HM Revenue and Customs

4. Mr M complains HMRC told him he had received an overpayment in the 2009 to 2010 tax year despite being entitled to the tax credits in question and regularly corresponding with the HMRC about his household income. Mr M disagreed with this decision at the time and complained.

5. Mr M also complains, in 2021, HMRC started action to recover the overpayment for the 2009 to 2010 tax year. Mr M believes as HMRC did not recover the money when he offered to pay back the overpayment in 2012, he should not be expected to pay it back now after such a long time has passed.

6. Mr M says HMRC has caused him added distress and financial hardship by now deducting the money from his earnings.

7. Mr M would like the money HMRC has deducted from his earnings to be refunded and any other overpayments in his or his wife’s name to be written off.

8. On 27 January 2010, Mr M told HMRC his household income had increased during the 2008 to 2009 tax year. As his tax credit entitlement for 2009 to 2010 was based on his 2008 to 2009 income, HMRC sent an updated award notice on 11 February 2010 reflecting the increased income. This award notice also shows that Mr M had received more tax credits than he was entitled to because of the income increase and he had received an overpayment of over £2,000.

9. On 19 April 2012, HMRC sent a notice to pay relating to the overpayment. Mr M disputed the overpayment and HMRC received his overpayment dispute in May 2012. HMRC responded on 28 June 2012 and explained the overpayment was recoverable.

10. Between July 2012 and May 2014, Mr M wrote to HMRC with further overpayment disputes. In HMRC’s responses, it explained its decision the overpayment was recoverable would not change because Mr M had not provided any new evidence relating to the overpayment.

11. In November 2014, Mr M complained to HMRC about the overpayment through his Member of Parliament (MP). HMRC sent a response on 19 December 2014, which again confirmed the overpayment was recoverable. However, no money was recovered at the time.

12. In June 2019, HMRC began to transfer some tax credit debt collections to the Department for Work and Pensions. On 17 July 2021, HMRC contacted Mr M explaining he still had an outstanding debt. On 27 August 2021, Mr M wrote to HMRC. This letter was treated as a Tier 1 complaint (the first stage of complaint handling) and HMRC sent a response on 23 September 2021. Mr M complained to HMRC again on 29 September 2021 and HMRC sent a Tier 2 (the next stage of complaint handling) response on 4 November 2021. Both of HMRC’s responses state that the 2009 to 2010 overpayment was recoverable. On 12 November 2021, Mr M emailed the Adjudicator’s Office (AO) in relation to his outstanding complaint about HMRC, which is the next stage in the complaints process.

13. In its report dated 17 December 2021, the AO partly upheld Mr M’s complaint. The AO considered HMRC had acted reasonably and in line with its guidance when deciding to recover the overpayment but there were delays in HMRC responding to some of Mr M’s letters and it had not provided an appropriate solution. The AO recommended HMRC apologise to Mr M about the delays.

14. The AO commented that its decision about HMRC’s delays did not mean the recovery of the overpayments should stop, and it did not recommend HMRC review the decision to recover the overpayments.

15. The AO also commented it could not consider Mr M’s entitlement to tax credits or any issues concerning recovery action. Mr M then approached us.

Mr M complains HMRC told him he had received an overpayment in 2009 to 2010 despite being entitled to it and regularly corresponding with HMRC about his household income.

19. The law says we cannot investigate a complaint if a person has (or had) the option to take legal action, unless we consider this is (or was) unreasonable in the circumstances. Simply put, if someone has (or had) a legal route open to them which is reasonable for them to follow to get the outcome they want, we cannot look further at the complaint. This is because we are not intended to duplicate the role of the courts or tribunals.

20. Mr M tells us: ‘HMRC made an alleged overpayment to us in 2010 despite our constantly corresponding with them regarding household income. They then cancelled our award (tax credits was never applied for so we did query why we were receiving them in the first place and, to this day, we have never had a reply to that question). They then were asking for an alleged overpayment which we could not fathom out. The organisation went wrong by not replying to us in 2012 when we asked for bank details to repay this (even though we disagreed and we believed we were entitled to them, it was easier to just repay it). All these years later they do not have records of letters due to policy and we have few records due to policy. They keep spouting numbers at us and because we do not have records, we can't even dissect these numbers. It is unfair and unjust to claw back this money after all these years especially when it was them that did not correspond with us.’

21. HMRC’s data retention policy states HMRC usually retains documents for six years plus the current year. The letters from the original complaint are no longer available because of this policy.

