There was some discussion on an earlier thread about the legal position when a TC Annual Declaration is not returned and HMRC then claim to be able to recover an overpayment for the whole, current, tax year. As I recall there was some doubt about which powers were being used and whether such decisions were appealable.

So, for information, we have now managed to get one such case to an Appeal Tribunal (by referring our unactioned appeal to the TS District Chair who directed a hearing). The case in question is (touch wood) being resolved by consent (HMRC conceding that the Annual Declaration had in fact been returned). However they were adamant that there was no right of appeal, for rather interesting reasons.

Their case is that current year Tax Credit payments, prior to return of the Annual Declaration, are not payments pursuant to an award at all, since no award even a provisional one, has been made. They are payments made under S.24(4) TC Act and Reg.7 TC (Payments by the Commissioner Regs). Notices relating to such an award and its recovery are not true notifications but 'Statements Like a Notice' or SLAN's. There is no right of appeal against any such 'decisions'.

Unfortunately, none of this is obviously wrong.

The implications however are interesting. For instance any excess payment under these provisions is not an 'overpayment' under S.28 (which refers to overpayments following determinations under SS. 18 or 21) so the source of the right to recover is unclear, although it may exist. (Perhaps they are Payments Like Overpayments, or PLOP's).

Has anyone come across any of this before? What does it all mean?

Richard Atkinson
(Credit however goes to my colleague Brian Buckley for discovering most of this)

stunning! usually if it walks like a duck and quacks like a duck, it's a duck, but in the occult world of HMRC it might just as well be squirrell like a duck (SLAD), and probably attracts tax at 17.5%

i suppose if folks started arguing that payments like a payment (PLAPS) could not be PLOPS and recovered under section 28, they would pull another rabbit out of the hat...section 16 of the necromancers, alchemists and charlatans (the bank always wins) infallibity act 1563 or somesuch...

there are probably welfs all over the country refusing to budge from under their desks, sobbing and making a teary mess, crying, No...i'm not going to come out if i've got to start arguing about PLOPS and PLAPS and POOPIES... well ok, maybe i'm projecting...

but seriously, the government is big on what it terms 'rights and responsibilities', but the most responsible claimant in the world doesn't stand a chance with this lot...

i would like to kill the oft repeated myth that the tax credit system of annual awards is designed to provide maximum flexibility for tax credit claimants - counter intuitive as it may be for politicians, weekly rate awards give much more flexibilty than annual awards.

flexibility and responsiveness to changing circumstances is needed for low income claimants who are dependant on prompt, regular, _predictable_ and stable payments in order to manage their budgets and make decisions about their lives.

the flexibility in annual awards is on the side of the administrators...and HMRC's IT beneficiaries du jour...

the tax credit system was never going to have the simplicity of the old family credit system with its 6 month awards unaffected by many changes basis - on costs grounds...but the dungeons and dragons attempt to fine tune entitlement is a nightmare for the very poorest, and seems to have been designed by people without a clue of any of the social justice principles established within the social security system...or maybe gamers who have given themselves a cloak of 'you can't see me or touch me' immunity...

we might complain about the complexities of the income support legislation, and the select commitee or NAO might demand simplification of benefit rules, but in comparison to tax credits, the legislation is a lesson in coherence...at least, no fears that it was written by alistair crowley, channelled in an HMRC automatic writing seance...

the writing is on the wall for tax credits being a much bigger disaster than CSA, and a coherent radical re-draft of the legislation might be the most economical kick start to the task of turning the current dross into something 'fit for purpose'...

as for HMRC's insistence on no right of appeal, what's their problem with the discipline of providing submissions establishing 'no jurisdiction' for the tribunals to reject or not...? your client wouldn't have got any sort of a fair hearing or fair outcome left to their own devices, and it is much better that they get used to the idea that they are not the pope. imho. : )

If s28(1) does not allow the Revenue to stop the provisional payments, I wonder if s28(5) would do the trick? Clearly, the stopping of the provisional payments need not anticipate the termination of the entitlement, since the Revenue gives itself powers to keep the entitlement going based on the earlier info estimates that were in the original claim or in the previous declaration. They seem to be able to keep the show going on this basis, even if you miss the second deadline.

