HM Revenue and Customs

4. Mrs A complains that HMRC transferred her tax credit debt to DWP for collection even though it had cancelled her direct debit repayment plan in 2015 and not taken account of a payment her sister made to clear the debt.

5. Mrs A says DWP deducted payments from her wages to repay a debt she thought she no longer owed. In addition to the impact on her finances, she says dealing with this has been very stressful.

6. Mrs A would like HMRC to write off the balance of the debt and confirm it has done this. She would also like a financial payment for the stress the situation has caused.

7. Mrs A used to get tax credits paid by HMRC. In 2011 to 2012 and 2012 to 2013 HMRC paid Mrs A too much tax credit and she got an overpayment (when you have been paid too much tax credit) for those years of £2,352 and £2,345.

8. In May 2013 Mrs A agreed a Time to Pay (TTP) arrangement with HMRC to repay the 2011 to 2012 overpayment at a rate of £21.44 per month for 108 months. The TTP failed after 32 months leaving a balance of £1,666, although the reasons for this are unclear.

9. In February 2016 HMRC wrote to Mrs A about the failed TTP and the next month Mrs A rang HMRC to discuss it. HMRC’s notes state that Mrs A was not aware it had failed. She was unable to agree another TTP at the time because she was suspended from work, so her income changed. She said she would call back to set up a new TTP. This did not happen and HMRC took no action until June 2021, when it wrote to Mrs A to say the debt was being transferred to DWP for collection.

10. Mrs A spoke to HMRC explaining she thought she had paid off the debts using money from her sister. She complained about the overpayments being collected. HMRC confirmed the overpayments were payable as Mrs A had no evidence that she had repaid the debts and it had nothing in its records to suggest this had happened. It also offered Mrs A a payment of £50 because there had been a long delay in contacting her about the overpayments between 2016 and 2021.

Debt collection

13. Before we decide if we should do a detailed investigation of a complaint, we look at whether there are signs the organisation got something wrong. We do this by comparing what should have happened with what did happen. We have done this and have not seen any signs that HMRC did anything wrong.

14. Mrs A thinks HMRC should write off the tax credit debt because it broke the TTP ‘contract’ when it stopped collecting payments. She also believes the debt was paid in full by her sister.

15. HMRC said it did not cancel the TTP on purpose, but for reasons unknown it was cancelled. When Mrs A spoke with HMRC in July 2021 and explained she thought her sister had repaid the debt HMRC asked for evidence of this, like bank statements.

16. HMRC guidance explains when HMRC can cancel a TTP arrangement. Among the reasons it gives is when the customer defaults on the arrangement. It adds that ‘prior to cancelling a TTP arrangement we must issue a reminder letter to the customer to advise them that they have defaulted on their arrangement and give them an opportunity to bring it up-to-date’. The guidance does not say HMRC can write off a debt.

17. Mrs A provided us with a copy of a letter HMRC sent to her on 20 May 2013, that confirms the TTP arrangement. This made clear the consequences of missing a TTP payment, saying:

‘I will consider cancelling the arrangement if you: • make a late payment or fail to make a payment • do not tell me immediately about any changes in your circumstances which affect your ability to pay an instalment.’

18. HMRC’s records show that the direct debit was cancelled, but do not show why it was cancelled. Mrs A thinks HMRC cancelled the direct debit and told us her bank said it could only have been cancelled by HMRC, probably because she had paid off the debt.

19. The Direct Debit Guarantee gives account holders the right to cancel a direct debit at any time. This suggests that either HMRC or Mrs A could have cancelled the direct debit. We saw no sign in the record that HMRC planned to cancel it, which suggests that if it did, it was in error. There is not enough evidence to say why the direct debit was cancelled, or who cancelled it – the record simply says ‘cancelled’.

20. HMRC noted the direct debit was cancelled on 21 January 2016. On 4 February it wrote to Mrs A to ask her to contact it about the TTP. This is in line with its guidance. Regardless of why the direct debit was cancelled, this gave Mrs A an opportunity to restart the payments. Unfortunately, it happened when Mrs A’s circumstances changed, which meant she could not commit to regular payments. It seems likely that, even if the direct debit had not been cancelled, the TTP would have failed anyway because of this change.

21. HRMC made it clear to Mrs A what would happen if a payment was missed, or her circumstances changed. When the TTP was cancelled, HMRC acted in line with its guidance because rather than writing off the debt, it gave Mrs A an opportunity to make a new TTP. Unfortunately, she was unable to do this.

22. Mrs A called HMRC about the reminder letter on 31 March 2016. There is no other activity on the debt collection record until 6 May 2020, when an automated note records that the ownership of the collection activity had changed (to DWP). Mrs A could not remember when or how her sister paid the debt. This means there is no evidence to support that she paid it.

23. We are sorry to learn that Mrs A found it stressful when HMRC told her she would still need to repay this debt, more than five years after it had last contacted her. We are pleased to see that HMRC recognised this and offered her a £50 payment. We think HMRC acted in line with its guidance when it said it would not write off the debt. We have decided we will not look any further at Mrs A’s complaint because we do not think HMRC did anything wrong.

24. We understand this is likely to be disappointing for Mrs A and we recognise that repaying the debt has caused her financial hardship. Mrs A can still give HMRC evidence that her sister repaid the debt on her behalf if she has any.

1. We have carefully considered Mrs A’s complaint about HM Revenue and Customs (HMRC). We have seen no sign that anything went wrong when HMRC decided Mrs A should still repay a historic tax credits debt.

2. We recognise that Mrs A does not know why the payments she was making stopped and how she believes her sister cleared the balance of the debt for her. We understand she was very upset when HMRC transferred the debt to the Department for Work and Pensions (DWP) to recover.

3. We saw no sign that the debt had been repaid by Mrs A’s sister. There was not enough evidence to say who cancelled the direct debit and it seems HMRC took steps to reinstate the monthly payments shortly after.