CTC overpayments effect on HB

mopixy
mopixy Posts: 8 Forumite
edited 11 July 2018 at 2:08PM in Benefits & tax credits
Hi guys,

I have got a question about the effect of child tax credit overpayment on housing benefit. I couldn't find an answer by searching the website, so I would really appreciate if anyone can help.

I am working full-time and my wife is not working, but she is in receipt of DLA and we have got two kids. We used to get CTC and HB while I was working part time at the start of financial year in 2017. HB was of course adjusted because of the CTC we were receiving. I started working full-time in July and informed both the HMRC and local council about change of circumstances. HMRC kept paying CTC at the same rate and the council worked out our HB based on my new income and the CTC. Now after almost a year HMRC has sent us a letter of overpayment by £3500, even though they knew about the changes in my working hours and my income. We disputed it but it seems that it cannot be avoided and I have to pay the overpayments back.
My question is, what happens to the HB cuts because of the CTC payments over the past 11 months? We have been receiving reduced HB (quite rightly) because we were receiving CTC. Now that HMRC wanted their money back can we ask local council to work out the correct HB since last July and backdate our HB?
Has anyone been in this situation before?

Regards,
Mo
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Comments

  • tboo
    tboo Posts: 1,379
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    mopixy wrote: »
    Hi guys,

    I have got a question about the effect of child tax credit overpayment on housing benefit. I couldn't find an answer by searching the website, so I would really appreciate if anyone can help.

    I am working full-time and my wife is not working, but she is in receipt of DLA and we have got two kids. We used to get CTC and HB while I was working part time at the start of financial year in 2017. HB was of course adjusted because of the CTC we were receiving. I started working full-time in July and informed both the HMRC and local council about change of circumstances. HMRC kept paying CTC at the same rate and the council worked out our HB based on my new income and the CTC. Now after almost a year HMRC has sent us a letter of overpayment by £3500, even though they knew about the changes in my working hours and my income. We disputed it but it seems that it cannot be avoided and I have to pay the overpayments back.
    My question is, what happens to the HB cuts because of the CTC payments over the past 11 months? We have been receiving reduced HB (quite rightly) because we were receiving CTC. Now that HMRC wanted their money back can we ask local council to work out the correct HB since last July and backdate our HB?
    Has anyone been in this situation before?

    Regards,
    Mo


    HB is calculated on income received at that time
    If HMRC have thus decided to reduce your CTC then that's their decision.
    No backdate I'm afraid

    Page 66

    Recovery of overpaid tax credits
    P2.635 If an overpayment of tax credits has occurred during a period in which HB/CTB was also payable,
    and the overpayment is subsequently recovered, there is no provision in regulations to reassess
    the HB/CTB award for that previous period
    “You’re only here for a short visit.
    Don’t hurry, don't worry and be sure to smell the flowers along the way.”
    Walter Hagen


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  • mopixy
    mopixy Posts: 8 Forumite
    tboo wrote: »
    HB is calculated on income received at that time
    If HMRC have thus decided to reduce your CTC then that's their decision.
    No backdate I'm afraid

    Page 66

    Recovery of overpaid tax credits
    P2.635 If an overpayment of tax credits has occurred during a period in which HB/CTB was also payable,
    and the overpayment is subsequently recovered, there is no provision in regulations to reassess
    the HB/CTB award for that previous period
    Thanks @tboo !
    I am really disappointed though. It is not fair at all. I am sure I am not the first person in this situation. Someone somewhere should have considered updating the regulation regarding this situations to ensure that the people don't get stripped of their entitlements. There must be a way to fix this.

    Anyway, I was also wondering if there is any chance that our current housing benefit increases if we provide the local council with the details of our repayment plan to HMRC? I mean they had reduced the HB based on the fact that we were receiving CTC from HMRC, now that it is reversed and we are paying back to HMRC could they consider it in reassessing the HB?

    Mo
  • tboo
    tboo Posts: 1,379
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    mopixy wrote: »
    Thanks @tboo !
    I am really disappointed though. It is not fair at all. I am sure I am not the first person in this situation. Someone somewhere should have considered updating the regulation regarding this situations to ensure that the people don't get stripped of their entitlements. There must be a way to fix this.

    Anyway, I was also wondering if there is any chance that our current housing benefit increases if we provide the local council with the details of our repayment plan to HMRC? I mean they had reduced the HB based on the fact that we were receiving CTC from HMRC, now that it is reversed and we are paying back to HMRC could they consider it in reassessing the HB?

    Mo

    Sorry HB will only assess on the ctc you are receiving.

    If the CTC is now reduced due to HMRC changing them to take the o/p back then the council will be aware of the changes - look at the notification letters to see if the new weekly amount matches the CTC award otherwise show your tax credit revised award to the council

    if you are repaying the ctc any other way then sorry HB can't be changed as that will be an expense and HB doesn't consider income out only income in

    You can ask for a DHP - if your expenxes are higher than your income
    link
    “You’re only here for a short visit.
    Don’t hurry, don't worry and be sure to smell the flowers along the way.”
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  • tomtom256
    tomtom256 Posts: 2,208
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    mopixy wrote: »
    Thanks @tboo !
    I am really disappointed though. It is not fair at all. I am sure I am not the first person in this situation. Someone somewhere should have considered updating the regulation regarding this situations to ensure that the people don't get stripped of their entitlements. There must be a way to fix this.

