HMRC’s decision to recover the overpayment
10. When we consider a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this, and we have not found any indications that something has gone wrong.
11. HMRC issued the initial 2012-2013 award notice in August 2012, which totalled £10,746.47. This figure was based on a single claim for tax credits after a temporary breakdown in Mrs A’s household. It covered the period April 2012 to August 2012, and September 2012 to April 2013. The first period was for one young person and two children, while the second period was for one young person and one child.
12. In September 2012, HMRC issued an amended 2012-2013 award notice for £12,345.76. This was based on the additional young person included in the award from September 2012. In October 2016, HMRC recalculated Mrs A’s single award based on a change in working hours from 10 to 16 hours. It used the income of £6,423 and issued a new notice totalling £14,182.21.
13. In November 2012, the HMRC Compliance Team opened an enquiry and sent a letter to Mrs A about a possible undeclared partner, in this case her husband. The tax credit award for Mrs A was for a single person and therefore the possibility of an undeclared partner meant HMRC had to undertake further enquiries. Following a discussion with Mrs A in January 2013, HMRC amended the award notice and declared Mrs A had no entitlement to tax credits and the award would be stopped from April 2012.
14. Mrs A complained about HMRC’s decision to the AO, and the AO’s investigation report explained it was unable to consider the part of the complaint regarding the decision to end the tax credit award for 2012/2013.
15. This is because HMRC’s decision to stop the award comes with a statutory right of appeal to a tribunal. Therefore, if Mrs A wanted to contest HMRC’s decision she should have done so via a tribunal or court, as explained in HMRC’s tax credits guidance leaflet WTC/FS10. The guidance states that: ‘We may stop or reduce your tax credits. You can ask an independent tribunal at any time for a direction that we stop our enquiry. If you feel your payments should not be suspended, you have the right to contact us to discuss whether or not they can be reinstated.’
16. There is no evidence to show that Mrs A requested a Mandatory Reconsideration of the decision. This is the first step in appealing a decision about tax credits entitlement. There is also no evidence Mrs A that she pursued the matter at a tribunal.
17. The legislation which sets out our powers to consider complaints, the Parliamentary Commissioner Act 1967, tells us that we may not consider complaints where someone has or had the right to go to a court or tribunal, and where it was reasonable for them to do so.
18. In this case, we can see that Mrs A had a route of appeal regarding HMRC’s decision to stop her tax credits. Mrs A is looking for a change of decision, which is what the tribunal is set up to achieve in cases where the evidence shows the decision is wrong. This means it would have been reasonable for her to pursue this avenue.
19. Therefore, we are not able to look at the decision to end the tax credit award. We can still consider the decision to recover the overpayment for the award period.
20. As explained above, Mrs A’s overpayment arose following HMRC’s decision to stop the payment of tax credits for the 2012/2013. As the original award notice was issued in August 2012 (for the period commencing in April 2012), and it was not stopped until January 2013, Mrs A had received a large proportion of the award. Consequently, the amount that was now considered to be an overpayment was significant.
21. HMRC said it had made enquiries about Mrs A’s award notice after a compliance check. Compliance checks are carried out to ensure that the tax system is operating fairly and correctly. In some cases, there may be a specific incident or event that triggers a compliance check. However, this is not always the case and HMRC retains the right to power to carry out a compliance check on a tax credit claim at any time. This is line with Section 16 (1) and HMRC’s Claimant Compliance Manual CCM18230.
22. HMRC informed Mrs A it had opened a Compliance case after receiving information that Mrs A was living with an undeclared partner in 2012/2013. As the tax credit award was a single person award, and not a joint person claim, HMRC investigated further. In addition to the compliance checks, HMRC is also able to check the information they hold about a taxpayer at other government departments.
23. After carrying out the compliance checks, HMRC spoke with Mrs A in January 2013. It said that it asked her for further information or evidence she may have to support her single award. The HMRC records show Mrs A was unable to provide any supporting evidence and it was on this basis that HMRC ended the claim.
24. When a claim is altered, or ended, an individual has the option of requesting a Mandatory Reconsideration of the matter. If they remain dissatisfied with the outcome of the Mandatory Reconsideration, then they may appeal to a tribunal. A Mandatory Reconsideration usually must be requested within one month of the decision being made. This means Mrs A should have requested one by February 2012. HMRC’s records show Mrs A did not make this request.
25. Mrs A says she lodged an appeal via Citizen’s Advice Bureau (CAB). However, there is no information or evidence available to indicate exactly when this was submitted, or what it included. The HMRC records show Mrs A called in November 2013, about the appeals process, but there is no information to show that Mrs A had already submitted a Mandatory Reconsideration request. The AO explained that the correct route of appeal for a tax credit decision is to refer it to a tribunal once a Mandatory Reconsideration notice has been received.
26. HMRC says that it received no Mandatory Reconsideration request from after the decision was made in January 2013, and before the deadline (30 days from the decision). The call notes from November 2013 do not indicate that Mrs A asked about any previously submitted Mandatory Reconsideration request. Unfortunately, the original call recording for November 2013 is no longer available as HMRC only retains call recordings for six years.
27. HMRC records show that after speaking with Mrs A in November 2013, a letter was sent to her which included information on the appeals process. There is no evidence to show that Mrs A requested or submitted a Mandatory Reconsideration after this letter was sent to her.
28. Mrs A did not contact HMRC again until October 2020, almost seven years after her previous call with HMRC. This meant she was outside of the time limit to dispute the decision as HMRC’s guidance relating to overpayments ‘TCM0226190 – Payment – overpayment; disputed overpayments’ says individuals have three months to dispute a tax credit overpayment.
29. This came into force in April 2013, which means Mrs A had until July 2013 to challenge the overpayment. However, she did not contact HMRC until November 2013.
30. Having considered all of the available evidence, we cannot see any indications of failings in the way HMRC has dealt with Mrs A’s complaint. The records show it acted in line with the relevant guidance regarding overpayments, and in the recovery of overpayments.
31. While Mrs A is clearly very unhappy with HMRC’s decision, it was open to her to pursue a statutory route of appeal. This would have had the knock-on effect of eliminating the overpayment if she had been successful, or enabled her to challenge the overpayment within the relevant timeframe. In looking at the action HMRC took, the evidence shows it acted in line with applicable policies and guidance.
32. Mrs A tells us that that she was busy raising her young family and was unfamiliar with the relevant procedures to progress her complaint. Having thought about this and looked at the correspondence between Mrs A and HMRC, there is nothing to suggest she shared these concerns or explanations for delay with HMRC. It could not consider these reasons for delay if she did not disclose them, so we cannot say that HMRC made any mistakes in thinking about its time limits in Mrs A’s case, or ultimately reaching its decision not to set the overpayment aside.
33. The evidence available to us shows HMRC acted in line with its own guidance in pursuing the overpayment, and reaching its view that the challenge to that decision was outside of the relevant time limit. As such, we have decided to take no further action on this complaint.