Tax Credits: Examinations

This section of the website provides information about examinations.

Examinations are one of the compliance powers that HMRC can use to check tax credit claims. Examinations can be carried out:

Examinations can sometimes take the form of a 'discrepancy check' where there is a discrepancy between the information on the claim provided by the claimant and other information which HMRC hold. In such cases, HMRC may contact the claimant to ask them for information which may explain the discrepancy and that contact can be by telephone, letter or SMS text. Often, the message from HMRC asks the claimant to contact HMRC and tells the claimant that if they can't or don't contact HMRC within a set period (quoted to them), HMRC will amend the award with the information they hold.

Examinations can also start with a simple letter, or a formal notice seeking information. There is no right of appeal against the issue of a formal notice seeking information, and therefore little recourse if HMRC decide to question the claimant about things which do not strictly relate to their tax credit entitlement (known as 'fishing expeditions'). However, instructions to compliance staff discourage such actions. Also, by statute the purpose of an examination is:

'to provide any information or evidence which [the Board] consider they may need for making their decision',

There are penalties which can be applied for failure to comply with a formal information notice.

HMRC have the power to suspend tax credit payments where they have made a formal request for information and the person has not provided the information asked for. This is a very wide power, and the legislation has no ‘reasonable excuse’ or similar defence for not providing the information requested.

The power to suspend payments applies only to requests for information during the tax year (not examinations prior to the first decision, nor any requests made after the end of the tax year (although HMRC can stop provisional payments at any time)). HMRC have produced leaflet WTC/FS9 that deals with this process.

HMRC practice in conducting examinations is set out in their Claimant Compliance Manual CCM4000ff .

Official leaflets are the factsheets FS2 (Tax credits examinations) and FS3 (Tax credits formal request for information).

Last reviewed/updated 18 April 2018