Para 15605 of the current compliance manual says the following...

'Where an examination or enquiry is opened on or after 17 May 2007 and it establishes there was an undisclosed partner we will consider remitting all or part of the overpayment to reflect the true loss to the Exchequer. However, this can only be considered in cases where the claimant made a genuine error when they made their claim. It cannot be considered where a claimant was late in telling us about a change in their circumstances.'

However, here is a clip from the minutes of the TC Consultation Group Minutes of 16.5.2007...

'Representatives had suggested HMRC should apply a consistent approach and should therefore have a similar practice for overpayments in cases that did not arise from compliance activity.... HMRC had reviewed the position and, following discussions with interested parties, reported to representatives that the apparent inconsistency of approach could not continue - with immediate effect, the existing practice of notional entitlement will end. HMRC said that the Claimant Compliance manual will be amended from June. They confirmed that TCO and Helpline will have similar guidelines.'

My question is therefore, does the post-May 2007 version of offset require there to be a compliance examination/enquiry or not? if the answer is no, then the Revenue should amend para 15605, or else we might find Revenue staff confining their generosity to compliance cases only.

What do my colleagues think?

Steve

Steve

I've probably got this entirely wrong but doesn't the phrase "the existing practice of notional entitlement will end" read in context with "the apparent inconsistency of approach could not continue" mean that they will not allow offset at all, whether it is a compliance case or not? In other words, their "generosity" isn't going to apply at all.

In practice, I've no idea what they are actually doing now!

me neither!

steve, i agree with your comments on the CCM on another thread, and in view of HMRC's quoted reply, expect that they will differentiate between types of non-compliance when it's on their own side, but don't think there's any basis for accepting HMRC's arguments...the fairness of overpayment recovery decisions is not determined by whether or not an investigation was opened, or what part of the internal processing it has reached when the matter is raised...

however, i'm more concerned by the unsatisfactory and unacceptable outcome of the review - i had an overdue FOI request regarding the internal review - your post reminded me to remind them... i've had the reply now - there is no formal report, and there was no ministerial statement, and i have been referred to the consultation group minutes of 17/5/07. the minutes are it as far as explanation goes!!

http://www.hmrc.gov.uk/taxcredits/minutes160507.htm

as far as i can see, HMRC has been completely revisionist about the whole issue - its position is that the cases referred to by CCM15000 are, and always were, cases where the joint or single claim was made in the wrong capacity due to genuine error. i daresay there are cases where this happens, but the major concern was cases where there was a change in circumstances, reported late - these have been completely booted into touch.

i had one of these cases put on hold pending the outcome of the review, and when the review was conducted, it was in the context of HMRC solicitors conceding that recovery in these type of cases being irrational...i would be surprised if the representatives did not make clear that recovery in these cases was the priority concern, not consistency...

i will now have to do some more digging - but afaic "we will only seek to recover true losses to public funds..." is a most significant policy, which stands between HMRC exploiting the disadvantaged for profit to the Treasury, and administering the tax credit scheme fairly, reasonably, and in a matter consistent with the objectives of the scheme...
notional offsets were the mechanism by which that policy is acheived...

a policy of enforceably recovering sums which are not true losses to public funds risks causing injustice to claimants, exposing ministers to accusations of a most serious nature, and bringing the whole scheme into disrepute...

HMRC had a major hand in drafting the legislation, and we are talking about sums which are designated overpayments not because the person received more than they were entitled to in terms of conditions of entitlement, but because they received X amount under award A, when they should have received it under award B...

Policy, procedures, practices, processes...HMRC doesn't seem to be able to differentiate between these...

the technical manual section on overpayments is extremely thin, surprising when HMRC has had nothing but flak about overpayments from day 1....

I agree with your point about fairness (different Revenue approaches, depending on whether its a compliance case or not). Wasn't it the duality of their former approach that led them to alter the offset rules in the first place? I also agree that denying access to offset in change of circumstances cases is extremely harsh, but surely this is in line with the Revenue's philosophy that claimants should be maximally responsible to report certain changes, even within the context such a complicated and confusing system.

The Revenue seems to have moved their criteria for offset to a place that is a million miles away from its older brother, regulation 104 of the HB regs ('offset for all, under all circumstances, let them eat cake', etc).

I wonder if we should still apply for offset in relationship change cases, irrespective of whether there is a compliance investigation, and irrespective of whether the error occurred at the claim stage or due to a subsequent change of circumstances. So far as I can see, there is no legal impediment to the Revenue applying offset in any of these scenarios, because the Act is full to bursting point with discretion anyway. Also, even if the Revenue fails to agree, the Adjudicator or Ombudsman see it another way, further down the line.

It wouldn't take much effort to draft a pro-forma paragraph to drop into a letter/challenge.

