HM Revenue and Customs (HMRC) agreed to reduce rate of recovery of overpayment

What happened

Mr and Mrs A were overpaid tax credits in the 2006-07 and 2007‑08 tax years, totalling over £7,700.

The overpayment arose after they mistakenly entered a nil household income on their 2006-07 annual declaration, prompting HMRC to make a large payment (around £7,500) to Mr and Mrs A in summer 2007. Mrs A telephoned HMRC soon after to explain that the payment was incorrect and to discuss repaying it. The adviser explained that while the overpayment could be repaid straightaway, they could also retain it as it would be recovered through their ongoing child tax credit entitlement – as long as their son remained in full-time non-advanced education.

As a result, Mr and Mrs A retained the overpayment and paid it back through their ongoing entitlement until 2011-12, when, because of changes in government policy, their entitlement ended, and HMRC asked Mr and Mrs A to pay the remaining overpayments back directly.

Mr and Mrs A complained to the Adjudicator in summer 2012. The Adjudicator partly upheld their complaint. It saw no reason to recommend that the overpayments were written off, but considered that the advice given to Mrs A in the telephone call in summer 2007 could have been better. The Adjudicator recommended that HMRC pay Mr and Mrs A £30 in respect of that poor advice.

What we found

HMRC gave Mrs A poor advice and this gave her and her husband a reasonable expectation that their tax credit overpayment would be recovered over a far longer period than was eventually the case.

However, we could see no reason to disagree with the Adjudicator's decision that the overpayment should be recovered.

Putting it right

We recommended that HMRC's debt management unit recover the overpayment at a similar rate as it would have if Mr and Mrs A had retained their tax credits entitlement: around £50 per month.

We considered that this rate of recovery, as opposed to pursuing Mr and Mrs A for the full amount immediately, returned them to the position they were in before their entitlement unexpectedly ended.

HMRC agreed with our recommendation and provided a contact number for Mr and Mrs A to use to set up the arrangement.