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Bankruptcy and Other Options

Mark18th August 2010

Tax credit overpayments can often result in a demand for payment from you, which can bring unwanted financial difficulties. For some this can be manageable, for others not so. If you find yourself in this situation then it is important that you know how to deal with your debts. This post will provide you with an overview of the main debt solutions.

Going bankrupt

Going bankrupt is usually considered the most consequential option for dealing with your debt. This is simply not true. The most consequential is doing nothing or choosing the wrong solution.

In its most basic form going bankrupt is one way in which you can wipe your debts, subject to some restrictions, to obtain a fresh start. Your assets will be shared out among your creditors and there will be an investigation into your affairs. I will explain more in the next post titled “What is bankruptcy?”.

Proposing an Individual Voluntary Arrangement (IVA)

An IVA is a legally binding agreement between you and your creditors. With the help of an authorised insolvency practitioner you will put forward a proposal to your creditors offering to repay a specified amount of the debt over a specified period of time. If approved and providing you have adhered to the terms of the agreement you will be debt free at its conclusion.

An IVA will typically involve you making monthly payments and/or making a lump sum payment. You may be expected to release equity in your property. During the IVA your creditors will not be able to commence legal action to recover the debts. An IVA will typically last five years.

For further information on an IVA take a look at the R3 leaflet Is an IVA right for me? It compares the IVA to bankruptcy.

Debt Management Plan

A debt management plan is usually arranged by a debt management company who will assess your financial situation and then contact your creditors to structure repayment of your debts at an affordable amount. You will make one payment to the debt management company each month who will then distribute the agreed amounts to your creditors.

A debt management plan is not usually legally binding on your creditors and repayment will be expected in full. Many organisations charge a monthly fee for arranging this kind of solution and make a profit whilst doing so. A debt management plan will usually only be suitable as a short term solution.

Refinancing

Refinancing can take a number of forms. It involves using new finance to make your existing repayments more affordable. This is most commonly achieved by consolidating your debts using either a secured loan or an unsecured loan. The objective is to reduce your monthly repayments to a more affordable amount and/or to reduce the overall amount of interest that you will have to pay.
Refinancing will usually be an option if you have an income and a reasonable credit rating. A remortgage is an example of refinancing. It is essential that you seek advice if you are to consider refinancing, it is not the low risk option that it is often perceived to be.

Income maximisation

Income maximisation is often overlooked. It simply entails you increasing your income and reducing your expenses. The objective is to increase the amount of money that you have to repay your debts and hopefully bring you within your budget. This type of solution is only viable if you have a small deficit in your monthly budget. Adopting an income maximisation strategy to your finances is good practice in any case.

As you can see there are a number of solutions available to deal with your debts, even where tax credit overpayments are part of the problem. The most important step you can take is to seek advice. The sooner you do this the less consequential your debt problem will be. There are a number of charities that you can seek free help from including:

• National Debtline
• Citizens Advice Bureau

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Tax Credit Casualties Newsletter August 2010

Paula12th August 2010

Welcome to the Tax Credit Casualties newsletter for August 2010.

Although we are sending the newsletter out to our subscribers, we’ve decided to publish it here too as a bit of an experiment. But please subscribe if you haven’t already, because we may want to get in touch with you quickly if anything important crops up! You can subscribe to Latest News using the RSS feed, too,  if you know how.

As always, please get in touch if you know something that we don’t …

‘Your Freedom’

You may of heard about the new coalition Government’s web-based ‘have your say’ initiative – AKA ‘Your Freedom’. Well, our Ali has been busy and created a vote for an amnesty on Tax Credit overpayments.

We have to get this ConDem lot to listen, so let’s use the means they’re offering and VOTE HERE. You just need to complete a simple 10 second registration process (top of the screen; click on ‘Register’)  then add a rating by clicking on the grey/yellow stars just above the comments section, further down the page. Five stars would be nice, thanks! Feel free to add a comment too, explaining how much this dangerous farce has affected you and your family.

Adjudicator’s Office Response Deadlines

Here at TCC we often feel we are fighting the agencies that are supposed to be helping us, as well as fighting HMRC. We’ve already had to accept that the Information Commissioners Office is actually pretty toothless when it comes to HMRC infringing our Data Protection rights, and The Adjudicator’s Office (AO) probably have my number blocked now after I tried (several times) to get a policy statement regarding HMRC attempting recovery action while a case was being disputed, but the AO have now developed a new habit that has left me foaming at the mouth.

Once a case gets to the Adjudicator’s Office (AO) stage of the dispute process, the procedure is that the AO asks HMRC to produce a report on the circumstances of the claim, overpayment and dispute. This report is then sent to the victim (only after TCC demanded this become standard practice, by the way) and the victim is asked to comment on HMRC’s report. HMRC are then asked to comment on the victim’s comments. This report and the responding comments then form the basis of the AO’s investigation. Sounds fairly reasonable so far?

But over the last 3 months we have been involved in no end of cases where the AO have supplied the report and, at the same time, given a very short deadline in which the victim is asked to respond. Usually 2 weeks or so. Given that this report often runs to at least 10 pages, involves complex ‘facts’ and figures that definitely require double checking AND that this is their ‘day’ job, not ours or their victims, this is totally unacceptable. The majority of the time we have had to wait 3 months, or more, for the AO to do anything other than acknowledge receipt of the dispute, and then a further 6 months or more for HMRC to actually produce the report. To then give the lay-person claimant less than 4 weeks to respond is arrogant in the extreme.

