The tax credits system is flawed and shows no sign of improving and that means overpayments will continue to be made on jobseekers allowances, says Steven Holden, tax director at HCB Solicitors.
As unemployment remains high and more people face redundancy, the number on jobseekers allowance is increasing too, but what most do not know is that there are two types - 'contributions' based and 'income' based.
Steven says that this is where mistakes can occur and overpayments be made. The contributions based allowance is usually a low fixed amount and the other is means tested.
"The errors occur because HMRC's tax credit system doesn't differentiate between the two and that is almost never explained to those claiming the allowance", said Steven.
"So very often if the individual tells HMRC that they are in receipt of jobseekers allowance they are treated as if they are on the income-based benefit.
"What this does is override the system and apply the maximum amount of tax credits to the claim", he said.
Unfortunately, says Steven, this gives rise to an issue that will not surface for two to three years when the HMRC figure it out and will then pursue the claimant for the overpayment.
"Any individual facing the problem must immediately contact HMRC and ask for a breakdown of the exact figures and dates.
"They are not supplied upfront and it is important that all the relevant dates and figures are to hand before lodging the dispute complaint.
"The HMRC are only keeping file notes on tax credit claims for three years which is somewhat ironic given that the rest of us have to keep our records for at least six", said Steven.
If you have any questions or queries regarding this article, or would like further information on how HCB can help you with Tax products, contact:
Steven Holden – Tax Director
Direct Line – 0844 556 8674
Mobile – 07805 41782
