To regard or disregard

In the 2006 Budget Gordon Brown announced that the level of increased income that could be disregarded for tax credit purposes was to be raised from £2 500 to £25 000 and this has subsequently been extended for 2007-08 at the same level.
I have a very irate self-employed client married with one child who has an accounting year end of November and profits to November 2005 of £9 000 (tax year 2005-06) and to November 2006 of £17 000 (tax year 2006-07). My client's wife was unaware of the income disregard level and replied direct to the Tax Credit Office when they wanted details of the current level of earning. She has indicated £17 000 and the TCO are now clawing back an alleged overpayment of tax credit for the 2005-06 tax year. Surely the income disregard figure should be taken into account and the tax...