It can be difficult to work out whether to appeal or dispute a decision. Which you should choose depends on whether you think the HMRC’s decision is wrong or unfair.
If you think the HMRC are wrong about the amount of tax credits you should have received (not that their decision was unfair), you should appeal the decision. The first step of this is to ask the HMRC to look at the decision again. This is called a ‘mandatory reconsideration’. If they do not change the decision, or do but you still don’t think it is right, then you can appeal the decision. This is when a panel of three people who are independent and do not work for HMRC look at the decision. For information about how to do this see How to appeal.
If you agree that you have received more tax credits than you should have but you don’t think you should have to pay it back, you should dispute the decision. The dispute process is how you ask HMRC to look at this kind of decision again. Disputes are decided by HMRC; they don’t go to an independent tribunal. For information about how to do this see I don’t think I should pay the money back: the dispute process.
Sometimes you might want to send a letter asking for a mandatory reconsideration and a dispute letter at the same time. You may want to do this if you are not sure why you have been overpaid. If you don’t know the cause or aren’t sure, then you can’t be certain which process is the right one for you to use. So to protect yourself you can do both. It’s also possible that the overpayment has two causes.
Appeals and disputes: the differences
You should appeal if HMRC have worked out your tax credit award incorrectly or decided that you are not entitled to part of or all of your tax credit award and you do not agree with this.
Daisha claims tax credits for her 3 children. Her eldest child finished her GCSE’s but decided to stay on at school to do her A levels. Daisha told HMRC and continued to receive tax credits for 3 children. When HMRC work out Daisha’s final tax credits for the year, they only included 2 children. Because Daisha received money for 3 children, HMRC thought that they had overpaid her. Daisha appealed the decision and asked HMRC to change her award as she should have received tax credits for 3 children. If she is successful, the overpayment will disappear. Daisha was right to appeal.
You should dispute if HMRC have the right information about your income and situation, but for some reason you were paid more than you were entitled to.
Eric and his wife have 2 children but were paid tax credits for 3 children. When Eric received his award notice, he phoned HMRC to tell them they had the number of children wrong. HMRC did not correct the mistake and kept on paying Eric too much tax credit. At the end of the year, Eric had received more tax credit than he should have and so had an overpayment. Eric used the dispute process because he didn’t think he should have to pay it back because he told HMRC of the mistake as soon as he saw his award notice. It was their fault that they hadn't done anything about it. Eric was right to dispute.
What can I do?
I don’t think I was paid too much.
You can appeal. See How to appeal. If you have missed the appeal time limits you might be able to make an 'official error request'. For more information see Official error.
I agree I was paid too much but I don't think I should have to pay it back.
You can send a dispute letter. See I don’t think I should pay the money back: the dispute process.
I agree I was paid too much, but not as much as HMRC say.
You can send an appeal about the amount that HMRC say you owe that you don’t agree with. See How to Appeal. If you have overpayments from other years that you are not appealing then you should either start paying them back (see Repaying the overpayment) or send a dispute letter if you don’t think you should have to pay them back. See I don’t think I should pay the money back: the dispute process.
I was overpaid because I was late telling HMRC that I had become part of a couple or stopped being part of a couple.
If you are overpaid because you were late telling HMRC you had become part of a couple or stopped being part of a couple or your partner had died, you may be able to have the overpayment reduced. When you tell HMRC about a change like this, your claim ends and you have to make a new claim as a single person or as part of a new couple. If you report the change late, this usually results in an overpayment on your old claim. Many people then get a surprise when they find out that they cannot backdate their new claim for more than 1 month. However, the rules changed on 18th January 2010 and now HMRC will reduce any overpayment on an old claim by the amount you would have received if you had made your new claim on time. This is called ‘notional entitlement’. They will do this in most cases, except where they believe someone was deliberately dishonest.
