(2) what measures are in place to assist families in financial hardship as a result of tax credit overpayments;
(3) if he will take steps to ensure that repayment demands made of tax credit claimants who have received overpayments are affordable;
(4) what procedures are in place for consultations between his Department and HM Revenue and Customs to ensure that demands for repayments made to tax credit claimants who have been overpaid by both departments are affordable.
HMRC’s approach on recovery of overpayments is set out in Code of Practice 26 ‘What happens if we have paid you too much tax credits’. In cases where recovery is made from an ongoing award, a customer’s award notice will confirm the amount of the overpayment and how much the award will be reduced by to recover the sum. To prevent hardship, payments from ongoing award are restricted to 10 per cent. of the tax credit award for those on maximum tax credits awards (those families with the lowest incomes). For those on a tapered award (those families whose income is higher than the WTC or CTC income threshold) recovery is set at 25 per cent. If families face financial difficulties on the reduced payments, they are advised to contact HMRC and ask for their case to be reconsidered.
If the customer is no longer entitled to tax credits, or their tax credits award has ended, as the household has changed, HMRC will write asking for a direct payment. The customer can pay back the amount over 12 months or, if a family says this would cause them financial hardship, over a longer period.
In exceptional circumstances, HMRC may write off all or part of an overpayment if it would cause hardship to pay it back.
I announced to the House on 18 October 2007, Official Report, column 944, that HMRC will replace the “reasonable belief test” with a clearer test that will set out customer’s responsibilities for checking factual information, and what in turn they can expect from HMRC.