Overpayments and official error | CPAG

Overpayments and official error

23 October 2014
Issue 242 (October 2014)

Simon Osborne reviews rules on the relationship between benefit overpayment recovery and official error, with reference to some recent decisions from the Upper Tribunal.

The basics

For most benefits, the basic rule is that an overpayment is recoverable if it was caused by misrepresentation or failure to disclose a relevant fact.1 Although official error is not referred to, it follows that an overpayment that was caused solely by official error is not recoverable under that rule. Some recent caselaw is considered below.

There are two main exceptions. Currently, the most important one regards housing benefit (HB). There, the basic rule is that all overpayments are recoverable (ie, however caused), except those that were caused by ‘official error’ (a term defined in the rules) where the claimant could not reasonably have been expected to have realised that an overpayment was occurring.2Recent caselaw about such cases is considered below.

The other exception concerns universal credit (UC) and, where the claimant comes under the UC system rules, contributory employment and support allowance and contribution-based jobseeker’s allowance. There, the basic rule is that all overpayments are recoverable, (ie, however caused), and the claimant is reliant on the Secretary of State to reduce or wipe out the overpayment where it was caused by official error.3 Official guidance is contained in a code of practice.4">https://www.gov.uk/government/publications/what-happens-if-you-are-overp... The guidance does not contemplate official error as a reason for not recovering an overpayment.

In tax credits, the basic rule is that all overpayments are recoverable (ie, however caused), and the claimant is reliant on Her Majesty’s Revenue and Customs (HMRC) to reduce or wipe out the overpayment where it was caused by official error.5 Official guidance on recovery is contained in a Code of Practice.6">http://www.hmrc.gov.uk/leaflets/cop26.pdf Official error is at least contemplated as a reason for not recovering all or part of an overpayment.

Official error: misrepresentation and failure to disclose cases

In these cases, the context in which official error may be relevant is that of causation – ie, the question of whether the overpayment was caused by the misrepresentation or failure to disclose. If the answer is yes, it is recoverable; but if the overpayment was in fact caused by, for example, an error by the Department for Work and Pensions (DWP), it is not recoverable. But the mere occurrence of an official error is not enough to prevent recovery: the overpayment must actually have been caused by it. If correct representation or disclosure would have prevented the overpayment then the overpayment is recoverable even if there was also an official error.7

However, it has been emphasised recently, in the context of a child benefit overpayment (and so involving HMRC rather than DWP) that it is indeed possible that an official error has occurred and that was the cause of the overpayment. In MO v HMRC (CHB) [2014] UKUT 199 (AAC) (Bulletin 241, p12), the claimant had correctly represented that she was a person subject to immigration control. However, she was nevertheless paid child benefit, until HMRC realised the error and then attempted to recover overpayment on the basis that it could not possibly have paid her had she represented her status correctly. Although that line of argument was accepted by the First-tier Tribunal, it was robustly rejected by Judge Wikeley in the Upper Tribunal, who said ‘the tribunal appears to have proceeded on the assumption that decision makers never make mistakes, a position which is simply unsustainable...’ (paragraph 17). On the facts, there was no misrepresentation or failure to disclose, the overpayment was caused by official error and there was therefore no recoverable overpayment.

Official error: housing benefit cases

In these cases, ‘any’ overpayment is recoverable, except on ‘which arose in consequence of an official error where the claimant or a person acting on his behalf...could not...reasonably have been expected to realise that it was an overpayment’. For these purposes, being caused by an official error, is defined as ‘... caused by a mistake whether in the form of an act or an omission’ by the relevant local authority, the DWP or HMRC (or someone acting on their behalf) and where the claimant ‘did not cause or materially contribute to that mistake, act or omission’.8 Causation is therefore again at the root of the matter.

The basic approach, set out in R (Sier) v Cambridge CC HBRB [2001] EWCA Civ 1523, CA, is to look at what as a matter of common sense was the cause of the overpayment. So, again, official error may have occurred but if as a matter of common sense it was something the claimant did (or did not do) that caused the overpayment then it will be recoverable.

Regarding what constitutes a ‘mistake’, recent caselaw has held, contrary to previous authority, that a local authority’s failure to ask all claimants a particular question on its standard claim form can amount to an official error. In MB v Christchurch BC (HB) [2014] UKUT 201 (AAC) (Bulletin 241, p14), the overpayment occurred due to payment of HB for a child where the child in fact spent more time with a parent who was not the claimant. Judge Wikeley held at paragraph 48 that, on the particular facts of the case, the claim form was deficient in failing to ask questions so as to establish whether the child normally lived with the claimant, and that error was so fundamental that it clearly amounted to an ‘official error’.

The potential fallibility of the HB authorities (and indeed, of all humankind) has also been pointed out in recent caselaw. In London Borough of Islington v JM (HB) [2014] UKUT 23 (Bulletin 239, p12), the local authority argued it was perverse to have accepted that the claimant had reported starting full-time work given that it had not recorded that and had not altered the HB. Judge Poynter (accepting on the facts that the claimant had indeed acted as she claimed) rejected that argument, commenting at paragraph 56 that it amounted to ‘an assertion that no tribunal could reasonably have come to the view that Islington’s procedures ever worked less than perfectly. That is not the case. Islington’s procedures sometimes fail to operate correctly...the same is true of every other local authority; and of the DWP and HMRC; and indeed of the FTT, the Upper Tribunal and of every other human institution’. On the facts of the case, the overpayment had been caused by official error and the claimant could not reasonably have been expected to have realised the overpayment was occurring: it was therefore not recoverable.

Please be aware that welfare rights law and guidance change frequently. Therefore older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. s71 Social Security Administration Act 1992
  • 2. Reg 100 Housing Benefit Regulations 2006
  • 3. s5(6) Welfare Reform Act 2012
  • 4. 5. s28 Tax Credits Act 2002
  • 6. 7. R(SB) 3/90 and Duggan v Chief Adjudication Officer, appendix to R(SB) 13/89
  • 8. Reg 100(1)-(3) Housing Benefit Regulations 2006