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Last Updated: Friday, 1 February 2008, 12:50 GMT
New rules for tax credit claims
Alexandra Roberts
Alexandra Roberts faced a tax credit demand for 21,000 last year
New rules governing the recovery of overpaid tax credits have been issued by HM Revenue and Customs (HMRC).

Since 2003 the tax credit system has been bedevilled by overpayment problems after apparent mistakes by the Revenue.

Many people have been dismayed to be told that they had to repay their money after making accurate claims.

The new guidance, known as COP26, is less subjective then before and sets out a list of responsibilities for both the Revenue and claimants to fulfil.

Robin Williamson, of the Low Incomes Tax Reform Group, said the new guidance was a substantial change, and partly an improvement.

"The reasonableness test, about whether you should have realised you were overpaid, is no longer there," he said.

"There is no longer a tension between what the Revenue thinks you should have spotted and what the tax credit claimant can reasonably expect to spot," he added.

30-day windows

The 12 page booklet - What happens if we have paid you too much tax credit? - sets out the responsibilities of both HMRC and the claimant to make sure the information about income and personal circumstances in their claim is accurate.

This places responsibilities on the claimants at the point at which they receive their award notice
Robin Williamson, LITRG

A revision to the procedures was announced by the Government last October.

"It is clearer, setting out claimants' and the Revenue's responsibilities - we have consulted widely on this," said a Revenue spokeswoman.

The new COP26 procedures give the Revenue 30 days grace to process any new information from a claimant and to recalculate the payments.

If the new award is sent out late, and is then found to contain a mistake, it means the Revenue can still reclaim any overpayments made in the first 30 days while it was crunching the new figures.

If there are any mistakes when the award is finally recalculated the onus is also on the claimant to spot them and tell the Revenue quickly.

Assuming the new award goes out in time, then overpayments spotted within a month of being received will not trigger any recovery.

But if claimants delay, or just don't notice there has been a mistake, and wait more than a month to alert the Revenue, then overpayments will still be collected up to the time the Revenue is contacted.

"This places responsibilities on the claimants at the point at which they receive their award notice," said Mr Williamson.

He predicted that there might still be disputes about whether or not the Revenue had actually received telephone calls or letters from claimants telling it of changes.

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