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View the related Tax Guidance about Tax credit overpayment

Recovery of overpaid tax credits

Recovery of overpaid tax creditsThis guidance note looks at how tax credit overpayment arise, and the rules about how and when they are repaid to HMRC. Migration of tax credits to universal creditNew claims for tax credits are no longer possible as they have been replaced by the universal credit for all claimants. Existing claimants will continue to receive tax credits until they are migrated to the universal credit system. Migration will take place when a change in circumstances is reported or when a migration notice letter is received. This is expected to be completed during 2024. There is further information about migration notice letters on the GOV.UK website.See the Universal credit guidance note.Overpaid tax creditsTax credit awards are provisional until final income figures and circumstances are confirmed to HMRC as part of the renewal process which happens after the end of the tax year of claim. The amounts received by claimants during the tax year are initially based on income of the previous tax year, and are ‘provisional’ in the sense that the exact entitlement cannot be determined until later (as part of the renewals or finalisation process).As a consequence, when the actual income for the current claim year is calculated and reported to HMRC, it can result in underpayments or overpayments.When the award is finalised for a year, the actual income of the tax year of claim is compared with the prior year’s income (on which the award was initially based) and an adjustment. In order to

HMRC complaints process

HMRC complaints processIntroductionWhen HMRC has acted mistakenly, unreasonably, disproportionately, unfairly or not in accordance with its published guidance, redress can be sought through an accessible and customer-focused complaints process.In the right circumstances, HMRC’s complaints process can be used to provide an effective and economical means of seeking redress. This applies across the whole spectrum of taxes work, not just to HMRC investigations or straightforward service delivery failures. It is not a universal panacea, but it is an option that tax advisers should always consider when HMRC has got it wrong or acted unreasonably.The purpose of this guidance note is to explain how this process can be used effectively. It draws on published case studies provided by the Adjudicator’s annual reports as illustrative examples.Complaints concerning serious and / or potentially criminal misbehaviour by HMRC staffComplaints concerning serious and / or potentially criminal misbehaviour by HMRC staff fall outside the scope of HMRC’s normal complaints process. It is suggested that, for record keeping purposes, the complaint is made in writing. For a list of the particulars which should be included in the letter, see the GOV.UK website.For information on the normal complaints process see below.HMRC’s three-tier complaints processHMRC has a three-tier complaints process. The first two tiers are handled within the relevant HMRC business unit, and it is there to which any complaint should be sent (see below). All taxpayers are entitled to make complaints, and they may be made by telephone, in person or in writing. They can also be

Collection of tax underpayments via PAYE tax code

Collection of tax underpayments via PAYE tax codeIf the tax payment due for the tax year is less than £3,000 and the taxpayer is employed or receives a pension, they can ask HMRC to collect the tax via their pay as you earn (PAYE) tax code rather than making a payment. Note that this method of collection is not available if the tax is due under a simple assessment. See the Simple assessments guidance note.The taxpayer may prefer this option from a cash flow perspective. HMRC prefers this option as it makes collection of the debt more likely.HMRC may also try to collect estimated unpaid tax for the following tax year via the PAYE code. This may be less attractive to the taxpayer as it relies on assumptions made by HMRC before the facts are known.Overpayments of tax credits and late paid Class 2 national insurance contributions can also be collected via the taxpayer’s PAYE code. The amount of such debts which can be collected in this manner changed from April 2015. Prior to this date, the amount that could be collected via the PAYE code was £3,000, but from 2015/16 onwards the limit is increased on a sliding scale, with up to £17,000 of debt able to be collected via the PAYE code from taxpayers with ‘PAYE income’ of £90,000 and above. This is discussed at the end of this guidance note.However, the amount of underpaid tax (and other debt as appropriate) that can be collected via the

Universal credit

Universal creditThis guidance note covers the scope of universal credit, who can claim, advance payments, sanctions and claim procedures.Universal credit is a non-taxable state benefit that is administered by the Department of Work and Pensions (DWP) and is available throughout the UK. It is available to individuals on low incomes whether they are in work, unemployed or self-employed. It is designed as a replacement for several ‘legacy benefits’, primarily tax credits. Individuals can no longer make a new claim for tax credits. Individuals seeking to make new claims and reporting changes in circumstances, are now directed to making a new claim for universal credit.It is intended that by March 2025 at the latest, all claimants currently receiving the legacy benefits, with the exception of income-related employment and support allowance (ESA), will be automatically transferred to universal credit. In the interim the natural migration to universal credit will continue through new claims and changes in the circumstances of claimants. The government decided to delay the move of ESA claimants until 2028 and there will therefore be a lull in migration activity for around three years before it restarts in 2028. For more on other non-taxable benefits, see the Non-taxable state benefits guidance note.Legacy benefits being replaced by universal creditUniversal credit is intended to replace the following tax-free benefits which are cumulatively referred to as ‘legacy benefits’:•child tax credit•housing benefit•income support•income-based jobseeker’s allowance (JSA)•income-related employment and support allowance (ESA)•working tax creditWelfare Reform Act 2012, s

Time to pay arrangements for tax due under self assessment

Time to pay arrangements for tax due under self assessmentA time to pay arrangement, which may also be referred to as TTP in practice, is a negotiated agreement between HMRC and the taxpayer to allow for tax to be paid after its due date.The guidance in this note applies to individuals under self assessment and companies paying corporation tax. It does not apply to VAT liabilities or where there is a statutory right to pay by instalments (eg for large companies).For further details on paying VAT or corporation tax by instalments, see the following guidance notes:•Paying VAT•How to pay corporation taxIf a taxpayer becomes aware that they will not be able to pay their tax liability by the due date, then they, or their appointed agent, may be able to negotiate a time to pay arrangement with HMRC. Anecdotal experience from practitioners indicates that the ease with which a time to pay arrangement is agreed can vary, with some arrangements being agreed with little or no questioning, and some taking significantly more negotiation. The amount of tax at stake and the taxpayer’s previous payment history can influence this. A taxpayer with a history of delinquency is less likely to be able to secure an agreement.HMRC guidance on time to pay arrangements can be found in its manuals from DMBM800000 onwards.Conditions for time to pay and steps to take before approaching HMRCTime to pay is arranged at the discretion of HMRC and it looks to the ‘viability’ of