Afternoon everyone,

The issue of ‘notional offsetting’ has been covered in several rightsnet threads over the last couple of years. Previously HMRC compliance guidance stated that where an undisclosed partner was discovered, HMRC would offset what the couple would have been entitled to if they had made a claim in the correct capacity against the overpayment that had accrued. In essence, only recovering the actual loss to the exchequer. The problem with this approach was that it only seemed to benefit those who were non-compliant.

In May 2007, the guidance was changed. Although the new guidance applies to everyone (not just compliance cases) the offsetting is restricted to those claimants who made a ‘genuine error’ at the point of claim. This means that offsetting is no longer available where claimants have delayed reporting a change of circumstances. Consequently there are cases where two people have made the same fundamental error, one at the point of claim and the other in failing to report a change of circumstances, but offsetting allowed only in the former case.

Over many months we (LITRG), and other Tax Credit Consultation Group (TCCG) members have been in dialogue with HMRC and Ministers on this issue. The current FST has agreed to meet with members of the TCCG shortly to further understand the problems and explore what, if anything, can be done.

We would like to encourage advisers to contact us, or other TCCG members, with their views on the issue, in particular:

* any examples of where the current approach has worked against the child poverty agenda
* ideas and thoughts on how to change the procedure whilst not allowing it to be open to any misuse or it cutting across the need for people to report changes of circumstances promptly
* any other points on this issue that need to be considered.

Unfortunately we are working on a rather tight timetable, with only a week until the proposed meeting.

Feel free to send comments directly to me victoriatodd29@yahoo.co.uk or via the comments function on our website www.litrg.org.uk

Thanks

Victoria

Just a brief update.

The meeting with the Minister was positive and an appreciation of the issues displayed.

Further, more detailed, discussions are now ongoing.

We will post more when there is something more that can be said.

Just an update.

There will be more meetings at the request of Stephen Timms. The advisory sector together with HMRC have to come up with proposals that meet a range of criteria if this issue is to be satisfactorily resolved.

Meanwhile, tax credit claimants continue to be harshly punished for their mistakes.

However, there may be a resolution to this by, say, October.

A further update when there is something that can be reported.

Colleagues,

I thought that Notional Entitlement was only possible post May 2007 if there was a compliance investigation running. Although para 15605 does not spell this out, paras 15630 to 15695 all refer to Notional Entitlement subject to an examination or enquiry. I would of course be delighted to be wrong about this - please clarify.

So far as ideas to improve the whole issue are concerned, I wonder if the Revenue would be willing to consider bringing the couple definition for married/civil partners into line with social security? I know that would mean changing the Act, but anyhow.

More broadly...

How about an agreement that the Revenue will issue a stand alone overpayment notice subject to the same contents requirements of a HB overpayment notice?

Come to think of it, how about making offsetting mandatory (and without strings) prior to a TC overpayment decision, just like reg 104 of the HB regs? This would I know require a philosophical shift on the attitude towards the reporting of changes of circumstances.

How about following their own COP26, and agreeing to hardship based write-offs once in a while?

How about referring to the possibility of a write off on the TC846 form?

I feel better already! Thank you for the therapy.

Best wishes,

Steve

I have a client who separated from his partner 20/11/07. He was in receipt of IS and thus maximum CTC. He continued to be responsible for the children.

His CTC ended 28/02/08 when the TCO found out about the separation. He made a new claim 20/06/08; this was backdated 3 months to 20/03/08. He was still iro IS.

He has an o/p for the period 21/11/07 to 28/02/08. HMRC have refused to do an offset in line with their current policy. Client speaks little English and needs an interpreter when he sees us.

We have complained and have now asked them to reconsider the complaint. When this is refused we will be going to the Adjudicator.

Am I wasting my time or is it possible this overpayment will eventually be written off or offset?

As John posted above, meetings are ongoing about this issue between HMRC and advisory groups, because of the harshness in cases such as the one you have mentioned above.

The current policy (dating from May 2007) is that HMRC will only offset where the claimant made a genuine error at the point of claim. That means the current policy does not allow an offset where the error was made around reporting a change of circumstances.This leads to a very unfair situation if two people made the same fundamental error but at different times.

If people want to continue to send me their examples, they will be incredibly helpful in showing HMRC the harshness that is created and the type of cases where this happens.

My email is victoriatodd29@yahoo.co.uk or you can use the contact function at www.litrg.org.uk

Victoria

Hello again Victoria,

Do you have any further thoughts on the issue I raised earlier in this thread: namely, whether a claimant has to be subject to a compliance investigation, for notional entitlement to apply. My earlier post in this thread refers to the relevant paras from the manual.

Steve

We have been assured that the current policy should apply to compliance and non-compliance cases. The problem seems to be that it is only in the compliance manuals, and therefore you will need to request it during any dispute.

Victoria