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Tax Credits

Volume 450: debated on Monday 16 October 2006

To ask the Chancellor of the Exchequer (1) whether his Department plans to change the way that tax credit overpayments are recovered; (92725)

(2) whether he has made an assessment of the merits of a system of suspending payments until the overpayment is cleared for dealing with tax credit overpayments.

I refer the hon. Member to my remarks and those of my right hon. Friend the Chief Secretary to the House on 7 June 2006, Official Report, column 293 and columns 326-27.

HMRC's policy is set out in CoP26, “What happens if we have paid you too much tax credit.” When HMRC seek recovery of an overpayment they seek to do so in a manner which will not put a family in financial difficulty. PBR 2005 announced that from November 2006 HMRC will apply automatic limits on recovery of excess amounts paid where awards are adjusted in-year following a reported change. These limits will be the same as the current limits on cross-year overpayment recovery, and will ensure that no low- to middle-income family faces unexpected reductions in tax credit payments.