This 'flexibility' seldom helps. Claimants sometimes believe that giving up all contact means killing the claim. Not responding to the Revenue can mean either a bad decision on entitlement, and/or an overpayment decision, or even more exciting, the possibility of a visit from the Compliance Team!

Steve

I don't think s28(5) does do the trick because the mechanism for reducing the overpayment is to amend the award whereas these payments are outside of that provided for by the award. But then every time I think I have worked this out it seems to turn out I was wrong!

I would like some advice about this as I have a couple who hae an initial overpayment that I believe they are liable for but has increased due to subsequent non return of review letters. The TCO have told me their claim has been "terminated" as from 31st July 2007. The clients would be happy about this as they are heartily sick of the whole system. I am considering the option of arranging to pay back the overpayment on the most favourable terms we can and not to bother claiming again for some time. From your comments will this lead to another request for information at the end of the tax year and will they get another automatic overpayment from a "provisional payment" based on the previosu years joint income?

I think that for the current tax year, since there has been no award, there can be no s17 notice and therfore no s18 decision. I think this means there can be no overpayment and your client should get to keep the provisional payments.

If an award is made for the current tax year I think this changes things since as Jan points out s24(5) provisional payments are treated a payments of tax credits. I think this maens that if there is a s14 award of say £500 and provisional payments of £200 have already been made then the revenue need only shell out another £300.

In practice it seems likely that the revenue will still try to recover the provisional payments so rather than getting away from all the hassle your cleint may well be in for a bit of a fight.

I'd be very cautious in advising anyone about this saying something along the lines of they have a case to argue but it isn't possible to tell how things will work out.

Here is the earlier thread:

http://www.rightsnet.org.uk/dc/dcboard.php?az=show_mesg&forum=104&topic_id=2542&mesg_id=2542&listing_type=search

Well done Richard for showing that I was dead wrong on the recovery part: to fit within the definition of overpayment it seems clear that it has to be based on determinations under sec 18 - 21. It doesn't then seem possible to use sec 29 for recovery.

Not sure what power they could use to recover it. There may be a power to recover through general law but following Paul Staggs list of the requirments for using restitution taken from his old overpayments book (about benefits not tax credits) it doesn't seem that that route is open either:

"The money was paid to the claimant in mistake and therefore s/he can acquire no legal title to it

a) money was paid over to the defendant;
b) the money was paid over as a result of a mistake; and
c) the mistake was one of fact rather than of law."

There would be no mistake causing the money to be paid so presumably rstitution couldn't be used.

looking at it again, i think section 24(5) would allow recovery under 28(1).
24(5) states section 24(4) payments are to be treated _as if_ they were payments of tax credits for the next tax year. section 28(1) refers to the tax credits paid to a person in a tax year...this presumably would include 'as if' tax credit payments...

...exceeding the entitlement, determined in accordance with sections 18 - 21

i think that this means that only the entitlement has to be determined under those sections, not the payments...


so, if i'm right - _as if_ payments are tax credits for overpayment recovery.

section 38 - Appeals also falls under part 1 of the Act - would this mean that as if payments of TC under section 24 (4) are brought under section 38 as well as section 28?

Since s18 decisions can only be made following a notice under s17 and s17 notices can only be issued "Where a tax credit has been awarded for the whole or part of a tax year". Does that mean that for a tax year where there is no 'award', just payments without an award (under 24(4)) there can be no s17 notice and therefore no s18 decision? And if for the year there is no award & therefore no s18 decision does this mean there can be no overpayment?

I think I need a pint of Guinness

Good idea - I'm going to get one now.

i don't think that will do...

it would take at least a pint of absinthe before the TC legislation makes any sense.

i'm going back under my desk...need a nice little lie down...