HM Revenue & Customs

3. Ms I complains that the Tax Credit Office (TCO) did not provide her with adequate details when she telephoned in January 2018. She says she had asked whether doing overtime would impact her tax credit payment, and the adviser informed her if it was below £2,500, it would not. She complains that the adviser did not go on to explain that it would affect her payments in the next tax year.

4. As a result, Ms I did the overtime, and the following tax year her tax credit payments were reduced from £1,656.39 to £801.34. She says this caused her distress, frustration, and financial hardship.

5. Ms I is looking for a financial remedy of £1,000 to cover the loss of her entitlement and for the distress this has caused her.

6. In January 2018, Ms I was offered some overtime at work. Before she agreed to do this, she made a call to the TCO. She asked the adviser if she did overtime whether this would reduce her payments. The adviser told her that it would not, so long as it was less than £2,500.

7. In the tax year 2018-19, Ms I was entitled to £1,656. This was based on her income from the previous year being £14,701.

8. In May 2019, Ms I completed her annual declaration for the tax year 2018-19 and provided an income figure of £16,972. The TCO did not adjust the payment in this year as she had not earned more than £2,500 over the income she gave to the TCO the previous tax year.

9. In July 2019, the TCO issued a provisional award notice for the 2019-20 year, based on the figure Ms I gave in her annual declaration. This meant she was entitled to £801.34 for the 2019-20 tax year.

10. Ms I complained to the TCO as she had not expected her entitlement to reduce, based on the information it gave her during the call she made in January 2018.

11. The TCO responded to explain that the adviser she spoke with during the call, in January 2018, did not provide any incorrect information in terms of the ‘income disregard’. But it said the adviser could have explained more about what may happen to her entitlement the following tax year.

14. Ms I contacted the TCO on 26 January 2018, as she had been offered the chance to do overtime. She wanted to ask the TCO if she did the overtime, whether it would affect her entitlement and reduce her payments.

15. As part of our investigation, we listened to the call. The TCO adviser told Ms I that if the overtime was not a regular thing and her earnings were no more than £2,500 over her usual income, it would not affect her claim.

16. From 2012, a person’s tax credits would not alter in the tax year if their declared income went up or down by less than £2,500. This is known as ‘Income Disregard’.

17. HMRC’s Complainant Compliance Manual details the Income Disregard. It says that customers’ awards are initially based on their previous years’ income. They must report their current year income in response to a S17 notice, and their awards are then finalised.

18. Ms I’s tax credits for 2018-19 were based on her income of £14,701. This means her income increased when she did the overtime, and this was what the TCO used the next tax year to work out her entitlement. As Ms I’s income had increased, her entitlement was reduced to £801.34 for the 2019-20 tax year.

19. Our Principles of Good Administration say that public bodies should give people information and, if appropriate, advice, that is clear, accurate and complete.

20. Information about claiming tax credits, and how it is worked out, is available online on the gov.uk website. This says that when a person makes a claim, they need to give details of their total income. They also need to work out their income when renewing tax credits each year. It says entitlement is based on their income for the last tax year, or 6 April one year to 5 April the next.

21. Furthermore, the checklist that accompanies an award notice explains that if a person’s income goes up or down by less than £2,500, then it will not affect the current tax year but will affect how much it may pay in the next year.

22. We consider that while the call handler could have gone into more detail about how tax credits are worked out, they adequately addressed the question being put to them. We also consider that the information about how tax credits are worked out, and what happens when income goes up or down, and together how that can affect tax credits, is readily available both online and within the documents the TCO sends out. Therefore, the fact the call handler did not convey this information does not fall so far short of our Principles that it amounted to a failing in communication.

1. It is clear that Ms I was caused distress because of her entitlement of tax credits reducing, especially when she did not realise this was due to the overtime she did the previous year. We recognise this must have been a very difficult situation for Ms I and acknowledge her view that HM Revenue & Customs (HMRC) could have given her more information over the phone. Our decision is in no way meant to detract from Ms I’s experience.

2. We found that HMRC gave Ms I enough information about what would happen if she did overtime. HMRC routinely makes claimants aware of how their entitlement will change if their salary does. Therefore, we consider HMRC acted appropriately.