If you think this might apply to you, contact the HMRC tax credit helpline on 0345 300 3900 (Textphone 0345 300 3909) and ask for your case to be passed to the ‘notional entitlement’ team (sometimes also called ‘notional offsetting team’). They will calculate whether your overpayment should be reduced. If you are not sure whether this applies to you, get help from an adviser. See How to find an adviser - tax credits.
I don’t understand this at all and want HMRC to explain it to me
Follow the steps explained at How to Appeal and I don’t think I should pay the money back: the dispute process and send two letters to HMRC. This way you won't miss any deadlines. You can also get help from an adviser. See How to find an adviser - tax credits.
Time limits for appeals
You must send your mandatory reconsideration request to HMRC within 30 days of the decision you want to appeal against. The decision is normally the award notice that sets out your tax credits award. The 30 days runs from the date on the award notice.
If you miss the 30 day time limit, don’t panic. If you can show a good reason why you missed the deadline, you can ask HMRC to accept a late mandatory reconsideration request up to 13 months after the date on the notice or decision letter if there is a good reason why you missed the deadline. HMRC do not have to allow a late request. See How to find an adviser - tax credits to get help with your late request.
When HMRC receive your mandatory reconsideration request, they will look at your claim again and decide if they were right or not. They will then send you a decision notice. If you still do not agree with the decision, then you must send an appeal form to the Tribunal Service within 1 calendar month from the date on the mandatory reconsideration decision. You must include a copy of the mandatory reconsideration decision notice with your appeal form.
Late appeals can be accepted up to 13 months after the mandatory reconsideration decision if there is a good reason why you missed the deadline.
Award notices can be difficult to understand and the first you may know that you have an overpayment is when you receive a demand letter from HMRC asking for the money back. You may have missed the time limits because they run from the date of the original award notice, not the date HMRC write to you asking for the money back.
If that happens, don’t panic. If your award is wrong because HMRC made a mistake and you didn’t cause them to make that mistake in any way, you may still be able to have the award changed up to five years from the tax year where the mistake happened. This is called an ‘official error request’. For more information see Official error.
Time limits for disputes
Lucy receives her final award notice for the tax year 2015/16 on 10th August 2016. The award notice shows that Lucy was overpaid £1,000 in 2015/16 and she also has an overpayment of £2,000 from 2014/15. Lucy has 3 months from the 10th August 2016 (to 10th November 2016) to dispute her 2015/16 overpayment, but she cannot dispute the older overpayment from 2014/15.
You normally have 3 months to dispute an overpayment from the date of your final award notice for the tax year in which the overpayment happened.
You can only dispute against overpayments that happen in the tax year of your final award notice. You cannot dispute overpayments from earlier years unless there are exceptional circumstances.
If you have any doubt, the best thing to do is to send a dispute anyway. If HMRC refuse to accept the dispute because they say you have missed the time limit, you should get advice (see How to find an adviser - tax credits).
What if I miss the 3 month time limit?
HMRC may still look at your dispute if you have a good reason for missing the time limit. For example, if you received wrong advice from the HMRC’s own helpline or if you have been seriously ill. If you think you have a good reason, you should include it at the start of your dispute letter.
What if HMRC refuse to accept my dispute?
If HMRC say they will not look at your case because you are outside the 3 month time limit and you think that you were within it or you had a good reason for missing it you should follow the guidance about How to complain - tax credits. (You still need to speak to HMRC about repaying the money even if you decide to make a complaint.) In your complaint letter you should make it clear why you think you did not miss the deadline.
Tax credits are very complicated and most claimants find it difficult to understand overpayments. If you are unsure, or would like someone to check your overpayment or help you with an appeal or dispute then try and get advice. See How to find an adviser - tax credits.
Speak to your MP
Your local MP might be able to help you with your overpayment. This can be especially helpful in cases where you are not getting any response from HMRC. See Further help - tax credits for information about how to contact them.
Be aware! HMRC will keep asking for the money
Normally, HMRC will not stop asking you to pay back your overpayment when you dispute a decision or complain. They will only stop when you send in an appeal. You might need to start making payments while you go through the complaints system. For information on how to do this see Repaying the overpayment.