I left the Army in April 2007 (DAOR) and never had any further contact with them until last week when I received a letter telling me that they had recently done an audit which showed I was overpaid £880, and they are looking for it back. Its taken them nearly 2 years to discover this. Can I be made to pay it back?
I had this issue when I switched from one fixed rate mortgage deal to another one in 2006. In 2008 I had a letter from the mortgage lender with whom I had the initial deal saying that there had been a mix up at the time the mortgages changed and that I still owed them a months mortgage payment!

I queried this with the Citizens Advice Bureau and was advised that legally I was obliged to pay the money back, but because it had taken them so long to sort their act out with regard to reclaiming it I could probably get away with specifying how I wanted to pay it back.

I wrote to the mortgage lender saying that I was aware that I was legally bound to pay back the outstanding sum. But because it was a significant amount of money which I hadn't budgeted for and it was their error in the first place compounded with the length of time taken for them to find out about it, that I would pay them back at £10 per month! Oddly enough, I then received another letter from them saying that they had written off the amount in question and that the matter was now closed!

I would first of all ask the MOD to prove that you have been overpaid. If they do provide you with proof then highlight to them the time taken for them to realise their mistake and offer to pay it back in instalments over the same time period. Alternatively, just tell them to * off!