A Question about Inland Revenue

Scarlett.1974

Hi all,

A quick question for you - I am currently paying back some overpayments of tax credits from 4 years ago. I pay it back at a rate of £10.00 per month. There's approx. £1400 still outstanding. Now, my question is this - can this debt form part of our BR or is debt to the Inland Revenue seperate? I guess I'm worried that if I do stop paying it that they'll cut my tax credits next year when it's up for renewal (or even sooner maybe).

Can anyone advise?

Thank you.

Scarlett xx

fermi

It depends whether a "final award notice (of repayment)" has been issued.

I'm assuming in your case it must have been?

Assuming the above is true then in theory it can go into the BR.

Is the £10 per month being deducted from what you get now, or are you actually paying it? If it's being deducted then that should stop when you are discharged, but if you are actually making payments you should be able to stop as soon as you are BR. You should confirm with the OR before stopping any payments though.

Whatever happens make sure the debt is entered on the forms. Then it's up to the OR to work it out.

fermi

This is the official bit:

Once the Official Receiver is aware of the overpayments, they can apply these guidelines to decide whether they are included/provable in your bankruptcy.

From: http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch73-84/Chapter77/part7/Part7.htm

77.50 Recovery of overpaid credits after a bankruptcy order is made

In certain circumstances a tax credit may be overpaid and thereafter a recovery may be sought by HMRC. That recovery may be achieved by deductions made from ongoing awards of tax credits or by direct collection where there is no ongoing award of tax credits or where the ongoing award has ceased.
Where tax credits have been overpaid and a bankruptcy order is subsequently made against the claimant, whether or not the overpayment is a provable debt in the bankruptcy depends on the circumstances of the case as follows:

Final award notice (of repayment) issued before the date of the bankruptcy order.

* If the recovery is made, or would have been made, by direct collection (in cases where there is no ongoing award of tax credits), HMRC will submit a proof of debt in the bankruptcy, considering the debt to be a provable one.

* If the recovery is made, or would propose to have been made, by deductions from ongoing awards of tax credits, HMRC will not submit a proof of debt in the bankruptcy but will continue to make the collections from the ongoing award of tax credits until the bankrupt’s discharge from bankruptcy. Thereafter the balance of the debt will be written off. This action, of continuing to recover the debt post bankruptcy, follows the decision in the case of R v Secretary of State for Social Security, Ex Parte Taylor and Chapman [note 1]which provided that where a bankrupt was indebted to the Secretary of State for Social Security in respect of debts arising from earlier receipts of social security benefits, he/she was entitled to deduct sums from future benefits to be received thereafter in reduction of that indebtedness. Should any bankrupt object to the taking of the ongoing recovery action by HMRC in this way, they should be referred to that Department without further comment by the official receiver.

In all cases where a final award notice (of repayment) has been issued by HMRC before the date of the bankruptcy order, the debt should be added to the list of creditors and HMRC treated by the official receiver as a creditor in the usual way.

Final award notice (of repayment) issued after the date of the bankruptcy order.

* Where a final award notice (of repayment) is issued by HMRC after the date of a bankruptcy order, whether the recovery action be considered by direct collection or from the ongoing award of tax credits, the bankrupt will be pursued by HMRC in the usual way even though the over-paid tax credits arose before the date of the bankruptcy order. This follows the decision in R (on the application of David William Steele) v Secretary of State for Work and Pensions [note 2]. In these circumstances the debt will not be included in the list of creditors. See also Chapter 40 Part 6 - Creditors and liabilities.

Should the official receiver require information on how HMRC intends to treat tax credit overpayments in individual voluntary arrangements, the official receiver should contact Technical Section directly for this information.

77. 51 Set-off and joint claimants

Where appropriate, HMRC will claim set-off in respect of monies it owes to the bankrupt to reduce or extinguish the indebtedness for overpaid tax credits [note 3].

Where tax credits have been claimed by two persons, HMRC will pursue the non-bankrupt person, if any, to recover the overpayment and if the intended recovery procedure is direct collection, it will also submit a proof of debt in the bankruptcy (as appropriate) (see paragraph 77.50), but it will not recover more than 100p in the £ of its debt (from both sources). Where the intended recovery action is deductions from ongoing tax credits, that will continue as far as the non-bankrupt claimant is concerned but a proof of debt will not be submitted in the bankruptcy. This follows an operational decision made by HMRC.

Scarlett.1974

Thank you Fermi, ever helpful and knowledgeable as always

I'm actually physically paying the £10.00 per month, it isn't deducted from my tax credits that I'm receiving now. I shall continue to pay it then and nearer the date of BR I'll call or write to them for a balance of what is still outstanding. I can then put this on the forms under the debts section and like you said, it's then up to the OR?

Thank you very much

fermi

Yep. It sounds 95% certain to me that they should be included in the BR.

Only the OR with the full info can tell you for certain, but if you put it down on the forms and give the OR a copy of all the info you have then that will give you the best chance.

Make sure that (probably in the interview or sooner) you get confirmation from the OR as to your liability for the ongoing payments.

Scarlett.1974

Thank you

I appear to have hit an added complication though I've just called them because after I'd posted this thread I suddenly realised that I hadn't contacted them since changing bank accounts to re-instate the DD :eek: I thought it would be a simple matter of giving them my new bank details...... but no - because it's been 12 months since setting up this payment plan I have to call them back tomorrow to do a new I&E over the phone so they can assess if the £10.00 a month is still a fair amount.

So...... how honest should I be? I mean, shall I tell them about the upcoming BR? We're not actually paying any mortgage, secured loan and other debt payments right now, so if they were to take that into account then we would appear to have plenty of disposable income right now :rolleyes: But obviously we haven't - this is being saved for the BR fees and cost of going into rented after xmas. Oh blooming hell, I don't know what to say to them tomorrow now. Help!!

fermi

That's a pain in the *** timing wise. :sad:

I don't know how thorough they are in doing those so I'm not sure what to say really. I expect others will have a few ideas.

Scarlett.1974

It certainly could have come at a better time Fermi! Obviously I don't want to out-right lie to them but neither do I want them thinking I've got loads of disposable income!

nomoneyprobs

Hi, seems a tricky situation but if it was me i'd view it like this ---

If you hadn't decided to go br you would still have the debts each month that your currently not paying and your disposable income would be much lower than it currently is, so I personally would give them your full I & E as it would be had you not decided to go Br.

Whats the worst that can happen? they could only make you Br for the amount you owe anyway, least that might save some fee's lol

Just my view, do with it as you please

Ian

Scarlett.1974

Hi Ian,

Thanks for your reply. H said pretty much the same as you actually The only question now is do I go with the I&E before we contacted Payplan (which showed a deficit of £900 a month) or the one after, which showed a deficit of just under £200 a month?!

I think I'll go with the "after" one and try and explain that we are working to reduce our outgoings as much as we can and that I do want to continue paying them their £10 a month and that I willing to try to "find" it each month, or words to that effect!

Thanks all

tigerfeet2006

Scarlett.1974 wrote: »

Hi Ian,

Thanks for your reply. H said pretty much the same as you actually The only question now is do I go with the I&E before we contacted Payplan (which showed a deficit of £900 a month) or the one after, which showed a deficit of just under £200 a month?!

I think I'll go with the "after" one and try and explain that we are working to reduce our outgoings as much as we can and that I do want to continue paying them their £10 a month and that I willing to try to "find" it each month, or words to that effect!

Thanks all

That's probably what i would do to as well . You don't have to give pacific details on just how you are trying to reduce your outgoings do you?