What do you think?

Steve

They have, in a couple of cases where we've threatened JR because they wouldn't apply the old offset policy to non-compliance cases, made it very clear that they will not allow an offset for any cases since the new policy came in.

However, I can see no reason not to continue asking for an offset, there is no justification that I can see for recovering beyond the actual loss to the public purse, and we certainly intend to go for JR if they will not do an offset. The case is not so strong now the policy has changed, but it still has to be arguable that it is unreasonable to recover a "technical" overpayment when the whole purpose of tax credits is to assist people on low incomes.

Hi Keith,

For clarity, have the Revenue been saying (post May 07) that they are only willing to apply offset in cases where there is a compliance investigation?

Steve

lol! HMRC and clarity - surly not?

i understand HMRC's policy position to be that offsets will only be made in the restricted types of cases where the wrong type of claim was made due to genuine mistake about single/couple status. : (
overpayments in these circs could arise in both compliance cases and regular cases, for want of a better word. i'm not aware of any policy distinction being made between the two types of cases, and there is no rational argument for making a distinction.

in practice, the offset is only ever likely to have been made _before_ an overpayment recovery decision in compliance cases - therefore, on regular cases, the issue will be raised _after_ the overpayment recovery decision, in representations on a dispute. at this point, we are in the hands of whoever eventually picks up the dispute at HMRC. (mileage varies )

we have the example given on the CCM Manual thread (but i think maybe not on the post -May narrowly resticted type of cases) in which exactly that distinction was made. in any event, i think it is likely that this problem would arise in practice, because it seems that only compliance officers (and welfs) read the CCM, and numerically, these types of cases will be rarer than the now excluded from offset cases we have been arguing for, and the chances of getting a person who understands what you're talking about, and can see outside of the HMRC bubble reduces. in the example case, the rejection was official but was it official official? i don't think so, and in cases where HMRC's offset policy is applicable, the demarcation/processing argument might prolong the dispute, but i don't think they can make it stick. (theoretically at least! - in practice the long silent sulk treatment is difficult... : )) so we're not only up against HMRC's tricksy official policy, we're up against its tricksy practices and unofficial 'policies'...this is my take on it, fwiw...

jan

steve, re your previous post, i still think its worthwhile arguing for offset. i'd taken to writing to HMRC solicitors, and got a few decisions changed by TCO that way, but i've just had a reply refusing offset on the basis of the May 07 policy change. we are considering JR action, but obviously that won't suit all cases, so i think the proforma idea, adjudicator/ombudsman route is a good one. : )

the HMRC philosophy at source is fundamentally of revenue collection not alleviation of poverty, and it appears a leopard can't change its spots. the 'maximum responsibility' on claimants approach may or may not work for the better educated claimant - i have my doubts, and of course income support recipients are many and varied, but still, the most marginalised and disadvantaged, suffering with the most social exclusion factors tend to fall in the lowest income groups, and are disproportionately hurt by the recovery of technical overpayments which are not true losses to public funds.

punitive recovery of technical overpayments to teach people who are ignorant of the rules a lesson the hard way may be perfectly consistent with HMRC's philospophy, but is deeply objectionable in many ways, not least of which is that the people who are actually punished by HMRC's design of a user-unfriendly obstacle course, are the CHILDREN who tax credits were intended to help.

the financial penalties are entirely arbitrary and unfair, and since they are not true losses to public funds may be seen as an illegal tax. no wonder that HMRC seem intent on effecting an exemption from Article 6.

Hi there Jan,

I hope you are right in your estimate that offset will be available in both compliance and 'regular' cases. This worry started this thread, because para 15605 of the CCM suggests otherwise. Whilst pondering the wording further, should we assume that the new offset applies at the renewal stage of an award, or do they only mean the start of the original claim, when they say 'claim'?

I had not thought through the likely sequencing of offset, but assuming that it does apply in regular cases, I agree we will need to make a point of asking for it.

This makes me think about the pro-forma thing again. I have this hazy idea of a 4 stage pro-forma letter, where you can strike through the stages that don't apply. Section 1 is a straight appeal request to challenge the numbers. Stage 2 is a late appeal request (quite likely since most of our clients come in way past the deadline). I think we could be on a winner on both 'interests of justice' and 'reasonable prospects' grounds in tax credits land (have you had any joy?). Stage 3 would be the offset request (as discussed), and stage 4 a cut and paste of TC846, for the orthodox recoverability challenge. I suppose there could be problems combining it all together because the decision making centers for stages 1 and 2 may be different to stages 3 and also 4. At the very least, setting it all out in one place would be a kind of adviser therapy.

