20 February 2017

Update on requesting hardship in ongoing recovery cases

Where someone has an overpayment and is still receive tax credits, HMRC may reduce their ongoing payments to recovery the overpayment. There are limits on the amount by which payments can be reduced in order to recover an overpayment (10%, 25%, 100% or 50% depending on circumstances) and HMRC say these limits are to avoid people falling into hardship.

However, some people may find themselves in financial difficulty when HMRC reduce their ongoing tax credit payments and in such cases HMRC have a hardship process that can be used. Historically this has been difficult to access and not well communicated to claimants, however HMRC have now made several changes to the process and the letters used to contact claimants.

Claimants can request a reduction in their rate of recovery either online, via the personal tax account or by telephone, via the tax credit helpline. They will be asked to fill in form TC1133 which requests information about the household and income/expenditure.

HMRC will then use this information, sometimes in conjunction with a telephone call or letter for further information, to make a decision. A decision letter will then be issued to the claimant.

It is important to note that the arrangement will only last until the end of the tax year, a new hardship request will need to be made each tax year.

You can find out more about the process and how HMRC decide whether to reduce payments in our tax credits dealing with debt section.