Council Tax refund frustrations

Hi - first time posting and I'm looking for some advice.

I've had a nice experience with my Local Council - nice people they are. Short version is I was on a repayment plan and missed a payment in Feb, and made it a few days later. However they attached an AEO on my wage, and didn't take the £150 I'd pay into account. The account is a joint one from when me and my OH moved in together.

Once I realised what had happened, I sent them an email to say the AEO was for £150 more than it should have been and could they amend it BEFORE the payment came out (We're talking a full 4 weeks). A response came back to say sure, no problem. I thought nothing more of it until payday - when they took the full amount out.

I then emailed them on payday at the end of Feb when it was taken out - and they agreed to a refund via cheque/BACS (Definitely not a credit on the account...), and I could expect it by middle of the following week.

Except...it ended up a credit. Knocking 10-12 off per month. Great, except I'm £150 down on my budget and kind of need this. So back I go, some more polite venting and I'm then told it's being processed as a payment and I can expect it in my account by the 7th Apr.

Brill.

Except....it's not there. No BACS or cheque.

Back I go...and several emails later with no response I find the web-chat thing they are currently pushing on us. I then find out that I'm not getting a refund.

The joint council tax is up to date - except they now find that my OH has a debt of £850 from 2012, and have already skipped the foreplay and hit her with an AOE. We're already challanging it as we have no idea what it's for (OR where - the letter is addressed to us both, with no address for the old place it refers to, or account number, and just a year) - but they said that because the account is now a joint one, the payments went to her debt from before we moved in together.

I've pointed out that this is before we got together, and asked why this is happening - they suggested calling, but I prefer email and chat because it's written in black-and-white. At this point the web-chat person began to say she can't go any further and kept posting the link for the complaints page.

Are they allowed to pull my refund for the joint account, and use it for an old debt in her name, from a place they can't tell us about?

I literally know nothing on Council Tax debt, and a few searches on Google don't seem to show much.

Thanks in advance!!!