22. HMRC sent a Tier 1 complaint reply to Mr M on 23 September 2021. In its reply, HMRC told Mr M: ‘Our records show you have previously disputed the overpayment for tax year 2009 to 2010 and requested several reviews of our decision. We wrote to you on 28 June 2012 advising the overpayment was due to an increase in household income and that the overpayment was recoverable. You asked us to review our decision. Our records show we wrote to you on 13 November 2012, 15 May 2013, 16 November 2013 and 14 May 2014 advising our decision to recover the overpayment for tax year 2009 to 2010 was correct. We also wrote to your MP on 19 December 2014.’

23. In his complaint to HMRC, Mr M states he wrote requesting bank details to pay the overpayment on 1 December 2012 and, as he did not receive a response to that request, he believes HMRC failed in its responsibility and should cancel the overpayment.

Our view

24. On 27 January 2010, Mr M told HMRC his joint annual income had increased to £26,419 for 2008 to 2009 and to £26,598.41 for 2009 to 2010 this was £26,598.41. This shows an increase in income which reduced Mr M’s tax credit entitlement to £547.50. HMRC sent an award notice with these details on 11 February 2010. This is within the COP 26 policy requirement that HMRC use the information and send an up-to-date award notice within 30 days.

25. When HMRC finalised Mr M’s award for 2009 to 2010, it established his household income was £26,776. This meant Mr M’s award remained at £547.50.

26. As HMRC had already paid Mr M £3,349.31, there was an overpayment of £2,801.81 for the 2009 to 2010 tax year. This is the difference between the amount Mr M had already been paid and the amount he was now entitled to receive.

27. The overpayment does not appear to be a result of any error by HMRC or Mr M. It was simply because of the increase in income, which reduced Mr M’s entitlement. As HMRC had already paid Mr M this full entitlement, the information about the increase in income meant he had been overpaid. The provisional nature of the tax credit system means in some cases overpayments do happen, even if HMRC and tax credit recipients act appropriately.

28. Although we do not have all the information from the original complaint in 2012 because of the data retention policy, it is clear Mr M disputed the overpayment from the correspondence we have seen. Following this, although Mr M says he did not agree with HMRC’s decision, he agreed to repay the overpayment and confirms he then tried to contact HMRC to arrange to make payments.

29. It appears from all the available information Mr M did not appeal to the tribunal about the tax credit decision which said he was not entitled to the full amount of credits he had received. But the option to appeal that decision was open to him, and we can see HMRC made him aware of it.

30. We are unable to consider a complaint if the complainant disagrees with a tax credit entitlement decision. This is because such matters can be appealed through HMRC’s statutory appeals process. HMRC will notify someone if its decision can be appealed when providing that decision. Rather than take the entitlement decision to a tribunal, Mr M offered to repay the overpayment.

31. Section 5 of the Parliamentary Commissioner Act 1967, which sets out our powers and responsibilities in carrying out our work, says we may not investigate if the aggrieved person (the complainant) has (or had) a right of appeal to a court or tribunal, and if it is reasonable for them to pursue it.

32. Mr M challenged the decision to recover the overpayment through the appeals process at the time as a ‘dispute’. A dispute about an overpayment is different to a statutory appeal about an entitlement which may go to a tribunal. Mr M’s dispute was not successful and it does not appear he appealed the tax credit entitlement decision. It would have been reasonable for him to take an appeal to a tribunal for the outcome he wants, that is, a change in HMRC’s decision to say he had the right to those credits, as that is the role of the tribunal.

33. The credits in question are classed as an overpayment because HMRC received updated information about Mr M’s income, which led it to reconsider his entitlement. The revised decision about his entitlement meant credits above the new amount were now classed as an overpayment. If Mr M had successfully appealed the decision about his entitlement to a tribunal and was able to demonstrate he was entitled to those credits, as he tells us he was, the extra credits would no longer be classed as an overpayment and HMRC would not ask for them to be repaid.

34. Having carefully considered the above, we will take no further action on this part of the complaint.

Mr M complains, in 2021, HMRC started action to recover an overpayment from the 2009 to 2010 tax year. Mr M believes he should not be expected to pay the overpayment back now after such a long time has passed.

35. When we consider a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and find no signs HMRC have done anything wrong in recovering the overpayment.

36. Mr M tells us: ‘All these years later they do not have records of letters due to policy and we have few records due to policy. They keep spouting numbers at us and because we do not have records, we can't even dissect these numbers. It is unfair and unjust to claw back this money after all these years especially when it was them that did not correspond with us’.

37. In his letter to his MP asking for his complaint to be referred to us, Mr M says: ‘HMRC [has] been found to be at fault in their communications with us and been asked to apologise which they have, but I feel that this is not enough as the apology is only referring to how they handled our complaint of 2021. We complained about this alleged overpayment many, many years ago and even offered to pay it back in 2012 as I have already stated below. They have now recovered the money that they allege I owed through my wages.’

