Tax Credits Overpayment was Not My Fault – How to Dispute

Dealing with overpaid tax credits that were not your fault can feel unfair and stressful. But don’t worry; you’ve found the right place for assistance. Each month, more than 170,000 people visit our website for guidance on problems just like this.

This guide will help you understand:

• What tax credits are and how they work.
• Why overpayments can happen and who oversees them.
• How to dispute an overpayment if it wasn’t your fault.
• What may happen if you don’t pay back the extra money.
• Where to find more support with your debts.

We know this is a tough time for you, which is why we want to help you make sense of it all. There’s no need for big words or scary facts. We’re just here to offer a helping hand in a tough spot.

Let’s dive right in.

What Are Tax Credits?

Tax credits are a form of benefit. People who are registered as disabled, are on a low income, or struggling to find enough money to cover family living costs, can apply for tax credits. Tax credits are a form of supplementary income for people who are working for the national minimum wage, and are not making enough to take care of everyone in their household.

Unlike most other forms of benefits, it is not the Department of Work and Pensions (DWP) that oversees the tax credit system. In this case, it is HM Revenue & Customs (HMRC). Tax credits are calculated annually. There are a number of different tax credits, such as child tax credits and working tax credits. However, universal credit is replacing these, and most people should have been switched to universal credit who were claiming these tax credits.

How Do Tax Credit Overpayments Happen?

Your tax credit is calculated yearly, at the end of each tax year. There are a number of ways that a tax credit overpayment could happen, as explained below.

1. You received more in tax credit payments than you were entitled to for the year.
2. You received a payment by mistake to which you were not entitled.
3. Your tax credits should have been adjusted to avoid overpayment but were not.

There are quite a few reasons the three situations outlined above can occur, and below we go into a little detail about each of these.

• The information you gave HMRC was incomplete or incorrect.
• You did not tell HMRC about a change in your circumstances.
• You did not inform HMRC that your income had increased.
• Your renewed application for tax credits was late.
• HMRC made a mistake and paid you too much in tax credits.

Disputing an Overpayment

If you don’t think you do not owe the overpayment debt, you can officially dispute the decision. This must be done within three months of the date you received notice of the debt. You make the dispute by completing a  TC846 Tax Credits Overpayment form, and then sending it to:

HMRC

Overpayments Dispute Team

Tax Credit Office HMRC

BX9 1ER

Note that there is no provision for making a dispute by telephone. All disputes must be made in a writing and must be sent with the aforementioned form completed.

Will HMRC Investigate You?

If you owe a tax debt or a tax credit overpayment debt, HMRC will initially want to work out how the debt came about. At this stage, you are under no suspicion of acting in a fraudulent manner.

» TAKE ACTION NOW: Fill out the short debt form

The HMRC needs to check all of the facts to work out if a mistake was made on their end, or whether you simply didn’t give them the right information by accident. 

In this case, HMRC will likely ask you to provide information about your current financial situation, and any changes to your circumstances that have occurred since you last applied for tax credits. If HMRC suspects that you provided incorrect information on purpose, or purposely withheld information, a much deeper investigation will begin. Depending on the results of this investigation, one of two things will happen:

1. If the HMRC decides the mistake was down to a simple error on either their part or yours, they will tell you that the overpayment must be repaid.
2. If the HMRC decides that you have been fraudulent in the way you have been dealing with your tax credit application, you will be told that you have to repay the overpayment, and you may face criminal prosecution for fraud.

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What Happens if You Don’t Pay HMRC?

If you owe money to HMRC due to a tax credits overpayment, the first thing that will happen is that HMRC will begin deducting money from future tax credit payments, until the debt is paid. If you stop being eligible for tax credits before the overpayment is repaid, then HMRC has many options available to enforce repayment of the debt. Depending on the route that HMRC takes, any of the following scenarios could eventually occur.

• The debt may be passed to a debt collection agency for collection.
• Deductions may be taken from your wages/salary or from your pension payments.
• Bailiffs may be sent to your home to collect the debt, or take goods from your home to be sold to pay the debt.
• HMRC can take the money out of any bank or building society accounts (including savings accounts) that you operate.
• Have you declared bankrupt.
• Seek a charging order on your home, to force you to sell it and pay the debt in full.

How do I Challenge My Tax Credit Overpayment?

You can challenge your tax credit overpayment, but keep in mind that your dispute will probably fail unless HMRC have made a mistake.

You need to tell HMRC that you are challenging their overpayment within 3 months of your first letter telling you that you were overpaid or the date on your Annual Review notice.

HMRC will then review your case and write to you with their decision. Their decision will tell you:

• If you have to repay the tax credits
• How much you need to repay
• Why they came to this decision.

Keep in mind that they will not stop trying to claim the money while they investigate your dispute.

After you receive their decision, you have 30 days to appeal.

Sometimes people dispute because the debt is very old, take a look at this example.

Unfortunately for this forum user, HMRC debts don’t become statute-barred which means that they are enforceable forever. If you are in a similar situation, I recommend speaking to a debt charity for some free advice.

Who is Past Due Credit Debt Collectors?

Past Due Credit Solutions is a firm of debt collectors, that creditors can either pass your debt to for collection, or sell the debt to at a reduced rate. In the case of PDCS, it is more likely the former situation, as they are used by large companies in the UK to chase bad debts. Some of which we have listed below.

• NPower
• First Utility
• British Gas
• Sky
• British Telecom

Furthermore, PDCS is sanctioned by the UK government and HM Revenue & Customs (HMRC) to collect debts related to tax. 

Why Is Past Due Credit Calling You?

Before you started getting phone calls from 01414470546, which we now know is Past Due Credit Solutions, you should have been sent at least one letter, explaining who PDCS is, why they are contacting you, and on behalf of which creditor. This letter will have asked you to contact PDCS to arrange for payment of the debt.

If you have ignored this letter, or have not taken any action yet, then PDCS will begin calling you. These calls are fully automated. The phone system has a list of numbers to call, including yours. If you pick up the phone, there will then be a short delay while the phone system connects you to an agent. The agent will want to pin you down to making payments to clear the debt. They can often be very insistent, verging on threatening when trying to force you to pay a debt.

If You Don’t Speak to Past Due Credit What Will Happen?

Many people will advise you not to answer these calls, and to never speak to the collection agency. Simply to avoid the unethical way the telephone agents act. However, there is another possible benefit of not answering these calls. If you can manage to avoid having any contact with PDCS for a whole 6 years, you may be able to have the debt written off. Unfortunately, PDCS has other tools at its disposal that could force you to pay the debt long before the 6 years is up, as we will explain later in this post.