When my workload recently became near impossible I decided we needed to take a bit of power back, so I started resisting the AO’s deadlines and complaining about the attitude it belies. More and more people are telling me they are getting these types of deadlines, and most are putting family and other commitments aside in a rush to comply. As such, I have developed a template complaint letter people might like to use should they be faced with the same situation.

Download Complaint Letter About The Adjudicator’s Office Deadlines

All the responses we’ve had to this letter, from the AO, have accepted the new deadline proposed in the template and I feel it is important that we continue this policy. Not only for the sanity of the overpayment victim, but also because I fear rushing to respond to the report means that the quality of the response does the victim’s case no favours. And, of course, because such an attitude and approach needs challenging strongly. 

Income Disregard

You may have seen mention of the Income Disregard feature of Tax Credits in the press recently. I feel it important to highlight that this feature is not the safety net the Treasury and HMRC have  lauded it to be. While the proposed reductions, from £25,000 to £10,000 by 2011 and down further to £5,000 in 2013 are indeed a concern, many of you are wondering why this feature has not been applied in your own overpayment case already.

The problem is that, once again, the media have over-simplified to the point of actually completely misrepresenting the issue. Nothing new there, (remember the great proclamations of “all overpayments to be written off” in 2006, 07, 08 and 09?), but this portrayal is creating false hope and unfair criticism of overpayment victims;  i.e. why are we moaning when we are being let off with £25k worth of income?

In short, the disregard only applies in very limited circumstances. And shockingly, those circumstances only exist when you have disregarded official advice to keep HMRC notified of circumstance changes throughout the tax year. £25,000 of income is NOT ignored.

Instead up to £25,000 of income ADDITIONAL to the income HMRC have recorded for you can be disregarded, but only if you did NOT update HMRC of income levels at any time since that years claim started.

Note that you can be accused of non-compliance and even neglect if you do this now, but this feature always has been a patch measure that didn’t offer what it claimed. When Tax Credits were first rolled out, the Income Disregard was £2,500, meaning your income could improve by this amount and you shouldn’t end up with an overpayment. BUT, crucially, the system was operated differently then, and as such no one’s income was updated on their claim until the end of the tax year, even if they did notify HMRC ‘in year’.  Therefore the disregard applied to nearly everyone.

When the level of overpayments were first revealed, some 18 months after the public roll-out in 2003, and when the subsequent outcry had generated enough embarrassment, the government bodged the disregard to the admittedly preposterous £25k and claimed they had solved the problem of normal people not being able to predict their income 12 months in advance. TCC cried foul on that at the time and have done ever since.

This is no safety net. There are still no means to protect people who follow compliance procedures AND earn more than they estimated. HMRC have not faced up to the fact that most claimants do not enjoy the benefits of stable incomes and therefore their income varies either through pay increments, new jobs or changeable working hours.

It’s only been in the last year or so that they have included a feature to allow you to advise them that your income for the new tax year will be different from the income for the previous year. Until then they worked on the assumption that everyone earned the same amount year in year out, and started all new claims on last year’s income. As such you had to advise them, when the new claim started, that your income level was different, and the claim had to be recalculated. Guess what that meant; the Income Disregard could now not be applied to that year’s claim, because you have updated your circumstances in year. Crafty!

We are concerned about the proposed drops, especially the aim of reducing it to £5k by 2013, as this means that a fairly modest improvement in circumstances could cause an overpayment bill of the same size or more. But the recent media coverage of the issue has done no one any favours and we felt you deserved a thorough explanation of this feature.

Comptroller & Auditor General’s Report

This week we learn from the Comptroller and Auditor General’s report on HMRC’s 2009-10 accounts  that the Treasury is still struggling to recover Tax Credit overpayments made in error. Thanks to the efforts of Tax Credit Casualties and other welfare groups and charities to advise people of their rights, HMRC’s “collection rate for Tax Credits debt … is substantially lower than that for tax debts”.

This is attributed to claimants being unable to repay and the Revenue prioritizing the task it has always done – collecting taxes – over the role it acquired but never really wanted – playing Tax Credit award hokey-cokey with poor families who are in no position to return money to the taxman just to make the bureaucrats’ books balance.

In the last tax year, HMRC – and this is only its own rough guess, almost certainly underestimated – made “incorrect payments to claimants of between £1.95 billion and £2.27 billion”. We are led to believe that a “new approach” has miraculously prevented “an estimated £569 million of error and fraud in the year”, sparing some families the terror and despair of receiving threatening Tax Credit recovery letters.

Suddenly someone – the Comptroller and Auditor General – has recognised that there is more “error” behind Tax Credit overpayments than “fraud”, and that these two words can occur in this order in a sentence about Tax Credits without the gratuitous prefix of “claimant” insinuating that everything is somehow the innocent claimant’s fault.

It’s about time!

Prime Minister’s Office Responds To TCC Letter

TCC wrote to the Prime Minister in May, and went to a lot of effort to describe the flaws of the system and the impact it has on claimants.

 Read Our Letter To David Cameron

Unfortunately so far we have only had the bog-standard acknowledgement and promises to pass our concerns to the Treasury. Very disappointing indeed, as this is all we used to get from Gordon Brown as well. To add insult to injury we haven’t had a response from the Treasury yet either, and probably won’t without chasing them up … which we will.

