SolvedDMBM555700 | Debt and return pursuit: tax credits: clerical compliance charges
From HM Revenue & Customs · Debt Management and Banking Manual
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This paragraph relates to Tax Credit charges arising from compliance activity.
For further general information on the finalisation process and the collection of overpayments arising from that process see DMBM555050.
Working Tax Credits (WTC) and Child Tax Credits were introduced in April 2003 under the provisions of the Tax Credits Act 2002 (TCA 2002).
WTC and CTC are paid on a provisional basis and entitlement is reviewed at the end of the year in all cases. An overpayment remaining or coming to light at the end of the year will usually be handled by the NTC system. Additionally, Claimant Compliance Offices (CCOs) identify and investigate cases where the claimant was not entitled to the amount of tax credits claimed. CCOs are responsible for calculating and raising the charges mentioned in the following paragraphs.
Types of charge
Contract settlements
If a penalty is appropriate, a contract settlement will normally be negotiated, even in cases where only the penalty is involved. If, in a penalty case, there was also no entitlement to tax credits, the contract settlement will include the overpaid tax credit. Contract settlements will be entered on to the SAFE system.
If it is not possible to agree a contract settlement, any overpayment will be dealt with as in ‘Overpayments’ below.
All NTC contract settlement cases will be referred for local recovery action irrespective of the class or amount outstanding.
Penalties
If a settlement cannot be negotiated, a penalty determination will be made. Penalties will be entered on SAFE. It is possible that there may be a penalty determination and an overpayment charge for the same award period.
Penalty will be charged under Section 32(1) TCA 2002 where a person fails to comply with a formal information notice under Sections 14-19 of the TCA2002. An initial penalty of up to £300 can be imposed, followed by penalties of up to £60 for each day that failure continues.
Overpayments
Where there is no entitlement to tax credits for the award period, for example because they did not meet the eligibility criteria, an overpayment is recoverable in-year. In these cases the overpayment is recoverable 30 days after the issue of a revised decision notice. Where a contract settlement is not appropriate as no penalty is being sought, or the claimant does will not enter a contract settlement, these will be treated as recovery of overpayments.
Interest
The amount of a contract settlement that attracts late payment interest will be dealt with automatically by SAFE.
All penalties carry late payment interest.
Interest on paid late is charged under Section 37(5) TCA 2002. Interest accrues from 30 days after the “date awarded” shown on the charge.
If you need to calculate interest use IRIS function SAIN01.
Late payment interest will also apply to NTC overpayment charges if overpayment arose as a result of fraud or neglect. Interest will be chargeable under Section 37(1) TCA 2002.
The element of WTC or CTC (or both) which attracts interest will be identifiable. If interest is chargeable in respect of both CTC and WTC overpayment, separate interest charges must be raised.
Interest will accrue in appropriate cases from 30 days after the date of revised decision shown on the charge.
An appeal against a decision to charge interest should be referred to the CCO. However, an interest objection, for example disputing the amount of interest charged, should be dealt with under DMBM404000.
If you need to calculate interest use IRIS function SAIN01.
SAFE will automatically deal with any late payment interest.
Appeals
The claimant or claimants have a statutory right of appeal against the
penalty determination or Commissioners/UAT penalty award
revised decision notice
decision to charge interest.
Claimants do not have a right of appeal against the recovery of the overpayment.
Any appeal, or written/verbal communication disputing an amount should be forwarded to the issuing office, immediately.
SAFE procedures
Contract settlements and penalties
SAFE will automatically make application for payment.
NTC Overpayment charges
The claimant will have received a revised decision notice, and a letter from the CCO advising that payment is due 30 days after the revised decision notice. SAFE will issue the necessary applications for payment.
Referral for local action
If the charge remains unpaid, SAFE automatically passes the charge to IDMS.
SAFE shows the CTC and WTC elements separately as required for legal proceedings in Scotland.
Debt pursuit office action
Cases for enforcement will be presented on an IDMS worklist and will include the letters ‘NTC’ as part of the reference number.
SAFE will have already issued applications for payment. Do not repeat the actions. You should issue a letter along the lines of the IDMS10 warning of enforcement proceedings if the debt is not paid. Remember that distraint cannot be taken for a contract settlement.
Every time that you take an action in the case carry out
a recovery proceedings (RP) check yourself, see DMBM615110 or
if the charge is one which was cutover, ask the SAFE team, see DMBM615120.
Joint and several liability
Where two claimants are shown on a charge they are jointly and severally liable for payment, for more information on this see DMBM555020.
Interest in enforcement cases
Where you take enforcement action use SAFE to calculate the interest charge “to date”.
Appeals/objections received locally
Any dispute or objection to the amount or content of a contract settlement, penalty determination, Tribunal penalty charge or overpayment should be forwarded to the issuing Compliance Office, immediately.
Interest
Contract Settlements
For late payment interest on contract settlements see DMBM610050.
Penalties
Interest on late paid penalties is charged under Section 37(5) TCA 2002.
Overpayment charges
Interest is only chargeable on an overpayment charge arising as the result of fraud or neglect. It is raised under section 37(1) TCA 2002. For more information on this see DMBM555500.
Enforcement
You should read the information under the heading Enforcement at DMBM555050 in conjunction with the following guidance, particularly with regard to joint and several liability and taking distraint.
County court proceedings
For NTC contract settlements follow existing guidance at DMBM665320 (for England and Wales only). You will find the particulars of claim in the DMB Guidance Gateway.
For form 305A penalty charges you cannot use the IDMS CPC/CCBC interface as the action is taken in the name of the General Tribunal rather than an officer of the Board. You will have to prepare the particulars of claim clerically. The certificate of debt will also need to be prepared clerically replacing “General Tribunal for the Division of” with “United Appeals Tribunal at”.