How dare you suggest that only compliance officers and welfs read the CCM. I read it for pleasure, and in the original latin. I am not the only one. I have a strong suspicion that Chapter 15 of the CCM was the inspiration for the forthcoming movie, the Golden Compass. You read it here first.

Nurse, the curtains!

Steve

hi steve, sorry for late reply...much to think about.,,and welfs, should have been welfs and allied trades, of course... : )

i don't bank on anything with HMRC...: )

client gets CTC from january 06, starting in February 06 and 12/3/06 is sent an award notice to sign and return in 30 days. sends it back 6 days late, WRC stops on 17/4/06, client phones, is told it will be reinstated in 2 weeks, nothing happens, 10 phone calls later is told they will send him a form, turns out to be a new claim pack, he eventually gets paid from November 06... he's on JSA and has 8 kids. Gets a letter, must repay £4,000+. Has been to 2 advice/support agencies prior....we know that overpayment is due to not returning award notice in 30 days(explanation letter states you have no right of appeal against this decision, does not state section notice issued under, certainly does not explain why issued). By May 07 the 06/07 overpayment (previously just under 500 quid, to 17/4/06) has increased and total o/paid in 05/06 and 06/07 is now well over £8,000. We have no explanation of the increase in o/p. Client on JSA throughout.

but i digress,,,this is not an 'offset case'... the review purporting to remove the 'inconsistency' has simply narrowed the scope of offsets and perpetuated the inconsistency between compliance and non-compliance cases, if they don't apply it across the board. i can't think of any rational reason why it should be applied in some cases and not others. even the rule they have arrived at regarding genuine mistakes only moves the notion of entitlement away from statutory and into grace and favour...i think the proforma is a good idea, but maybe it should be a proforma letter to the queen, petitioning her on unfair taxes... : )

Dear Jan,

Maybe I am over excited about Christmas (see below), but since when do clients have to sign and return award notices? Could client have got confused by a formal requirement under s14(2) to provide evidence/information? That has a 30 day requirement.

Totally agree with your point that offset is now narrowed in scope. The inconsistency post May 07 may be a different brand to the pre-May version, but its still inconsistent, as you say.

No need to petition the Queen, because I will be able to ask her in person. Her Highness has kindly agreed to be guest of honour at our bureau Christmas bash at Walthamstow dog track, and has once again requested to be the first on the karaoke machine. I have drawn Her Majesty in the secret santa game, so now I have to find her a present, for under a £1.00. Its a bit tricky, because in the same game last year, she gave a colleague Shropshire as a prize (we had not made the rules clear).

I will give her your regards

Steve

Hiya steve
: )

thanks, and please tell her majesticness that i used to love her wafer biscuits...under a £1 eh? you can't even get tupperware for under a quid these days...she'd probably enjoy a scratch card, but i think they come in at a piyind each. how about a copy of the Morning Star? 60 pence - cheap. : )

nah... my client is confused, but not as much as HMRC...and me... : )they put the 'award notice' stuff in writing, twice...apparently didn't even cross their minds that four grand is a bit steep for a 6 day delay in returning a form they probably didn't need in the first place...i think they do something roughly like it if it was an on-line claim, which this wasn't...but enough...

season's greetings to walthamstow crowd...may your bash be boozy and all your dogs winners...just don't let HM open with Her Song, or you'll all have to stand up and then go home...

merry xmas

jan

Right...so...after all that, can anybody tell me whether my client should try going for offset? She is a refugee claiming IS, husband came to stay, they went along to JCP who they, not having much English, thought dealt with all benefits (and were not told that they had to tell HMRC, natch). Client split up with her husband and told me - I told HMRC on her behalf, they say "we didn't know she had a hubbie" and yadda yadda yadda, overpayment of CTC for 6 months.

I've put in an appeal request with a poshified legalspeak version of the above story with a vague hint that they might like to try offsetting. What now?

Cheery

Ali

I certainly think you should try for it, however I don't really think the offset request will work. So put in new claim with request to backdate for three months in order to minimise the loss.

It's really very unfair, quite apart from not speaking English they could hardly be expected to understand how informing one bit of our Government that pays benefits is different from another bit of the Government that pays different benefits.

On top of all of which they could hardly be expected to know that they were receiving the wrong tax credits when they would have had exactly the same amount if she had claimed as a lone parent.

Incidentally, it is my impression from talking to front line advisers that getting offsets for pre May 07 cases is anything but straightforwarsd and may involve dark threats of involving the ombudsman, requesting judicial review etc.

******************************************************************
On another issue, I'm curious to know how the Queen got on at the Walthamstow Xmas bash, what song did she sing? perhaps something like "if I ruled the world".

I have never been privileged to meet our sovereign myself but I understand her to be most amiable company, unless she has one too many benedictines when she wants to arm wrestle everyone.

