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t24
Starting Member
1 Posts |
 Posted - 06 February 2009 : 20:37:01
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| If I was to declare myself bankrupt are any overpayments for child tax credits from HM Reenue and Customs taken into account |
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John
New Member
United Kingdom
73 Posts |
Posted - 06 February 2009 : 21:42:11
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Hi
this issue is a complex one. I have cut and pasted the details from a tax advisory website - hope it helps.
Tax Credits and Bankruptcy
The issue here is what happens when there are tax credit overpayments and the claimant becomes bankrupt. Is the liability to repay a tax credit overpayment extinguished by bankruptcy? The position can be complex and it would be a good idea to take advice. In outline, the position is as follows.
For a joint claim, where only one of the claimants becomes bankrupt, the overpayment is likely to be recovered in full from the other joint claimant
For a joint claim where both parties become bankrupt, or for a single claim where the individual becomes bankrupt, then the key issue is whether a formal notice to recover the overpayment is made before or after the date of bankruptcy.
If the formal notice of recovery is made before bankruptcy, then the overpayment is a bankruptcy debt. If there is an ongoing award, the overpayment will be recovered from the award, but only until the date of discharge from bankruptcy. The claimant will need to tell the Tax Credit Office when this happens. Any amounts deducted from an ongoing award after this date should be returned to the claimant. If there is no ongoing award, then the overpayment will be proved in the bankruptcy. In these cases the claimant is released from the overpayment on discharge from bankruptcy.
If the formal notice of recovery is made after the date of bankruptcy, then the overpayment is not a bankruptcy debt and can be recovered either by direct recovery action or from an ongoing award. In this case, recovery of the overpayment continues, even after discharge from bankruptcy.
What this means in practice is that in-year overpayments (viz. those which are recognised before the end of a tax year of claim) will not be treated as bankruptcy debts, as the formal notice to recover the overpayment will not have been issued at the date of bankruptcy. Overpayments from previous tax years can be bankruptcy debts once the formal notice of recovery has been issued (under s29 Tax Credits Act 2002). These debts will be extinguished by bankruptcy, but they can be recovered from ongoing awards until the date of discharge.
timendi causa est nescire
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If I was to declare myself bankrupt
