts and what claimants think they can afford to pay and how long claimants need, however the income/expenditure forms will not need to be completed unless the arrangement is longer than 3 years.

[TCCG October 2008 meeting]

  • Double recovery cases: Representatives raised the problem for claimants who have recovery via an ongoing award in addition to a direct recovery for an overpayment from another claim. HMRC have implemented a system which means that any direct recovery will be suspended if the claimant has recovery at 10% or 25% from an ongoing award. It is hoped that this system will be automated from April 2009.

[TCCG October 2008 meeting]

  • Debt management and TCO: Representatives raised concerns about the inability of debt management teams to contact the TCO where there are issues around disputes. HMRC have confirmed that debt management teams now have direct links into the TCO to enable better co-ordination of work.

[TCCG October 2008 meeting]

  • Time to pay: Representatives asked what happened when a claimant phoned Debt Management and Banking to say that they cannot afford to repay their overpayment. HMRC said that when overpayment staff will obtain full income and expenditure details from claimants, in accordance with the Code of Practice 26. Guidance on completion of the Income and Expenditure form 36A-1 and the use of the Discretionary Expenditure Table is detailed in the Debt Management and Banking Manual at DMBM 800010 onwards. Staff will establish through questioning whether -
  • Claimants have the ability to repay the overpayment through a long term time to pay arrangement;
  • Payment could be deferred to overcome some temporary financial difficulties, such as separation or divorce;
  • They are unable to make payment now or in the future, have no assets and are suffering hardship.

Every case is dealt with on a case to case basis, looking at the individual circumstances to determine whether hardship exists or not. We do therefore take family circumstances and disabilities into account – these inevitably lead to higher levels of expenditure and little disposable income.

[Victoria Todd, LITRG, response 25 March 2008]

  • Incorrect recovery channel: Representatives have seen several cases where recovery action has been initiated via direct recovery even though there is an ongoing award. HMRC have confirmed this should not happen and have suggested that this could be because the claims were terminated for non-renewal and then restored again. Representatives have written for further information.

[Victoria Todd, LITRG, response 14 August 2007]

  • TC689 & DMB: Representatives raised a case where DMB said they cannot see TC689 authorities. DMB have confirmed that they can view a claimant’s household notes and should be able to see an authority.

[Victoria Todd, LITRG, response 9 August 2007]

  • Automatic in year recovery: From June in year adjustments for overpayments are applied automatically. TCCG confirmed that only one award notice will be issued to the claimant showing the change processed and what adjustment had been made to the payments to recover any overpayment.

[Beth Lakhani, CPAG, response 11 July 2007]

  • Hardship: Representatives requested information of how advisers should be making hardship requests and commented on the unsuitability of the TC846 to do this. TCCG confirmed that the TC846 is designed for claimants to dispute an overpayment which is distinct from hardship requests. The following information was provided to us -

Claimants with an adjustment to their ongoing award -

'If a claimant is experiencing financial hardship as a result of recovery of an overpayment then, as stated in CoP26, the claimant or their adviser should phone the Helpline. If a claimant is experiencing hardship because of an in-year adjustment, a Helpline adviser can arrange for the recovery rate to be adjusted, depending on the level of award.

If, after the reduction of the recovery rate, the claimant is still, exceptionally, experiencing hardship they should write to the TCO who will consider the position with colleagues from Debt Management and Banking (DMB). The overpayment will be recovered at a maximum of 10/25% in line with COP26 (depending on the level of their award) whilst the hardship request is considered.'
 
Direct Recovery -

'If a claimant, or a CAB adviser acting on their behalf, states that they are suffering hardship, this is sufficient for DMB to stop recovery action until the circumstances have been discussed. The claimant or their adviser need to provide income and expenditure information, together with any other relevant information. No further recovery action will be taken until the matter is resolved.'

[Abigail Bremner, CAS, response 16 Feb 2007]

  • Recovery & IVA: Representatives queried how the DMB unit treat people who already have an IVA. TCCG states that DMB have links with the Voluntary Arrangement Service and receive information about new IVAs. In addition -
  • If the final TCAN or statement of account is issued after the relevant date of the IVA for a claimant, HMRC will continue to recover the overpayment as normal. 
  • In joint claimant cases where both claimants have IVAs, HMRC need to consider the position for each of those claimants before deciding if normal recovery can proceed or not. Where the overpayment is to be collected by direct payment HMRC will look to see whether the claimants can repay the overpayment now or later, or can come to a 'time to pay arrangement' (which would not affect the operation of the IVA).
  • If normal recovery cannot continue from the claimants, the overpayment is remitted on HMRC records and responsibility for claiming in the IVA is passed to VAS.

[Siobhan Harding, Citizens Advice, response 15 Jan 2007]

  • Time to pay: Representatives commented on the amount and depth of information that DMB were gathering in time to pay cases. It was felt that this level of information gathering is not necessary for tax credits (e.g. amount of equity on a mortgage, make model and registration of a car, amount of outstanding car loan). TCCG response stated that only information that HMRC feel appropriate is requested. Detailed information should only be obtained if repayment arrangements go beyond 12 months. Where HMRC agree to an extended arrangement they want to establish all of the facts, and assets are integral to this. They go on to say -

'If a claimant had little disposable income and offered, say, £2 per month for a debt of several thousand pounds but owned a house worth £1/4 million with only a small mortgage then a recovery option we would want to consider would be putting a charging order on the property to recover the debt when the property is sold or re-mortgaged.'

[Siobhan Harding, Citizens Advice, response 15 Jan 2007]




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