CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.   Tax credits project  Tax credits factsheets Training courses Distance learning course FREE tax credits training for Local Authorities Publications Online services Donate Join CPAG CPAG home Contact us    This project is funded by the Scottish Government	CPAG in Scotland Tax Credits E-Bulletin August 2010 Dear Colleague, Welcome to the August 2010 edition of CPAG in Scotland's tax credits e-bulletin keeping you up-to-date with tax credits news and developments.             Contents CPAG in Scotland news and events        - Tax credits training   Tax credits news                      - Updated guidance for advisers on overpayments           - 21st century benefits          - New caselaw CPAG in Scotland news and events Tax credits training  As reported in the news recently, overpayments are set to soar due to new government plans – keep one step ahead and refresh your knowledge with this course: Tax credits – appeals, overpayments and complaints 16 September 2010, Glasgow (10am - 4pm) This course aims to help advisers understand how overpayments can arise and how to challenge decisions. It will help workers to keep one step ahead of new government plans which are likely to result in an increase in overpayments. It is suitable for experienced advisers as well as those with little experience of tax credits. It looks at: How to appeal Recovery of overpayments, including recent changes regarding single/couple status Challenging overpayments Making a complaint Future changes to the income disregard, as announced in the June 2010 Budget Level Standard Tutor Mark Willis SNS 3.5 and 4.3 CPD 5 hours Course fee: £93 for CABx, £108 for voluntary, colleges and housing associations and £153 for statutory. To book a place click here.   Tax credits news Updated guidance for advisers on overpayments The Revenue has updated its downloadable leaflet, How HMRC handle tax credits overpayments. This guidance, aimed at intermediaries and advisers, provides more detail than COP 26 on the recovery process. It includes the following useful points: • If a customer appeals a decision, which created the overpayment, then any recovery action will be suspended until the outcome of the appeal is known. Benefits and Credits (HMRC) will write to the customer explaining the outcome of the appeal.  (Note the lack of recognition of the role of the Tribunals Service in the appeals process, which may help to explain the tiny number of tax credit appeals that reach First-tier tribunals). • The decision on hardship in ongoing recovery cases will be in line with considerations applied to direct recovery cases. • Charging orders on the customer’s primary residence will not be considered for a stand alone tax credits debt. • If a customer asks for a repayment period of more than 12 months, and up to ten years, HMRC will make an informed decision based on the new tax credits Time to Pay Negotiating Framework (a copy can be found at Section 5). Income and expenditure details will not be required for agreements up to ten years. (Note that the previous version referred to three years). • Where the customer advises they are unemployed, and have no savings or realisable assets, the case will be reviewed in 12 months and consideration given to remit the outstanding overpayment.  • Where a customer is in receipt of Sickness or Incapacity Benefit or Employment and Support Allowance, and has little prospect of ever gaining paid employment, HMRC will remit the outstanding overpayment and write to the customer. The guidance also includes useful Tax Credits Helpline numbers and examples of standard letters. View How HMRC handle tax credit overpayments 21st century welfare The government has issued a consultation document on reform of the social security and benefits system, including tax credits. Proposals for discussion include: • 'Universal Credit’ would subsume tax credits as the form of income top-up for families on low earnings, including support for childcare. It could include a single withdrawal rate in place of the current different withdrawal rates for out-of-work benefits, tax credits, housing benefit and council tax benefit.   • ‘Single Unified Taper’ would mean that the tax credits system would be retained but with a taper that would be applied to their overall benefit eligibility. This would mean that individuals would keep the same amount of every pound they earn as they move into work. • ‘Single Working Age Benefit’ would replace out of work benefits and give all working age claimants the same level of income. It assumes that there would continue to be separate provision for extra costs and that tax credits would remain as now. • Integration of income tax and benefits, or a negative income tax. These ideas would replace most benefits and tax credits by providing and withdrawing support through the tax system. • A new delivery system with one gateway for benefits and tax credits, building on IT capabilities to gather evidence, assess entitlement and combine with information on income. • A new system currently being considered by the Revenue could use real-time data on earnings reported by employers when they are paid, rather than at the end of the year. This would remove the need for claimants to report income and ‘could largely resolve the issue of overpayments’. Alternatively, a series of fixed period awards could be used. The government is seeking views on the proposals, with a list of questions for response at the end of the document. The consultation period runs until 1 October 2010. View 21st Century Welfare New caselaw A recent Upper Tribunal decision has highlighted the anomalies of the tax credits system when a couple separate during the year. In this case, the couple claimed and were awarded tax credits for 2006-07, based on their estimated joint income. They separated in September 2006, so bringing the joint award for that year to an end. At the annual review, both former partners were separately required to complete the annual declaration of income in the whole tax year 2006-07. The final decision for the joint claim from April to September 2006 resulted in an overpayment because joint annual income was higher than estimated, due to the former partner’s earnings later in the year. The appellant said that it was unfair that her former partner’s income of £5,000 earned after they had separated was included in the calculation because she did not receive any of that money. The Revenue’s representative stated that he understood this concern but that the Department had applied the regulations. The appellant indicated that she had followed the rules by notifying changes to the Revenue and as a result had been penalised. The Judge agreed with the conclusion in CTC/2270/2007; the wording was unambiguous and even if it created an anomalous outcome in a case where it attributed a portion of income to a claim period in which no income was in fact earned, the outcome was not so absurd that Parliament could not have intended it. The rules require the full year’s income to be taken into account, and the tribunal has no discretion to do otherwise. It should of course be noted that the Revenue has discretion not to recover in these cases where the claimant has met their responsibilities and an overpayment has arisen through no fault of their own. View 2010 UKUT 159 (AAC) If you wish to unsubscribe from all our welfare rights e-bulletins click here. If this e-bulletin has been forwarded to you and you wish to subscribe to it click here. We would welcome feedback on the e-bulletin, please contact us at acarr@cpagscotland.org.uk with your comments. 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