38. Mr M also says: ‘I am disappointed with HMRC and their tax credits office. A few years ago (approx[imately] six), I contacted you regarding an alleged overpayment from tax credits which they were pursuing me for. In Dec[ember] 2012 I wrote a letter to them explaining that although I didn't agree with their calculations, I would repay the amount at £40 per month and asked for the bank details to do this. Replies took six months in between and then the threatening debt collector letters started coming and I replied to the debt companies explaining the situation which was obviously taken onboard as these stopped. In July 2014 I wrote to a Mrs ________ at ________ and advised her that I had offered to pay but had not heard anything and we proposed that the matter was archived and written off. Nothing more was received and no further explanations as to how I could have been overpaid, when I regularly completed a self-assessment form and then was PAYE [pay as you earn]’.

39. Mr M believes as there has been such a large gap between when he agreed to repay the overpayment and when HMRC eventually took action to recover the debt, he should not be liable to pay it, especially considering he tried to make arrangements to pay it back in 2012. We recognise it must have been upsetting and disappointing to receive correspondence on that matter after so long.

40. In its complaint replies, HMRC says to Mr M: ‘Our records show you have previously disputed the overpayment for tax year 2009 to 2010 and requested several reviews of our decision. We wrote to you on 28 June 2012 advising the overpayment was due to an increase in household income and that the overpayment was recoverable. You asked us to review our decision. Our records show we wrote to you on 13 November 2012, 15 May 2013, 16 November 2013 and 14 May 2014 advising our decision to recover the overpayment for tax year 2009 to 2010 was correct. We also wrote to your MP on 19 December 2014. I have looked at the reason for the overpayment and can confirm this was due to an increase in household income and our decision to recover the overpayment is correct.’

41. HMRC also says: ‘We have reviewed our decision to recover the overpayment from the 2009 to 2010 tax year on a number of occasions. We are now unable to provide any further reviews; the overpayment will remain recoverable. I should also explain that we would only cancel an overpayment if we had made a mistake which contributed to you being overpaid. Your overpayment arose during the 2009 to 2010 tax year; there is nothing we could have done after receiving your letter of 1 December 2012 that could have contributed to this.’

42. HMRC also says: ‘The income figures quoted in our letter of 23 September 2021 were on award notices we sent to you during the 2009 to 2010 tax year. While I appreciate that you no longer have records for the 2009 to 2010 tax year, we made you aware of the figures at the time, giving you the opportunity to provide evidence if these were incorrect.’

43. In relation to the decision to recover the overpayment, HMRC tells Mr M: ‘Our Code of Practice 26 (COP26), “What happens if we have paid you too much tax credit?” explains our approach when dealing with overpayments. It explains that throughout a tax credit award, we and the customer must meet a set of responsibilities to reduce the chance of an overpayment occurring. We can only consider “writing off” an overpayment if we have not met our responsibilities as set out in our COP 26. In your case, I have found we met all our responsibilities.’

44. HMRC have also explained to Mr M the powers it uses to recover overpayments. It says: ‘Our lawful right to pursue tax credit debt is set out in sections 28 and 29 of the Tax Credit Act 2002 and part 6 of the Taxes Management Act 1970.’

Our view

45. We are aware HMRC considers the recovery of overpayments in line with its COP 26 policy. This code sets out several responsibilities for both HMRC and the taxpayer. COP 26 explains that if HMRC has not met all its responsibilities and if this causes an overpayment, it may not seek to recover all or part of the overpayment if a taxpayer has met all their responsibilities.

46. COP 26 lists the HMRC’s responsibilities:

• ‘When you contact us for information, we should give you the correct advice based on the information you give us. We’ll offer you support, for example, if you want us to explain your award notice to you, we’ll talk you through it in detail.

• When you make or renew your claim we should accurately record and use the information you give us to work out your tax credits and pay you the correct amount.

• When we send you an award notice we should include information you’ve given us about your family and your income. If you tell us that there is a mistake or something missing on your award notice, we should put it right and send you a corrected award notice.

• When you contact us to tell us about a change of circumstance, we should accurately record what you’ve told us and send you a new award notice within 30 days. The 30 days doesn’t start until we get all of the information we need from you to make the change. It is therefore important that you give us all the information when you tell us about a change.’

47. From all the information available, there is nothing to suggest HMRC did not meet its responsibilities listed in COP 26. Mr M is not complaining HMRC did not send award notices when it should have. There is nothing to suggest HMRC did not use the information Mr M provided to make an accurate record or pay him the correct amount. The overpayment was the result of an increase in income and HMRC’s assessment of what that meant for Mr M’s entitlement, not because HMRC made any administrative mistakes.