TCC had hoped to develop our links with the new coalition government as previous relationships with key members had been very positive. However we hit a stumbling block as our main contact was one Mr David Laws, who I’m sure your aware now holds the record for the shortest time spent in a ministerial post when he had to resign as Chief Secretary to the Treasury after just 17 days.

We will keep trying, but they are going to have to do better than they have so far to prove themselves much different to their predecessors on this issue.

Successful Cases

On a positive note, a quick tally tells me that we are nearing the £300,000 mark in confirmed, successful write-offs. £50,000 of that was achieved in the last 6 months. As I have mentioned previously, this isn’t actually a very true reflection of our success rate because:

1. I only started keeping track at the beginning of 2007;    and
2. I suspect a very high number of the people we help don’t get round to letting us know their case was successful, simply because they just want to forget about it all, which is pretty understandable. 

The cases included range from bills for £300 up to £16,000 , with the average being approximately £4,000.  The length of time the disputes have taken varies from six months to six years and the causes range from zeroed income, wrong number of adults or children on the claim and HMRC’s failure to record information, all the way to reasonable mistakes on the claimants part.

Overwhelmingly, this rough figure shows it is more than possible to win a dispute (If you’ve won your case through using this site, please contact us and let us know). While now may not be a good time to celebrate ‘costing’ the public purse, please remember not only are we innocent victims of this mass incompetence, but to continue to force millions annually into thousands of pounds of debt will cost the public purse much much more.

Struggling families with millstones around their necks become more of a drain on public resources the more vulnerable they become. Low income earners are typically in low paid, unsecure and changing employment. One unexpected or unachievable bill forces further, spiralling need for state aid. From income related benefits, to insolvency, to additional welfare support for families in poverty, to emergency mortgage support. Not to mention additional national expenditure to try and combat the social implications of increased poverty.

Writing off these debts and preventing them occurring again by an amnesty and a return to fixed payments is the only way to save the country money in the longer term.

We hope you are listening, Messr’s Cameron and Clegg.

That’s all for now, folks. As normal, we’ll let you know if anything important happens! Keep Fighting!!

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HM Revenue & Customs 2009-10 Accounts

Alison29th July 2010

This week we learn from the Comptroller and Auditor General’s report on HMRC’s 2009-10 accounts that the Treasury is still struggling to recover tax credit overpayments made in error.

Thanks to the efforts of Tax Credit Casualties and other welfare groups and charities to advise people of their rights, HMRC’s “collection rate for tax credits debt … is substantially lower than that for tax debts”. This is attributed to claimants being unable to repay and the Revenue prioritizing the task it has always done – collecting taxes – over the role it acquired but never really wanted – paying tax credit award hokey-cokey with poor families who are in no position to return money to the taxman just to make the bureaucrats’ books balance.

In the last tax year HMRC – and this is only its own rough guess and almost certainly underestimated – made “incorrect payments to claimants of between £1.95 billion and £2.27 billion”. We are led to believe that a “new approach” has miraculously prevented “an estimated £569 million of error and fraud in the year”, sparing some families the terror and despair of receiving threatening tax credit recovery letters.

Suddenly someone – the Comptroller and Auditor General – has recognised that there is more “error” behind tax credit overpayments than “fraud”, and that these two words can occur in this order in a sentence about tax credits without the gratuitous prefix of “claimant” insinuating that everything is somehow the innocent claimant’s fault.

The coalition government has already indicated that, as staff leave HMRC, there will be no new staff and hence a reduction in workforce. Yet for tax adjustments alone, HMRC has a backlog of  “18.2 million cases … awaiting action”, and expects to be handing back £3 billion in overpaid tax whist chasing underpaid taxes of £1.4 billion, without any extra staff. Figures show that “the value of tax credits debt had increased to £4.5 billion” and the Revenue now needs to assess “tax credit debtors’ ability to pay their debts … [and] extend this approach to older debts so that it can pursue debts that can be recovered cost effectively, and write off the others”.

We claimants need to be clearly demonstrating to our new government that the state-sanctioned abuse perpetrated by the last government on innocently overpaid victims cannot continue, and we will fight to the bitter end to prove that these are not our debts, that we will no longer be bullied into paying for the taxman’s mistakes, and that these so-called debts cannot be “recovered cost effectively” because we will evoke every part of the dispute process we are entitled to have our cases reviewed under, until we see justice done. These reviews do not come cheap; the Adjudicator and Parliamentary Ombudsman are snowed-under with tax credit overpayment dispute cases and are increasingly likely to be so for the foreseeable future.

The £4.5 billion reputed to be outstanding in tax credit “debt” is a huge sum, but still less than the reported £5.8 billion in tax credits which goes uncollected each year, which is more than enough to fund a full write-off. Spared from having to devote any more scarce time and resources to the endless bureaucratic trail that costs the public purse far more than is ever recovered from the hapless overpayment victim, the Revenue can direct its energies towards taxing people correctly and getting their tax credit awards right first time.

With this government made up of Ministers who made time for Tax Credit Casualties when they were in Opposition, MPs will be carefully gauging the mood of their constituents before deciding whether to be true to their word or not. We can all help persuade Parliament that “Justice is an Amnesty” by writing to our MPs asking them to write to Chancellor Osborne. Let’s finish the job we started together in 2005 and lay to rest Brown’s legacy of tax credit debt once and for all!

