TCTM08303 - Payment of Tax Credits: Overpayments: Recovery of overpaid tax credits

Tax Credits Act 2002 section 29

Where an overpayment is liable to be repaid by a person or persons, the Commissioners for HM Revenue & Customs must give notice to that person or each of them.

The notice must specify

  • the amount to be repaid; and
  • how the amount to be repaid is to be recovered.

An overpayment can be repaid to the Commissioners in the following ways:

  • it can be treated as tax charged in an assessment being due and payable by the person(s) named in the notice within 30 days: Tax Credits Act 2002 Section 29(3)
  • it can be recovered by deduction from a payment of any tax credit under an award made for any period to the person(s) named in the notice (see TCTM08304): Tax Credits Act 2002 Section 29(4)(a).
  • it can be recovered as if it was an underpayment of income tax for a previous year of assessment (known as PAYE coding out): Tax Credits Act 2002 Section 29(5)

Where an overpayment of a tax credit is to be treated as though it were an amount recoverable by the Secretary of State under section 71ZB of the Social Security Administration Act 1992 (Administration Act) or Social Security Administration (Northern Ireland) Act 1992 ((Administration Act (Northern Ireland)) the overpayment can be recovered by the:

  • Secretary of State
    • by deductions under section 71ZC of the Administration Act (deduction from benefit);
    • by deductions under section 71ZD of that act (deduction from earnings); or
    • as set out in section 71ZE of that Act (court action etc); Tax Credits Act 2002 Section (29)(4)(b)
  • Relevant Northern Ireland Department
    • by deductions under section 69ZC of the Administration Act (northern Ireland) (deduction from benefit)
    • by deductions under section 69ZD of that act (deduction from earnings); or
    • as set out in section 69ZE of that  Act (court action etc) Tax Credits Act 2002 Section 29(4)(c)

It is the introduction of Section 29(4)(b) and 29(4)(c) that allows an overpayment of a tax credit to be transferred to the Department for Work and Pensions.