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Bankruptcy and Tax Credit Overayments

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Hi in Febuary 2009 we recieved an amended awards letter from the tax credit office telling us that we had been overpayed by approx £2000 and that they would reduce our award to clear this overpayment as they intended claiming this back.


This was one of the main reasons for us declaring ourselves bankrupt 2 months later in April 2009.


My understanding is that if the TCO has informed you of this overpayment and there intension to claim it back before you go BR then they can continue to reduce your payments until you are discharged and then its like any other debt and written off.


I have informed them of this but they rtnd a letter saying they did not make there final decision until May 2009 of there intention to claim the money back so it was after our BR therefore we need to repay the lot.


The letter we recieved for our amended taxcredits shows that they are wanting to claim this back and that our payments were reduced instantly, surely this is proof in itself and now the reductions should cease and the overpayment written off.


Thanks for any help.



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This is what the Insolvency service say about the matter, the question is wha constitutes "the final award notice for repayment", That is the point ou need to argue, Surely if they had already started recovering the money then the final decision had already been made. Could it be that the reduce amount was just the new amount you were receiving rather than an amount reduced because of repayment.




40.102D Category 1 – treatment of tax credit overpayments

In relation to the recovery of overpaid tax credits falling within category 1 (see paragraph 40.102A), where the final award notice (for repayment) was issued before the date of the bankruptcy order, HM Revenue and Customs (HMRC) state that they will adhere to the following policy:

  • Where recovery of the overpaid tax credits was intended to be taken via direct collection rather than from ongoing awards HMRC will submit a proof of debt in the bankruptcy.
  • Where recovery of the overpaid tax credits was intended to be taken via ongoing awards, HMRC will continue collection until discharge; no proof of debt will be submitted in the bankruptcy and the balance of the debt will be written off upon discharge.

Should the official receiver be approached by a bankrupt, who objects to the recovery of overpayments by HMRC after the bankruptcy order date, they should be referred to HMRC without further comment by the official receiver.

HMRC will claim set-off in respect of monies it owes to the bankrupt if available [Note 17]. HMRC will also pursue the non-bankrupt claimant where tax credits have been claimed jointly. Where the intended recovery is via direct collection HMRC will also submit a proof of debt in the bankruptcy, but will not recover more that 100p in the £ of its debt; Where the intended recovery is via ongoing awards to the joint claimant, recovery will continue but a proof of debt will not be submitted.

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I agree with debtinfo as what he has posted is from the technical manual which is the official recievers guidance.

As always please check and double check what myself and other Caggers inform.


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