10. Based on what Mr K told us, we understand that the first he heard about the overpayment was when HMRC contacted him in 2021. We appreciate he was shocked and worried to learn it planned to recover £4,241.05 from him. We also appreciate that after he found out why he thought HMRC was wrongly saying he had been overpaid, he expected it would be a simple matter to correct.
11. Mr K found there was an error in his 2013/14 self-assessment return. The tax return showed he had received ten times more dividends than the amount he actually had. He told us he could not say whether that mistake was made by him or HMRC when processing the return, but he knows a decimal point was in the wrong place.
12. When Mr K reported this to HMRC in 2022 and asked it to reconsider the decision on his overpayment, it told him it could not do this because of the amount of time that had passed. Mr K’s tax credit award for 2013/14 had been finalised on 29 July 2014 and on that date he was sent a letter explaining he had been overpaid £4,241.05. HMRC expects any disputes to be raised within three months of a decision.
13. Mr K felt this was unreasonable because he had not received a letter to tell him about the overpayment in 2014. He said he noticed his tax credit payments stopped and he now knows this was also because HMRC thought his 2013/14 income was higher than it was. At the time he assumed there would be a good reason why he was no longer entitled to tax credits and he did not look into this.
14. Section 21A of the Tax Credit Act 2002 says HMRC should reconsider a tax credit award when asked to do so within 30 days of sending the claimant with a decision notice. Section 21B says that if there is good reason why a person cannot make a request within 30 days, HMRC can review decisions when asked to within 13 months of a decision notice. This means that after 14 months have passed, HMRC cannot reconsider a tax credit award.
15. We recognise Mr K has given reasons why he did not contact HMRC sooner. But, HMRC is required to act in line with the above legislation and we cannot say it should have reviewed or reconsidered the decision after September 2015 (13 months after it sent the decision notice on his award).
16. We can see the Tax Credit Act 2002 is not the only legislation or guidance that might apply to Mr K’s circumstances. HMRC’s COP 26 guidance explains how it should manage overpayments and the process that should be followed when an overpayment is disputed. This says overpayments should be disputed within 90 days of a notice. It says that where a dispute is made later than this:
‘You will not normally be able to dispute overpayments from earlier tax years. We will only accept a late dispute in exceptional circumstances, for example, if you were in hospital for that 3-month period.’
17. HMRC did not agree it could look at the decision to recover the overpayment when Mr K asked it to in 2021. We have discussed with Mr K the reasons why he did not act sooner. While we appreciate he did not get the notice of HMRC’s decision in 2014 and the 2014 and 2015 years were a difficult time for his family, we cannot see anything to suggest HMRC could have reviewed the overpayment when he raised it with them.
18. HMRC does not consider Mr K’s circumstances to be exceptional and we have not seen any signs of mistakes in the way it reached that decision. Mr K tells us he knew at the time his credits had been stopped and assumed there was a good reason for this. We understand he had the opportunity to query this with HMRC when the tax credits stopped and doing this would have identified any error. Our decision is we have not seen any signs of mistakes in the way HMRC reached its decision that Mr K’s circumstances were not exceptional.
19. Mr K said the overpayment may have happened because HMRC made an error when processing his tax return, rather than that he made a mistake. The tax credit regulations allow for decisions to be revised where they have happened because of official error, so we also considered whether this may apply.
20. Official error is defined as a mistake, ‘which the claimant must not have materially contributed to’. The Tax Credits (Official Error) Regulations 2003 gives a longer time limit for HMRC to correct issues that happened due to official error. But, that time limit had also passed when Mr K raised his concerns with HMRC. Section 3 of that act says HMRC may change decisions within five years of the end of the tax year to which it relates, which would be 2019 in Mr K’s case.
21. Mr K tells us his 2013/14 self-assessment tax return is wrong, so we also examined whether the return could be revised. Section 9ZA of the Taxes Management Act 1970 says returns can be amended within 12 months of the date they are filed with HMRC. Mr K would also have had the option to appeal HMRC’s assessment of the tax owed for that tax year, but section 31A of the Taxes Management Act 1970 requires appeals to be made within 30 working days of the assessment in question.
22. Mr K complained his ongoing tax credit claim was stopped as a result of the error in his 2013/14 tax return. Tax credit overpayments will be recovered from any ongoing entitlement in the first instance. Mr K would have needed to either challenge what he was owed in the years after any decisions on entitlement were made or make a new claim. The Tax Credits Act 2002 says tax credits can be awarded from the date of claim and this means Mr K would not now have the option to make a retrospective claim for tax credits (claiming for tax years that have passed).
23. Having looked carefully at the points Mr K made and the responsibilities HMRC had, we cannot see HMRC should have made a different decision when he disputed what he owed. We appreciate this is deeply frustrating for Mr K. HMRC is required to follow the time limits set out in legislation and its guidance. That guidance means we cannot say it could or should have made a different decision. With the above in mind, we will take no further action.