6 September 2004 Have the Inland Revenue overpaid your Tax Credits and asked for their money back? Check first – you may be able to keep it!
2003/4 was the first year of tax credits. Many people will either have been overpaid or underpaid. This is because tax credits paid in the year to April 5 2004 are based on individuals’ income for the year to April 5 2002. However, the amounts paid then have to be checked against individuals’ actual situation in the year to 2004.
Where the Revenue have overpaid someone, they will normally require that the extra is refunded. Individuals will now be receiving these requests. However, repayment is not always necessary.
Anne Redston, CTA and Chairman of the Personal Taxes Sub-Committee at the CIOT, said: “An overpayment does not have to be paid back if it was the result of the Revenue’s mistake, and the individual could reasonably believe that the tax credits were correct. For example, if Mary told the Revenue that her daughter had left school and was now at work, and the Revenue didn’t process this information to change her award.
There were also mistakes in the original Revenue guidance provided with the Tax Credit form. For example, the form said that farmers’ income should be averaged (as it is for tax). This is not the case, so a farmer who relied on this guidance will not have to repay the overpayment. The CIOT are currently pressing the Inland Revenue to publish the details of the errors on the form so that claimants will know when they are in this situation.
Anyone who thinks they should not have to repay their overpayment should contact the Revenue, and ask for Form TC846 ‘Request to reconsider recovery of tax credits. There is also a copy of the form on the CIOT website."