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Tax Credit Overpayments and Mental Health

Alison15th June 2010

Receiving a tax credit overpayment demand is incredibly stressful, creating massive instant debt out of the blue, placing victims at the mercy of the ruthless, all-powerful Revenue, and often arising from official errors or inbuilt system quirks which victims fight for years to resolve. Victims report being treated like criminals by bureaucrats.

Suicidal thoughts, despair, depression, family hardship, relationship breakdown, intolerable stress, physical and psychological illness, loss of sleep and feelings of helplessness are frequent side-effects of Gordon Brown’s “Flagship” Tax Credits.

Tax credits, when they go wrong, bring court threats and life-wrecking bills and leave people physically and mentally battered. Imagine how much worse the situation is when the victim is already a mental health survivor, suddenly facing the added worry of either finding money they do not have for a debt they never created, or desperately seeking exoneration in a system where, by default, the claimant is always guilty until proven innocent, and the Revenue acts as judge and jury in its own cause.

For the last five years, countless claimants with mental health needs have come to Tax Credit Casualties for support, exhausted by the bureaucracy, degradation and injustice heaped upon them by Brown’s Treasury. It is bad enough that some of the lowest paid, hardest working families in Britain, because of state ineptitude, are forced to devote hours of their precious time to doing the Revenue’s job for them, painstakingly evidencing what officials did wrong until, years later, they are heard.

Yet to have to do this if your average day is already a battle against chronic fatigue, anxiety, depression and debilitating illness is intolerable. We cannot hold people with mental health needs hostage to state-created debt, beating on a bureaucratic brick wall. “Reasonable adjustments” must be made to the dispute process so that people living with mental illness do not end up capitulating to state-sanctioned bullies simply because they have no more fight left in them. It isn’t fair, and it is certainly not in the public (taxpayers’) interest.

Tax credit policy does not match the experiences of mental health survivors, who report no let-up in bullying tactics – condoned by Brown – whilst their health deteriorates. Meanwhile, here’s what the policy says:

Mental Health

We will need a letter from a health care professional or mental health social worker explaining the mental health problem to enable us to deal with these cases. In most cases the evidence provided will be sufficient to relieve the customer from responsibility for payment.

• For sole debts we will write to the third party and the customer to let them know that we will not continue with recovery of the overpayment.
• For joint debts we will continue with recovery from the other partner…

(Ref: HMRC Leaflet ‘How HMRC Handle Tax Credit Overpayments‘)

The following excerpts come from the HMRC Debt Management and Banking manual:

DMBM555610 Tax Credit overpayments: Mental Health cases: Overview

Introduction

This guidance is for the recovery of Tax Credit overpayments where it is claimed that the claimant, or one of the claimants in a joint household, is suffering from a mental health problem.

These cases should be dealt with locally. The number of cases received is small but due to their sensitivity they must be handled carefully and sympathetically.

If you receive information/evidence about the mental health problem of a claimant you can agree not to pursue that claimant for payment. This is to prevent any detrimental effect or unreasonable distress to the claimant (This text has been withheld because of exemptions in the Freedom of Information Act 2000).

In the majority of cases, the initial contact about a claimant’s mental health problem will be from a third party on behalf of the claimant, such as from a doctor or psychiatric nurse. Organisations such as MIND and Citizens Advice Bureaux can also be involved.

Note: Mental Health cases should be overseen by a Higher Officer or above.

The Money Advice Liaison Group (MALG) has produced guidelines which provide additional information and understanding about dealing with customers with mental health problems. These guidance lines can be found in the DMB Guidance Gateway under ‘Good Practice Guidelines.

---

DMBM555620 Tax Credit overpayments: Mental Health cases: Evidence required

The Disability and Discrimination Act 1995 defines a person with a disability as someone with a ‘physical or mental impairment which has a long-term adverse affect on his/her ability to carry out normal day to day activities’. This definition should be used when considering the effect of the mental health problem on the claimant’s ability to repay.

The evidence should include the nature of the illness and as far as possible, whether the illness is likely to be long-term (for example schizophrenia) or where the prospects for recovery are expected to be good (such as depression).

If the initial approach is a letter from the third party explaining the mental health problem, or includes such a letter from the claimant or third party, treat this as evidence obtained, see DMBM555630.

If the required evidence is not initially available, you should write to the claimant or third party asking for documentary evidence about the nature of the illness and its prognosis (likely outcome) from the claimant’s

• community psychiatric nurse
• general practitioner (Note: some GP’s charge a small fee for this service)
• psychiatrist
• mental health social worker
• other healthcare professional

---

DMBM555630 Tax Credit overpayments: Mental Health cases: Evidence obtained

Only in exceptional circumstances will the evidence received be insufficient to relieve the claimant from responsibility for payment.

If the evidence satisfies you that the claimant should not be pursued for payment of the overpayment(s), you should

• For sole debts
  • write to the claimant and/or the third party to advise that the overpayment(s) will not be pursued
  • (This text has been withheld because of exemptions in the Freedom of Information Act 2000)
• For joint debts
  • write to the claimant and/or the third party to advise that the overpayment(s) will not be pursued from them and ensure no further correspondence is issued to the claimant
  • make the following Retained note in Household Notes on the NTC system ‘’Mental Health case – decision to relieve [XXXX] from responsibility for payment of [£XXXX (original amount of the client’s share of the overpayment)] for the year/period [XXXX]. Made by (the decision maker’s name)’’
  • enter the same note on IDMS
  • remit any overpayment(s) due from the claimant under Type 5a (Hardship)
  • continue to recover the other claimant’s share of the overpayment (note; the Tax Credit and IDMS systems will continue to reflect a joint record and this cannot be amended at present)
  • ensure that any court entry is done manually, not through the County Court Bulk Centre (CCBC).

