7 August 2017

Tax credits notional entitlement and UC - An update

We wrote about the changes HMRC have introduced to the way they apply notional entitlement (notional offsetting) in our blog post in February.

HMRC apply notional entitlement in cases where a tax credit overpayment is created due to the late notification of a changehousehold make-up in a tax credits claim and a fresh, correct, claim is subsequently made.

HMRC have recently confirmed that they are considering the position for those claimants who live in UC full service areas and cannot, therefore, go on to make a fresh tax credits claim but they do make a correct UC claim instead. HMRC have not yet fully established their policy and processes for these cases but in the interim, they have told us that overpayment recovery action for these types of overpayments will be suspended until such time as the new policy and process are introduced.

However, even under notional entitlement, HMRC only agree to consider adjustments to the amount of overpayment to be recovered in relation to the notional entitlement. There is no guarantee that notional entitlement will be appropriate for all overpayments where recovery has been suspended under this announcement or that it will, in reality, make a difference even if it is applied. Unless and until claimants are notified that HMRC have changed the amount of overpayment to be recovered, claimants remain liable for the full amount of debt notified to them by HMRC.

We will update the website once more details are available.