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HMRC are, in typical style, trying to wriggle out of paying you when the whole error was made by the DWP. Complain about their antics, the procedure is here:
It most certainly is. HMRC would like the 4 year rule to be the law, but what HMRC would like and what the law actually is are entirely different matters. It is certainly worth making an appeal and writing to your MP might concentrate minds wonderfully too!
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Thank you for your support.
HMRC will always tell you what that Department would like the law to be, not what it actually is!