We need to remind HM Revenue and Customs that by statute it must exercise discretion, and write off tax credit debts for claimants who have mental health needs; to fail to do so is in breach of the Disability Discrimination Act.

We also need to remind our politicians that failure to ensure that policy is consistently applied is sanctioning the abuse of people with mental health needs, and will not be tolerated any longer.

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A Letter For Your MP

Alison10th June 2010

Following on from our letter to David Cameron, I’ve put together a letter that everyone can send to their MPs, asking them to support our call for an amnesty.

The letter is published below. You can download a copy here, in Word format, to edit and send to your MP: Download MP Amnesty Support Letter.

We are asking you to send these letters to your MP because we can’t! If we were to write to every MP, our letters would be ignored because they can only act on behalf of their constituents.

But if you send this letter to your MP, it’s a completely different story! Not sure who your MP is? Find out here!

Please take this small amount of time to do something for your campaign, even if you’ve never joined in before. It will make a difference. We’re doing what we can, but now it’s up to you! Be a Tax Credit overpayment rebel …

[Name of your MP] MP
House of Commons
London
SW1A 0AA

[Insert date]

Dear [Name of your MP] MP,

I am writing as a member of your constituency to ask for your help, on behalf of both myself and the national user group Tax Credit Casualties (www.taxcc.org ) in ensuring that this Government ends the unfair, punitive recovery of tax credit overpayments caused by system errors.

Tax credits were meant to reduce poverty and make work pay but up to £5.8 billion of tax credits goes uncollected each year, according to the previous Labour government’s figures.

The Citizens Advice Bureau has found that only 1 in 5 entitled people actually claim working tax credit, many fearful of bureaucratic errors and unsolicited future debt.  Advertised as “Money With Your Name On It” to offset low wages and provide vital support for lower income families, countless honest workers trusted HM Revenue and Customs to correctly calculate their entitlement, and spent their money in good faith providing for their dependents.  The draconian recovery tactics now used by HMRC to snatch back historic overpayments strikes terror into the heart of innocent people and would be the envy of any dictatorship; totally inappropriate to a nation whose pride is its sense of fair play.  HMRC is allowed to endlessly admit sloppy mistakes on overpaid claims, yet continually absolve itself of all responsibility, being its own judge and jury. Millions of pounds are being spent in the pursuit of money which has already gone, whilst the low take-up of tax credits is marvelled at, analysed and dissected, and further money thrown at encouraging reluctant lower income families to claim.  Meanwhile the obvious solution is ignored.

We need this coalition government to grant an immediate Amnesty of all non-fraudulent overpayment claims – supported not simply by our new government, but all parties, for the good of our nation.  If shame and compassion haven’t to date prompted an urgent write-off, the staggering long-term costs of deadlock dispute should.  One look at the balance sheet for recovery versus write-off should soon convince any critic that under the current, draconian recovery policy, the Treasury’s resources are diverted and overstretched on an endless bureaucratic trail that invariably ends up costing more than is recovered from the hapless overpayment victim. The system cannot move forward because it is chaotically busy looking back, haemorrhaging scarce public money as it goes.

Despite many overpayment victims being kept unaware of their rights, they soon sense injustice and growing numbers are empowering themselves to fight back.  Hence, Tax Credit Casualties (TCC) has grown from a handful of founding members to a multiple award-nominated national voluntary user group whose membership runs into thousands, and whose free dispute pack has – with their blessing – been begged, stolen and borrowed by welfare rights, tax justice groups and unions as a template for their own self-help booklets.  Over 100,000 unique visitors have accessed their website, and 1000s of people have acknowledged their support in winning their cases.

The beauty of consumer action is that every successful case simply adds to the overwhelming body of evidence TCC now has that the system, for all the rhetoric of its success, is failing too many honest, hardworking families.  This accumulated knowledge has helped politicians, councillors, the media, tax groups, solicitors, unions, charities and welfare agencies – who now consult us when researching problems with the system – to better understand where the problems lie in the current system.  Bad practice, data loss, insider fraud, the cruel annulment of previous awards when returned renewal packs go missing, the maternity leave trap, HMRC internal guidance to only discuss the issues claimants themselves raise, the rhetoric-practice gap in exercising Revenue discretion in cases of serious illness, bereavement, mental ill health and acute hardship, breaches of confidentiality and premature court action are just a few examples TCC has found.

Every victim successfully evidencing their innocence of blame, through data access requests which cannot lie (although you must believe that the instances in which key evidence fails to arrive in the data bundle received by the claimant victim on a first request far exceeds the level of coincidence) provides a further piece of the hellish jigsaw, showing a failing, incompetent and ruthless system.  This can no longer be ignored by politicians of any party; it is quite simply wrong.  Within all our main political parties there are supporters of a full write-off, and an Amnesty has been sought at various times by Citizens Advice, Advice Northern Ireland, the Child Poverty Action Group, One Parent Families, the Royal College of Nursing, the GMB and UNISON and the Parliamentary Ombudsman, among many others.

[Here you can insert a short summary of how you or a family member has been affected by a non-fault tax credit overpayment, and the impact this has had, especially on someone’s health and wellbeing or chance of a better life.]

