Government dishes out more than £1.5 billion in overpayments: Now they want it back

The latest annual report from HMRC has revealed that overpayments under tax credits and universal credit are spiralling out of control. And according to warnings from the National Audit Office watchdog, the situation is going to get worse before it gets better. The news is setting off alarm bells for thousands of families who are already struggling to make ends meet and now face this additional threat.

A history of incompetence

The issue of overpayments as such is not a new one. The complexity of the benefits system means that there is always the possibility of misunderstandings, claimants sailing close to the wind or plain and simple errors. All of these can result in overpayments being made.

The real trouble started when HMRC appointed a third part company called Concentrix to take a look at the tax credit system. The witch hunt that followed has been well documented, and we discussed it here a month or so back. In short, they accused anyone and everyone of benefit fraud, those accused who were able to defend themselves effectively had the accusations thrown out, Concentrix were ultimately removed, and all faith in the system was lost.

Meanwhile, the issue of overpayments has not gone away.

Overpayments at a record high

Overpayments have increased by an astonishing 15 percent since the previous tax year – a rise of more than £200 million. Having removed Concentrix from the equation after they wrongly stripped 45,000 people of their benefits, HMRC has taken responsibility for getting its own shop in order. But the outcome for low income families will be no better.

Keen to get the numbers down, we can expect them to take an aggressive stance at anyone they believe to have received an overpayment. It is interesting to note that they classify claimant fraud and internal errors as the causes of overpayment, and it does not take a genius to figure out which of these aspects will be pushed the hardest.

MPs sitting on the House of Commons’ Work and Pensions Committee have already criticised HMRC for “hounding innocent workers on benefits,” but cynics might suggest that they are an easier target than multi-millionaire tax dodgers.

Clawing it back

HMRC managed to claim almost £29 billion from businesses and individuals who had not paid enough tax, but against this is the fact that they were forced to pay back almost £8 billion after losing legal battles.

However, it is the topic of overpayment of tax credits that is really capturing the attention of politicians, the media and the general public. In taking the task in-house after the Concentrix debacle, HMRC has empowered its own Compliance team to oversee tax credits. But this has simply resulted in more accusations of heavy handedness and incompetence.

How could it affect you?

There are many reasons you might receive an overpayment. HMRC themselves acknowledge that there are errors in eight percent of calls they take regarding tax and tax credit. That equates to mistakes in almost one in every 12 calls. The statistics do not go into details as to who makes those mistakes, but with overworked call centre staff talking about complex benefit matters with worried individuals who have been on hold for anything up to an hour, it is perhaps surprising that the error rate is not even higher!

It is important to understand this context, however. Not every overpayment is down to a fraudulent claimant trying to beat the system with acts of dishonesty. But that does not stop HMRC’s over-eager Compliance team from treating people as if they had been doing just that – and it can be a scary experience.

If you have received an overpayment from the tax office, the first you are likely to know of it is when they send you a letter. This is, in itself, an alarming experience for most. Remember, HMRC’s default position seems to be to treat anyone who has received an overpayment as some sort of criminal, and they are keen to be on the front foot. Even though most incidents are from genuine mistakes.

What can you do?

If you find yourself in this position, there are three golden rules to remember, and it is worth looking at each of these in turn:

  • Don’t panic

First of all, we have already mentioned that it can be a scary experience, and HMRC do little to make it any easier. The letter will probably ask you to contact them immediately and / or to attend an interview.

As you will have worked out by now, you have not been singled out, and there are plenty of others in the same boat. It is a serious matter, but nothing that cannot be resolved, however you came to be there.

There is a temptation to get straight on the phone and try to explain yourself. This is a bad idea, as HMRC will be specifically looking to gather evidence against you.

  • Don’t ignore it

Having advised against a knee jerk reaction, that doesn’t mean you should simply throw the letter away and pretend it never happened, either. Once HMRC have started on this road, they are in “Terminator” mode and will never give up till it is resolved. So you will need to take action, but slowly, calmly and on your own terms.

  • Get some help

Benefits and credits are a complex area, and expert help will lead you to the best outcome. That’s where we come in. If you attend an interview, you will end up tied into all sorts of knots, and that is exactly what we seek to avoid.

We will deal with HMRC on your behalf, and we will ensure that you never have to be interviewed by the authorities. Remember, we do this every day.

Our friendly team of experts is always on hand to advise you, so give us a call us on 020 7381 8111, or email us at

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