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:
- before making an award or 'pre-award' check (Section 14 Tax Credits Act 2002);
- on a claimant notifying a change in their circumstances (Section 15 Tax Credits Act 2002); or
- at any time if the Board have 'reasonable grounds for believing' that the claimant has been awarded credit at the wrong rate, or that they are no longer, or have never been, entitled to the credit (Section 16 Tax Credits Act 2002).
- Following notice under Section 17 (renewals notice) prior to making a final decision under Section 18. (Section 18 Tax Credits Act 2002).
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 .
Last reviewed/updated 18 April 2018