I want to see our new government putting just a portion of the unclaimed tax credit billions to good use, freeing the innocent indebted from the nightmare of tax credit overpayment bills.  This will give honest victims back their lives and dignity, as well as restoring public confidence in all our political leaders, whether in government or opposition, to take the interests and wellbeing of their constituents seriously.  You will know how much this has been in question recently.

I urge you to support a tax credit overpayment Amnesty as an important step towards tackling poverty, encouraging future take-up of tax credits by qualifying families, and securing a safer, fairer tax credit system.  Please let me know by return of post that you will be adding your support to this vital action.

Yours sincerely,

Please share this with all of your friends. The more, the merrier!

And keep campaigning, because we’re going to win!

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Our Letter To David Cameron

Graham28th May 2010

Tax Credit Casualties are in the process of writing to many MPs in our new Government. We thought you’d like to see the letter that David Cameron has received from us this morning, so we’ve published it below.

It’s a long letter, but worth reading because we believe that it says just about everything that can be said about Tax Credit overpayments and how unjust the system truly is. Why not send a copy to your own MP, asking them to do their best to make sure that the Government acts on what we have written?

Dear Mr. Cameron,

Congratulations on your new appointment as Prime Minister and leader of our exciting new Conservative and Liberal Democrat Coalition Government. We think this is a very positive step forwards to a new way of working, and fully support your ambitions.

Whilst we appreciate that there are many items of urgent business requiring your attention, we did want to take this opportunity to remind you that casualties of the Tax Credit system are still waiting for help from Central Government. Some of our members have been fighting the unjust repayment of overpayments for five or six years now and have been disregarded and disenfranchised by the previous Government.

The people of the United Kingdom urgently need reform of the Tax Credit system to reinstate the fixed term payments that worked so well in the days of Working Families Tax Credits, but they also urgently need an immediate amnesty on the repayment of all non-fraudulent overpayments.

We have previously highlighted the unfairness of the Tax Credit system and the devastating impact that overpayments have on families, in our ‘Voices of the Victims’ booklet. Yet we continue to hear of more and more injustices on a daily basis.

So many overpayments are caused by HMRC themselves, through a mixture of poor training, understaffing, incompetence, computer system faults, internal fraud and the very complexity of the system itself.

One recent case resulted in a young mother, who was helped back to work through an apprenticeship, losing her position towards the end of her apprenticeship because her Tax Credits were withdrawn. HMRC had retrospectively decided that an apprenticeship was not work. Whilst HMRC later reverted to their original decision that an apprenticeship was actually work and she no longer has to repay her Tax Credits, she has still lost her apprenticeship and the opportunity of improving both her and her child’s lives.

The Tax Credit system was designed to be heavily automated, yet was broken even before it was implemented. This placed huge demands on a reduced HMRC workforce and resulted in blocks of inexperienced HMRC staff being shuffled around to whichever department had the biggest fire to fight at the time. To some degree, this is still happening.

Very often, advice given by HMRC to claimants turns out to be wrong and causes an overpayment. Yet when a data Subject Access Request is submitted by the claimant, the data that is returned omits the single item that would incriminate HMRC, and therefore ensures that the claimant, unjustly, remains responsible for repayment.

Computer software faults still exist, with Tax Credit Office personnel having to find ways to ‘fool’ various software modules so that claims can be paid. This practice causes further problems that few TCO employees can recognise, and therefore cannot compensate for, so the innocent claimant ends up repaying an overpayment that never happened.

In one such example, a claimant recently contacted us because she had received a large overpayment bill. On analysing her Subject Access Request data from HMRC, it transpired that this claimant had actually been underpaid since 2003, to the total of some £10,000, because of this software problem. We have still to learn whether she will have to repay the alleged overpayment.

A particularly vile practice of HMRC is the annulment of awards and the fact that they make no allowance for losses within the postal system. Should their end of year paperwork be lost at any stage of its travels through the postal system, and not recorded as received by the Tax Credit computer system, the whole of the previous year’s award is demanded back as an overpayment. There are no second chances.

Injustice exists even within the dispute process that is available to claimants who have been overpaid through no fault of their own. HMRC’s internal dispute procedure uses the information contained in their Code of Practice 26 as their rule book. This has been amended several times since 2003 because of unfair flaws that strongly favoured HMRC, yet claimants can still only dispute their overpayments in accordance with the version that was in force when their overpayment occurred.

To this day, HMRC still apply these rules unfairly. For example, if the claimant made a minor mistake and HMRC made a huge error, the fact that the claimant erred at all is used to justify the repayment of an overpayment.

Should the claimant have the stamina to take their dispute further, they find that both The Adjudicator, who is appointed by HMRC themselves, and The Parliamentary Ombudsman both also use HMRC’s Code of Practice 26 as their rule book. Without wishing to taint either office, it stands to reason that they have no brief which allows them to give a truly impartial ruling.

We have seen numerous disputes that have been taken to The Adjudicator and The Parliamentary Ombudsman, where HMRC have rightly been found to be at fault. Yet the claimant is still ordered to repay the overpayment, but is granted a very small amount of compensation because of HMRC’s failings.

The final possible step in the available dispute process is for the claimant to take legal action. Unfortunately, the very fact that a claimant is receiving Tax Credits is enough to take them outside of the financial qualification for legal aid. To the best of our knowledge, because of these financial restrictions, nobody has yet attempted this.

