Tax Credits: Challenging overpayments

Most advisers who deal with tax credits are likely to have dealt with a claimant who has been overpaid. The nature of the tax credits system means that overpayments are a natural part of it and can arise without fault by either the claimant or HMRC. However, some overpayments occur as a result of an error by HMRC or a mistake by the claimant.

There are six options that must be considered when challenging an overpayment. The options are not mutually exclusive, therefore it may be appropriate to pursue one, two, three or all of them, depending on the circumstances of each case.

From around September 2018, HMRC have amended their telephone handling where claimants call in respect of challenging a tax credits decision or overpayment, in order to streamline the processes and reduce inconvenience.

The process, which HMRC trialled for a short while, means that where claimants (or their advisers) call in respect of a tax credit decision or overpayment they are unhappy about or want an explanation about or want to dispute or challenge, HMRC's advisers will usually attempt to deal with all aspects of that call in one go. This is likely to involve:

If a claimant does not understand why they have an overpayment – they should contact HMRC’s tax credit helpline. An explanation may be given over the phone. In some cases, claimants may need to write to HMRC for a fuller explanation and may need to consider a subject access request. It should be noted that HMRC will not suspend recovery of a debt when a claimant asks for more information/an explanation. Recovery is only suspended when a mandatory reconsideration is lodged (or a subsequent appeal made to the First-tier Tribunal).

The revised telephone handling process does not affect the claimant's options.

The options to challenge an overpayment are:

  1. Appeal
  2. Dispute
  3. Official Error
  4. Complaint
  5. Repayment/hardship
  6. Judicial Review

Last reviewed/updated 9 November 2021