48. The communication difficulties Mr M complained to HMRC about came after the overpayment and relate to HMRC not always responding to Mr M’s correspondence about his complaint and his dispute with HMRC recovering the overpayment. By the time of these issues, the overpayment had already happened and HMRC had correctly informed Mr M of the overpayment as soon as it became aware of it.

49. Mr M mentioned in his complaint to HMRC he believed it had recalculated the overpayment and he no longer owed it as HMRC had not made further efforts to recover it back in 2012. This appears to be an assumption on Mr M’s part as there is no evidence to suggest HMRC ever did any recalculations or gave him reason to believe it had decided the overpayment was no longer recoverable. HMRC records from the time only say it considered his dispute about the overpayment and, after reviewing the decision, HMRC advised Mr M the overpayment was recoverable. As such, its decision and responses appear consistent.

50. The power to recover an overpayment are given to HMRC in the Tax Credits Act 2002.

51. Section 28 of the Act says: ‘Where the amount of a tax credit paid for a tax year to a person or persons exceeds the amount of the tax credit to which he is entitled, or they are jointly entitled, for the tax year the Commissioners may decide that the excess, or any part of it, is to be repaid to the Commissioners.’

52. The Act does not set out a time limit for HMRC to recover the overpayment. So, any debt incurred from an overpayment remains liable for collection and the amount of time that has passed does not affect HMRC’s ability to take action to recover the overpayment. There is no provision in COP 26 for an overpayment to be set aside on the basis of any delay in HMRC chasing it.

53. In its complaint replies to Mr M, HMRC informed him it had considered his complaint and the recovery of the overpayment of tax credits in line with COP 26 and the Act. Having considered the evidence available to us, we can see it has acted in line with its responsibilities as set out in both documents. In doing so, HMRC has also acted in line with our Principles of Good Administration, which say: ‘In their decision making, public bodies should have regard to the relevant legislation.’ Our principles also say public bodies must bear in mind the proper protection of public funds so, by recovering money it is owed, HMRC is keeping to this principle.

54. We understand Mr M is very frustrated and disappointed that HMRC did not take action for so long, and he strongly feels he should not have to make any payments. Having thought about what he has told us and from all the available evidence, it appears HMRC has acted within its powers, and it followed the relevant guidelines and standards when it started action to recover the overpayment, even after a number of years had passed.

55. Concerning the delay in HMRC communicating with Mr M, we have considered whether its actions were in line with guidelines and standards, even if there is nothing to suggest any delay should result in the overpayment being set aside. As there are limited records available, we cannot give any view, overall, on the quality or timeliness of any correspondence beyond those letters listed in the AO report.

56. The AO identified one letter which had not received a response and some which did not receive a timely response. It therefore recommended HMRC apologise to Mr M for the frustration that delay likely caused. We agree the delay in responding to the letter was not in line with HMRC’s Charter commitment to ‘answer your questions and resolve things first time, or as quickly as we can’. We also agree an apology is an appropriate way of putting things right for the frustration caused, in line with our Guidance on Financial Remedy.

57. We have thought about the longer gap between the correspondence in 2014 and the renewed contact in 2021. We do not see any signs of maladministration (fault) in the overpayment not being raised again until 2021. This is because it was open to Mr M to contact HMRC to make enquiries about what was happening with his case and to settle the debt at any time during that period. As explained above, HMRC had been clear and consistent Mr M would need to make that payment.

58. So, we have seen no signs of maladministration (fault) in HMRC recovering the overpayment and, when its communication was poor, it has already taken steps to put things right. As such, we will take no further action.

1. The Parliamentary and Health Service Ombudsman has carefully considered Mr M’s complaint about HM Revenue and Customs (HMRC). We understand Mr M continues to feel worried and frustrated about the handling of his tax credits and feels he has been treated unfairly because of HMRC’s decision he must repay an overpayment of tax credits for the 2009 to 2010 tax year.

2. In relation to HMRC’s decision about Mr M’s entitlement to the tax credits in the 2009 to 2010 tax year and whether or not the credits in question should be classed as an overpayment, we cannot further consider these aspects of the complaint. This is because this is an appealable decision through HMRC’s statutory appeals process and we can see it would have been reasonable for Mr M to have taken that route to achieve the change of decision he is looking for. We can take no further action on this part of the complaint.

3. After carefully considering all the evidence available, we can see HMRC acted in line with its policy and procedures when deciding to recover the 2009 to 2010 tax year overpayments and although there were some correspondence delays, it has already taken appropriate steps to put things right. So, we will take no further action. We explain our decision in more detail below.