Hopefully, you can see that there is no truly impartial and independent dispute process available to Tax Credit claimants who wish to dispute overpayment bills that they know have been unjustly imposed upon them. The system is, in fact, still weighted heavily against them.

The amounts being disputed are very often not small, either. Although the majority of overpayments are in the hundreds of pounds, many are in the thousands and we often hear of repayments in the tens of thousands. The largest for which we have been asked advice is £58,000.

With the exception of annulments, when the sums of money being demanded are more than a few thousand pounds it is often because HMRC suddenly discover that an overpayment occurred several years ago and has compounded over the intervening years.

Apart from negating the intended benefit of Tax Credits, the repayment of large overpayments causes severe hardship for claimants. The poorest are always the hardest hit, simply because they receive the largest Tax Credit awards by default, and therefore have the largest overpayments.

HMRC have guidelines regarding hardship, allowing them discretionary powers to write-off overpayments if a case for hardship can be proven. We have never heard of this discretion being applied, yet we know of claimants who have long term, crippling repayment agreements.

One claimant that we know of, who was the victim of a known computer fault that zeroed his income, has to repay £65.46 a month for 8 years and 7 months, despite The Adjudicator finding HMRC at fault. Another is repaying £10.09 a month for the next 50 years, despite keeping the Tax Credit Office fully informed of circumstances, as is required.

One of the reasons that there has not been a huge and sustained public outcry about the numerous injustices of the Tax Credit system is because the majority of overpayments are recovered from future awards. This means that most overpaid claimants do not actually have to find hard cash with which to repay the Tax Credit Office because repayment instalments are taken at source by HMRC. In fact, the overwhelming majority of these claimants do not know that they can dispute their overpayments, and simply accept their reduced Tax Credit payments whilst glad to still be in receipt of them.

However, some of these claimants do decide to investigate their overpayments, and the fault is found to lie with HMRC far too often. Yet, once again far too often, the innocent claimant is forced to repay, their families suffering simply because injustice abounds unchecked within the Tax Credit system.

Many of the claimants who ask us for help to dispute their overpayments are facing bills of many thousands of pounds. This often happens because their award is terminated whilst an existing overpayment, sometimes accrued over several years of maladministration by HMRC, is being reclaimed from their current award.

Awards are terminated for many reasons other than non-qualification upon renewal at the beginning of the Tax Credit year. Joint awards are terminated at any time because relationships and marriages break down, or loved ones die, often after long and traumatic illnesses. Any existing overpayment that was being repaid, in instalments from a current award, then becomes an immediate payment due.

Once again, HMRC has the power of discretion to write-off these overpayments because of the ill health or psychological trauma that claimants experience, at a time when they are at their very lowest and in need of most help. Yet we have never heard of HMRC doing so.

We could go on and on, listing injustices within the Tax Credit system and the many ways that HMRC compound the effect of those injustices by using harsh tax laws that should never have been applied to what is effectively a benefit.

As for the financial argument of writing-off all non-fraudulent overpayments, when we launched ‘Voices of the Victims’ at Portcullis House in June 2008, we clearly demonstrated that pursuing recovery of these overpayments is not in the best interests of the public purse. This is an issue which is of increasing importance in the current financial climate.  We also firmly believe that a fair and transparent system would reduce the costs of administering the system and deliver much needed efficiency savings.

Tax Credit Casualties are a small group of unpaid and unfunded volunteers who have willingly given their spare time and skills to help victims of unjust Tax Credit overpayments since 2005. We are joined together in a common goal from across the political spectrum and have found ways of working in harmony around our diverse and separate political beliefs.

We have enjoyed the support of both the Conservative and Liberal Democrat Parties whilst both were in opposition. Nothing regarding Tax Credit overpayments has changed, and now that both Parties share power justice can be done.

Reforming the Tax Credit system and ceasing the recovery of all non-fraudulent overpayments is in the best interest of the country and its’ people. We look to you to deliver this on behalf of every Tax Credit claimant who has been forced into debt by this unjust system, under a Labour government that deserted them and didn’t care.

Let yours be the Government that rights one of the biggest wrongs ever done to the people of the United Kingdom.

Yours Sincerely,

Tax Credit Casualties.

How else can you help? Easy! Just use the buttons at the bottom of the page to share this page with all your friends on Facebook, and ask them to do the same.

There are another 1 million  overpayment victims out there who need help. Let’s show them where they can get it!

Categories: Letters | Top | 15 Comments So Far

HMRC Try To Bury New Overpayment Figures

Graham27th May 2010

HMRC have published Tax Credit overpayment figures for 2008-09 today, trying to slip them out under the cover of their latest data loss scandal.

Yes folks, HMRC would prefer to admit sending out other peoples data to 50,000 Tax Credit claimants rather than be up-front about the latest overpayment statistics. We will be writing to the Information Commissioner about this latest data loss, but for now let’s concentrate on the overpayment figures …

Here’s a summary of the Tax Credit overpayment figures for 2008-2009 :

• There were a total of 6,996,000 claims for Tax Credits
• 1,036,000 claims were overpaid by a total of £917,000,000
• This means that 14.81% of all Tax Credit claims were overpaid
• 842,000 claims were overpaid less than £500
• Claims overpaid between £500 and £1,000 were 212,000
• 147,000 claims overpaid £1,000 – £2,000
• 85,000 very unhappy claimants will be repaying between £2,000 and £5,000
• Some 20,000 claimants have overpayments of greater than £5,000

Once again, we are reminded of the sheer number of lives that are being ruined by Tax Credit overpayments.