    Anyway, I was also wondering if there is any chance that our current housing benefit increases if we provide the local council with the details of our repayment plan to HMRC? I mean they had reduced the HB based on the fact that we were receiving CTC from HMRC, now that it is reversed and we are paying back to HMRC could they consider it in reassessing the HB?

    Mo


    Why is it not fair, you had the income at the time so the HB was lowered. Now the CTC is lowered the HB should raise.
  • mopixy
    mopixy Posts: 8 Forumite
    edited 13 July 2018 at 8:46AM
    tboo wrote: »
    Sorry HB will only assess on the ctc you are receiving.

    If the CTC is now reduced due to HMRC changing them to take the o/p back then the council will be aware of the changes - look at the notification letters to see if the new weekly amount matches the CTC award otherwise show your tax credit revised award to the council

    if you are repaying the ctc any other way then sorry HB can't be changed as that will be an expense and HB doesn't consider income out only income in

    You can ask for a DHP - if your expenxes are higher than your income
    link
    Thanks for the clarification.
    My problem is that I do not qualify for CTC anymore, so I have to pay it back in instalments (If I can!) and based on what you said HB won't consider this expense in their calculations so I am screwed!

    I am exploring another option though. What happens if I ask HMRC to recover the overpayment .through adjusting my tax code? This way my household income will decrease and HB should be adjusted to my new income, is that right? Do you think that's the way that I could recover at least part of the HB we have lost because of CTC overpayments?

    Thanks,
    Mo
    tomtom256 wrote: »
    Why is it not fair, you had the income at the time so the HB was lowered. Now the CTC is lowered the HB should raise.
    As I said the problem is that CTC is not lowered, it has stopped. So I have to pay the overpayments directly to HMRC and HB won't cover that expense!
  • pmlindyloo
    pmlindyloo Posts: 13,049
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    mopixy wrote: »
    Thanks for the clarification.
    My problem is that I do not qualify for CTC anymore, so I have to pay it back in instalments (If I can!) and based on what you said HB won't consider this expense in their calculations so I am screwed!

    I am exploring another option though. What happens if I ask HMRC to recover the overpayment .through adjusting my tax code? This way my household income will decrease and HB should be adjusted to my new income, is that right? Do you think that's the way that I could recover at least part of the HB we have lost because of CTC overpayments?

    Thanks,
    Mo


    As I said the problem is that CTC is not lowered, it has stopped. So I have to pay the overpayments directly to HMRC and HB won't cover that expense!

    See bolded part.

    I do not know if this option is available any more and I am pretty certain that this will not solve your problem.

    I think you are grasping at straws to be honest.

    You need to have a thorough read of this and make some arrangements to pay back what you owe.

    https://revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt/
  • tboo
    tboo Posts: 1,379
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    mopixy wrote: »
    Thanks for the clarification.
    My problem is that I do not qualify for CTC anymore, so I have to pay it back in instalments (If I can!) and based on what you said HB won't consider this expense in their calculations so I am screwed!

    I am exploring another option though. What happens if I ask HMRC to recover the overpayment .through adjusting my tax code? This way my household income will decrease and HB should be adjusted to my new income, is that right? Do you think that's the way that I could recover at least part of the HB we have lost because of CTC overpayments?

    Thanks,
    Mo


    As I said the problem is that CTC is not lowered, it has stopped. So I have to pay the overpayments directly to HMRC and HB won't cover that expense!


    If you have no CTC then HB should be assessing you on income only - unless that is too high to qualify you


    If you have an element of HB then explore the DHP route - they look at income and expenses
    “You’re only here for a short visit.
    Don’t hurry, don't worry and be sure to smell the flowers along the way.”
    Walter Hagen


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  • mopixy
    mopixy Posts: 8 Forumite
    tboo wrote: »
    If you have no CTC then HB should be assessing you on income only - unless that is too high to qualify you


    If you have an element of HB then explore the DHP route - they look at income and expenses
    I do receive HB, recently reassessed based on my income only and no CTC. As I said my problem now is that I have to pay back £3500 to HMRC for 2017-18 CTC overpayments and I am trying to find a way to prove to the system that almost equal to this amount has been taken of our HB during 2017-18. In other words, while I was being overpaid by HMRC I was being underpaid by the Local Council. So there should be a way to get that money back.
    If I couldn't convince HMRC to recover their money through adjustment of my tax code I am gonna have to ask council for reassessment and backdate, which they will probably reject, and then appeal against their decision. Do you think I have a shot?
    There must be still some fairness left in this system.

    PS. DHP route would be the last resource, thanks for the hint.

    Mo
  • brewthebear
    brewthebear Posts: 292
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    But you knew the benefits you were receiving were wrong.
    Why did you not put some aside for when the eventuality dropped and had to be repaid.
    You can,t have it always which is what appears you want !!
  • mopixy
    mopixy Posts: 8 Forumite
    pmlindyloo wrote: »
    See bolded part.

    I do not know if this option is available any more and I am pretty certain that this will not solve your problem.

    I think you are grasping at straws to be honest.

    You need to have a thorough read of this and make some arrangements to pay back what you owe.

    https: //revenuebenefits.org.uk/tax-credits/guidance/how-to-deal-with-hmrc/dealing-with-debt/
    Can you please clarify why you think tax code adjustment does not solve my problem? I was assuming that if for whatever reason your tax code changes and consequently your net salary reduces then HB would increase. Is that wrong?
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