What we do
archived case summaries
In the year to March 2005, almost one third of all complaints received in the office concerned Tax Credits. The following three case summaries are typical of complaints about this area of work that we have investigated.
Tax Credit case summary 1
Mrs A complained about a sudden and unexpected reduction in her Child Tax Credit (CTC) payments by the Inland Revenue (now HMRC). She was clearly worried and distressed, claiming that the reduction led to considerable hardship for her and her family.
We requested a report from HMRC's Tax Credit Office (TCO) about Mrs A's case, together with her files. There was a significant delay before these papers were made available for our investigation. In spite of our frequent reminders, it took over three months before we received this information. Understandably, Mrs A became increasingly distressed as time went on.
When we did receive the TCO's papers, we were dismayed by the contents of their report, which failed to explain clearly what had happened in Mrs A's case.
Following her application for CTC, Mrs A had received a number of different Tax Credit award notices, each one showing different amounts of entitlement. It was not clear which, if any, of these notices showed the correct position. This mistake, resulting from serious problems with the software on the Tax Credit computer system, meant that Mrs A had no way of knowing how much she should receive.
During the early stages of our investigation it soon became clear that Mrs A had been overpaid by some £1800 in the 2003/2004 tax year, which caused the reduction in her entitlement and prompted her initial complaint.
At the time of our investigation, the Inland Revenue had yet to finalise their policy on the recovery of overpayments. This was subsequently set out in their Code of Practice 26 - What happens if we have paid you too much Tax Credit? (COP 26).
When COP 26 was published, after the end of the 2003/2004 tax year, it allowed for the Inland Revenue to waive overpayments in certain circumstances, specifically where:
- a tax credits claimant was paid too much because of a mistake by the Inland Revenue and it was reasonable for them to think that their award was right or
- it would cause hardship to the claimant or their family if they had to pay the Tax Credit back. The TCO may also accept payment over a longer period of time in a case of this kind.
In Mrs A's case, it was clear that her overpayment arose from mistakes caused by the Inland Revenue. The multiple award notices that she received meant that she had no way of knowing her correct entitlement and, therefore, she could not have realised that she was being overpaid. Unfortunately, because COP 26 was not published at this time, Mrs A suffered further delays during our protracted discussions with the TCO about the Inland Revenue's policy on overpayments.
We upheld this complaint.
Following lengthy discussions with the TCO, both about Mrs A's complaint and the policy on overpayments in general, the Inland Revenue agreed to waive the overpayment. This was more a decision made in principle because the TCO could not finalise the exact amount overpaid until they had processed Mrs A's end of year details. What was clear, however, was that the overpayment resulted from the Inland Revenue's errors, rather than any negligence on her behalf.
The unacceptable delays in this case, combined with the hardship that Mrs A and her family experienced as a result of her reduced entitlement meant that she suffered considerable worry and distress.
The TCO had already paid Mrs A £75 in recognition of her worry and distress and now offered to pay her a further £250. They considered that this was a generous offer in the light of their decision to waive her overpayment. Mrs A, however, considered that this was insufficient, given the problems that she had encountered.
We agreed with Mrs A that, in the particular circumstances of her case, the Inland Revenue should pay her a further £300 in addition to the £75 already paid. The Adjudicator also noted her concerns about the manner in which the TCO sought to link the payment of compensation with the concession that waived Mrs A's overpayment. These were separate issues that should have been treated as such by the TCO. Finally, we recommended that the Inland Revenue should also pay a further £20 to Mrs A in addition to the £10 that they had already paid to cover her direct costs.