Then there's the question of etiqutte, are you allowed to win? plus the embarrassment when she gets you to feel her bicep and teels you "feel that, not bad for my age eh".

Phils no help, he just struts round looking embarrassed, holding his hands behind his back, asking everyone what they do and pretending not to be with her.

Steve,

Sorry for not replying earlier. HMRC are saying to me that will be NO offset for any cases where the first dispute about the overpayment arises after May 2007.

For cases where there has been a dispute dragging on since before May, they still seem to be willing to apply an offset whether or not there has been a compliance investigation, at least if threatened with JR.

Hi Keith,

This is madness, bearing in mind how relatively clear para 15605 of the current compliance manual is on the matter. To recap...

'Where an examination or enquiry is opened on or after 17 May 2007 and it establishes there was an undisclosed partner we will consider remitting all or part of the overpayment to reflect the true loss to the Exchequer...'

Just checked the Revenue web site - the page is unaltered. Am I misreading it? I suppose the writer of para 15605 may have got it wrong, but if they haven't, it is likely that many claimants will be losing out because of poor Revenue advice. In my view, we need to press for offset in all possible cases, and run refusals by the Adjudicator/Ombudsman.

Picking up Ali's contribution, assuming offset still exists in principle, there are up to three sub tests that have to be passed before offset can apply in post May 2007 cases:

1) Is the client part of a compliance investigation? The Compliance Manual suggests this is necessary, but if you read the earlier contributions to this thread, the true answer may well be no. We do not have certainty on this.

2) Was the error made at the start of the claim? In Ali's case, it looks like there was an error at the start of the case (the Revenue thought client was single, for whatever reason)

3) Was there a genuine error on the part of the claimant? Could try running language etc, but the Revenue, in my experience, are quite severe on this as any kind of justification.

Ali, even if offset does still exist, I do not know if your case would pass the tests, so I suppose have a go.

Chris, I sense a whiff of envy in your question about our Christmas party guest of honour, which is unbecoming. The Queen's musical tastes are eclectic. A very strong rapper, I seem to remember she did a storming cover of a number made famous by '50 cent. The usual stuff.

Steve

LITRG, on behalf of a number of advice groups, wrote to the Minister some little time ago and pointed out the extreme penalties of any policy without sensible offsetting.

We are in dialogue at the moment.

At the very ealiest point I will post the results of this dialogue here.

Hopefully sense will prevail.

Hi John,

Thanks for this. In the meantime, do you agree we should act as though offset exists?

Steve

Steve

Yes I think you should. There are all sorts of issues which come to mind.....unjust enrichment......human rights....etc. Something which is so unfair must have many areas of attack.

We have just been concentrating on the straightforward remedies as the first course of action.

Hi John,

Messages received. I don't suppose that offset will become the issue that breaks the whole thing down, but surely at some point the very unfairness of the current system could end up in the courts.

Sometimes I find myself almost feeling sorry for the Revenue, who seem to fighting one rearguard action after another, applying one patch or fix after another, just to keep the tax credit beast's head above water. Comparisons to the LSC's new fixed fee contract system are irresistible!

Steve

Help! I hope some of you well versed in the offset issue will be able to advise me. I have read through the thread and am rather confused what I should be doing in practice for my case. I took it up in January 2007 as an appeal against OP recovery that arose when client split with partner on 29/6/03 but TCO not informed until 6/8/03. After claim was cancelled, client's circs changed and she did not claim again until 2005. After the initial appeal letter, I wrote again on 9/5/07 asking for confirmation that notional entitlements as single people had been offset against the OP figure and have just received the reply that "there is no entitlement to tax credits as no claim was submitted...therefore under the tax credit legislation we cannot apply notional entitlement and the overpayment is recoverable..". This seems to miss the whole point of notional entitlement, doesn't it? They direct me to the complaints fact sheet if unhappy with their response. Is this appropriate or what do any of you consider is the next step in a case like this?

Hi there,

Its difficult to know where to start with this one. Firstly, is this case covered by old offset rules or new? Must be old rules. If so no worries about the date of the separation etc because old offset allowed retrospective action, prior to its onset in Summer of 2005. I agree the Revenue are entirely missing the point of offset, by saying no claim was made - thats the whole point of offset! Also, the reference to there being no legislative authority is silly, because offset operates by discretion, outside of any explicit legal authority. Apart from these minor errors, I would say the Revenue has got things just about right...

I would propel this one to the Adjudicator, and maybe then onto the Ombudsman. You may or may not be inclined to give the Revenue one last chance by explaining the error of their ways (perhaps with a letter supported by the MP?).

Good luck

Steve

Thanks for this. I will head down the Adjudicator route as suggested. Rachel