In 03-04 client was overpaid tax credits. The amount she was actually paid was used to calculate her HB entitlement. She has now (very belatedly) been told the overpayment will be recovered from ongoing TCs. In the meantime, she has stopped work, is getting only CTC, and is on full HB.

I know that (from Apl. 05) the amount of TC actually received is used in calculating HB entitlement. The logic of this is presumably that if someone has had too little HB because they had too much TC the situation is corrected when the TC overpayment is recovered as the TC amount will then be lower & the HB higher. However, in this case the claimant is already on full HB so will lose out.

Can anyone say please whether I've got this right, and whether anything can be done about it.

This seems to be an unjust situation and the lack of responses suggests that there is no obvious way to sort it out. The HB Guidance Manual is unhelpful and states:

Recovery of overpaid tax credits
3.630 If an overpayment of tax credits has occurred during a period in which HB/CTB was also payable, and the overpayment is subsequently recovered, there is no provision in regulations to reassess the HB/CTB award for that previous period.

Is there any possibility of claiming that there has been an official error?

There have been postings about similar cases before. The situation stated seems to be correct - client apparently gets penalised twice because of the retorspective nature of tax credit overpayment recovery. Had a similar case myself a year ago. 'Fraid I have no answers.

I'll be popular at LAs for this post..... (er, not)....

I've been less than convinced that HBR 24A has the effect which is suggested by the DWP. It seems pretty clear what happens where a "normal" installment is paid. But, it is silent on changes of circs. It crosses my mind that once the initial calc has been done in accordance with HBR 24A, that does not necessarily stop a retrospective CofC having effect.

Some ideas have been floated below, but I'm not suggesting it is in anyway "definitive" - I may well just be plain wrong. Anyway, howabout arguing that:

1) guidance does not reflect the law

2) the law requires that income must be attributed to the period it is in respect of (CH/1561/2005 *may* be of general assistance in this regard)

3) HBR 24A does not have the effect of being able to override the CofC rules (HBR 68 etc) nor does the wording have the effect of being able to make the calculation of Tax Credit changes as being distinguishable from the law relating to how other income is attributed in circumstances where a retrospective CofC in Tax Credit has effect

4) DAR 8(3) is disapplied on the grounds that the clmt couldn't have known about the change at the time of effect and, in any case, its application would be perverse, irrational and/or Wednesbury unreasonable and cause injustice

5) (not sure about this....) HBR 24A(3)(a-d) refers to "in respect of" & "due to be paid". If it subsequently transpires that it was NOT "due to be paid", HB should be amended for the period(s) in question.


Regards

It is no help to your specific case but you might want to consider getting in touch with CPAG's tax credits monitoring network - the purpose of the network is to help gauge the impact of anomalies in the tax credit system and then lobby for changes - currently they are looking for overpayment cases so its a good time to get in touch.

For more info, see CPAG website

Don't suppose anyone has a definitive answer to these problems yet?

My Client was initially paid HB (failed to declare WTC) then overpayment decision in respect of HB when they discovered WTC had been in payment. However, around the same time, it was decided that WTC was also being overpaid for entire period which client admits and is paying back. HB overpayment is calculated on the (overpaid) WTC actually recieved during the relavent period, hence client hit by the now recurring double whammy effect. Kevin's suggestions are very helpful but has any of this been tested by anyone yet?

Circular A30/2004

'38 If an overpayment of tax credits has occurred during a period in which HB/CTB was also payable, and the overpayment of tax credits is subsequently recovered, there is no provision in regulations to reassess the HB/CTB award for that previous period'.

Further guidance from the Adelphi...

"Unfortunately you cannot quote a regulation in this type of scenario as one does not exist. This is the crux of the matter which is why para 38 (of Circular A30/2004) says there is no provision etc. The fact is that at the time of the claim the claimant did receive that income and legally you were correct in taking it into account at that time. The fact that this was later found to be incorrectly paid is irrelevant to the claim.

There will be a few cases where this happens, as the person is no longer entitled to tax credits but in the majority of cases the person will still be entitled to tax credits and a recovery will be made which means that you only take into account the net amount so that it balances out."

If your client is no longer entitled to Tax Credits and so is repaying the overpayment via an invoice, but is still entitled to some HB/CTB, I would suggest applying for a Discretionary Housing Payment.