What Should I Do About Overpaid Tax Credits That Are Not My Fault?

If you are wondering about what you should do if you have overpaid Tax Credits that are not your fault, you will find detailed guidance in the following blog post as we answer your questions and share details about how to proceed in such a case by providing you preferable options.

What Should I Do About Overpaid Tax Credits That Are Not My Fault?

If you have overpaid Tax Credits to your claim, you should inform HMRC even if the overpayment is not due to your fault.

If you are receiving Tax Credit payments and you come to realise that you’ve received an additional amount than your previous payments or your payment is not reflecting the change in your circumstances which were supposed to reduce your Tax Credits payments, it is still your responsibility to inform HMRC about the overpayment.

The easiest and quickest way to do this is by calling HMRC’s Tax Credits helpline at 0345 302 1429 on weekdays between 8 am and 6 pm.

Since the overpaid amount of Tax Credits, in this case, is not due to a fault at your end, it will be considered as one in which the authorities have not been able to fulfil their responsibility completely.

At the same time, you’ve made sure to abide by yours, you may not be asked to refund the overpayment to HMRC. However, you will need to ensure that you have evidence to support your claim of being overpaid in Tax Credits with no fault of yours. If you do, you can appeal for a non-refund of the overpayment on grounds of mandatory reconsideration.

The HMRC advises Tax Credits recipients to inform the authorities of an overpaid amount within 3 months of receiving the additional payment. If you fail to do so, you will no longer qualify for fulfilling your responsibilities completely as a claimant and will be asked to refund the amount to HMRC.

In addition to this, if the authorities have reason to believe that you’ve deliberately withheld information regarding overpaid Tax Credits from them, you may be charged with benefit fraud. This means that not only would you have to return the overpaid amount back to HMRC, you may be penalised by them.

This penalty can be in the form of a hefty fine to be paid in cash, a benefits sanction that prevents you from claiming Tax Credits (temporarily or permanently) or could even lead to legal proceedings through the court.

If you are unsure about how to proceed further in such a situation, you can seek guidance from the Citizens Advice Bureau.

Why Do I Have Overpaid Tax Credits That Are Not My Fault?

There are many reasons why you’ve been overpaid for your Tax Credits by HMRC. Possible causes for concern regarding Tax Credit overpayment include the following:

A substantial rise in income from one year to the next can create complications, especially when the income disregard threshold decreases.
Failure to promptly report changes that result in a decrease in entitlement, such as a reduction in working hours, changes in household composition, or a child no longer in full-time education.
If a claimant provides an estimated income for the current year that turns out to be lower than the actual amount.
When HMRC takes longer to process a reported change and the adjustments are not made in a timely manner.
Errors made by the claimant on their claim form or renewal form that favour their entitlement.
Mistakes made by HMRC, whether due to human or computer error or providing inaccurate advice that the claimant relies upon.
If HMRC conducts an investigation and adjusts the award downward.
Payments received during the initial months of a new tax year (from April) before the renewal forms have been processed may be higher than the correct entitlement.
Not submitting renewal forms within the designated timeframe.

Please note that these are possible causes and scenarios that can contribute to Tax Credit overpayment. Each situation may have specific circumstances that need to be assessed individually.

What Should I Do If HMRC Asks Me To Return Overpaid Tax Credits That Are Not My Fault?

If HMRC asks you to return overpaid Tax Credits that are not your fault, you have the following options to choose from:

you can return the overpaid amount through mutual agreement; either in full or in instalments
you can dispute the matter on the basis of the overpayment not being due to your fault

If you choose to repay the overpaid amount, the way you repay your Tax Credit overpayment will depend on the following situations:

you still receive Tax Credits payments
you are claiming Universal Credit
you are receiving neither Tax Credits nor Universal Credit

If you still receive Tax Credits, HMRC will reduce your payments by the amount you owe. The amount of the reduction will depend on your household income. Meanwhile, if you are claiming Universal Credit, HMRC will reduce your Universal Credit payments by the amount you owe.

However, if you are receiving neither Tax Credits nor Universal Credit, HMRC will send you a “notice to pay” asking you to pay the amount due within 30 days.

On the other hand, if you choose the second option, you can dispute the recovery of overpaid Tax Credits by filling in form TC846, or by writing to HMRC’s Overpayments Dispute Team at the following address:

Overpayments Dispute Team

Tax Credit Office

HMRC

BX9 1ER

You should do this within 3 months of receiving the overpayment and include details and evidence of why the overpayment is not your fault.

Conclusion:

The above discussion shares a complete roadmap for claimants who are struggling with the dilemma of receiving additional amounts through their Tax Credits payments with no fault of their own. There are two options for claimants in such a case; one is to return the excess amount to HMRC and the other is to appeal for a mandatory reconsideration and claim the overpaid amount due to the fault lying at the authority’s end. The option you choose will be based on your individual circumstance and the evidence you have to support your claim.