Hi

I have a client who owes IR a total of over £9000 (plus a £500 penalty charge)in overpaid TCs due to IR deciding he was not the main carer of his children. Client apparently agreed he was not the main carer during investigation. Client earns a very low wage.

Succeeded in getting penalty dropped (big deal!) but can't see how to progress the overpayment itself. Client has received those "30 days to pay" letters.

Client is considering bankruptcy but can TC overpayments be included? Will the TC debt be discharged when client is discharged from his bankruptcy?

All help gratefully received!

Phil

30 days to pay is not set in stone. payments can be spread over 12 months with one phone call. Obviously your client will not be able to make 12 monthly instalments, so contact can be made with the payment helpline to provide full details of client's income and expenditure and they will advise what payments they will accept.

I don't know about the bankruptcy side of things, so hopefully someone else will answer that.

Andrea

Thanks for the help, we are aware that negotiation over repayment time is possible, but TC o/payments alone are almost a full year's salary for this cl. With his other debts we can more than double this.

Do you know if there is a maximum period IR will consider for repayment? 2yrs, 5 yrs, 10yrs?

Phil

I would consult a debt counsellor at your local authority (probably trading standards or social work), Citizens' Advice Bureau or an insolvency practitioner regarding what debts can be discharged under sequestration. I know the bankruptcy laws have just gone through major change in Scotland but I'm not sure if it's the same in the rest of the UK.

Afraid I don't know if there is amaximum time limit for repayment. All I've ever beena ble to get out of the staff at Cumbernauld is " you tell us the client's income and expenditure and we'll tell you the amount of repayments expected", with no access to their guidance for how they work this out and no possiblity of us offering amounts according to our usual practice.

Andrea

This has been formally raised with the Revenue and they have been taking legal advice. We (the consultation group) are due to hear from them shortly.

In the meantime I would ring the charity TaxAid on 020 7803 4959 between 10.00 and 12.00 Mondays to Thursdays. They do more practical daily debt work with the Revenue than anyone I know.

Thanks JohnA

At least I know it wasn't a stupid question!

Phil

John

I've been told that the only debts not included in bankruptcy are those which legislation specifically excludes (such as student loans); and that tax credit overpayments are not among the debts excluded. If this is correct then the overpayment could be wiped out by bankruptcy. However, there is a question mark over whether IR could claw it back by deduction from ongoing entitlement. DWP can definitely do this in respect of their benefits (and the Insolvency Service booklet on bankruptcy says so) and it seems logical that the same could be done for tax credits. If so, the ability to wipe the debt through bankruptcy is only likely to benefit someone who doesn't have an ongoing claim. Even then, there could I suppose be an issue as to whether IR could reclaim it by deduction if a new TC claim was made after discharge from bankruptcy. Logically they shouldn't be able to because the debt should have been written off by then and there is arguably an analogy with income tax written off in bankruptcy, which is not reclaimed from later earnings. However, knowing the IR I wouldn't bank on it!

It would be very helpful if you could post whatever you get from IR on this.

Hi Phil

I recently took a judicial review of an inland revenue decision to recover an overpament from a client who had been adjudicated bankrupt before the revenue began to recover the debt by direct deductions. The revenue settled the action on the basis that it should have recovered through bankruptcy procedures as the amount overpaid prior to bankruptcy should be viewed as a bankruptcy debt.

Hope this was of some help

Patricia