Remember how you felt until you found Tax Credit Casualties? Please spread the word and do whatever you can to let people know that they can get help on our website. Let’s help as many victims as we can!

Categories: Overpayment Figures | Top | 5 Comments So Far

100,000 Hits and A New Government

Graham14th May 2010

Somewhere during all of the political excitement over the past week, the Tax Credit Casualties website had it’s 100,000th totally unique visitor! That means that over 100,000 different people have now visited the website, and the number is increasing fast as you spread the word and tell more and more victims about us.

Hopefully, we have helped each and every one of you to dispute your overpayment bills and free yourselves from the unjust debt that was forced on you by the last Government.

Not bad for a bunch of unpaid, spare-time volunteers, eh! Well done to the whole TCC team, including the silent many who help out on the forum and everyone who spreads the word about the website. Thank you!

No time to rest yet, though. The overpayment figures for 2008-09 would normally have been published by now, but we understand that HMRC were told not to release anything that could have been embarrassing for Labour in the run-up to the election.

Now that’s done and dusted, the figures should be released soon and you can expect there to be around another 1 million overpayment victims that might need our help until the new Government sorts out the Tax Credit mess.

Yes … we are confident that the new Government will hold fast to their promises about Tax Credits. The Liberal Democrats and Conservatives have given Tax Credit Casualties varying levels of support over the years. We have absolutely no reason to believe that they won’t do the right thing now that they are in a position to do so.

Let’s all do everything we can to make this the year that Tax Credit overpayments become just another bad chapter in the book of British history!

Categories: TCC | Top | No Comments Yet

A Rainbow Parliament?

Graham11th May 2010

It’s now been five days since the General Election, and we still don’t know what the heck is happening. It’s really hard to find any other stories being reported by the news channels … but are you fed up with it yet?

I can’t remember there ever having been such an exciting time in British politics. Something big is going on, and it will probably change the political face of the UK for ever!

The best outcome for Tax Credit Casualties and our campaign would be a Conservative & Liberal Democrat coalition. There, we would stand a chance, because both Parties have stated some intention to sort out the Tax Credit mess.

Since 2003, Labour have shown that they don’t care about the 1.2 million yearly Tax Credit overpayment victims. They’ve had seven years to correct this huge injustice, so I can’t see them changing their tune now – even as part of a ‘rainbow parliament’, as it’s being called.

A Rainbow Parliament? Now there’s a thing … I’m sure that George, Bungle and Zippy would do a much better job of it all !!

Categories: Election 2010 | Top | One Comment So Far

The Real Cost Of HMRC Blunders

Sarah4th May 2010

Read the article, by Tanya O’Rourke, at the Bradford  Telegraph & Argus

I have been working with Tax Credit Casualties for 5 years and in that time have heard many, many examples of how the system is failing hard working claimants, but this week I have heard a claimant’s story to top them all!

Lisa-Marie Holmes is a young, single mum with a 2 year old little boy. Tax Credits were established to help individuals such as Lisa-Marie Holmes – to make work affordable for those whose incomes would be too low to come off benefits, but it has back-fired for Lisa-Marie.

In May 2009, she was offered an apprenticeship opportunity at her local council through ‘Skills4Work’  (really, you’d think local government and a government agency would be aware of the problem that Lisa-Marie was going to encounter and would have talked to her about money and returning to employment).

Lisa-Marie spent a year working and gaining the skills she would need to achieve a Level 2 NVQ in Admin; she worked 37 hours per week for the grand sum of £2.95 per hour but Tax Credits topped up her income and helped with childcare costs so that she could work and learn and improve her chances for future employment.

Lisa-Marie had done all she should; talked to HMRC about her hours and income and had made it clear that she would be on an apprenticeship. Her childminder also contacted HMRC to ask if Tax Credits would cover childcare payments for a parent on an apprenticeship and was told ‘yes’.  Ms Holmes was told ‘yes’, too.

Until she contacted HMRC regarding her annual renewal.

She was then told that an apprenticeship isn’t classed as work because she has no contract of employment and she is paid a training allowance rather than a wage, which apparently is demonstrated by the amount being below the minimum wage.

Hmm, shouldn’t HMRC have spotted this last year?  HMRC then advised her that she wasn’t entitled to the Tax Credit payments she received last year, approximately £11k, and these would be recovered.

Ms Holmes has had to stop her apprenticeship because HMRC won’t pay for childcare and she cannot afford this on approximately £100 per week.

This is a waste on so many levels: Lisa-Marie only needed to do 5 or 6 more months to gain her NVQ, the council and ‘Skills4Work’ have both put time and resources into her training and development, and Lisa-Marie herself  has now lost an opportunity to gains skills and qualifications to improve her situation in the longer term.

I have looked at the guidance HMRC produce at http://www.hmrc.gov.uk/taxcredits/start/who-qualifies/how-work-qualifies.htm#3 and even for someone used to wading through HMRC’s quagmire of words it is not clear whether an apprenticeship is or isn’t work – it could be both.  Under what counts as work HMRC say:

Working Tax Credit is based on the hours you work and get paid for, or expect to be paid for, either as an employee or a self-employed person. Unpaid work doesn’t count as work when claiming tax credits. Check if your work can help you qualify for Working Tax Credit.

If you have children, you need to be aged 16 or over and do paid work of at least 16 hours a week to qualify.

Presumably the way to check if you qualify for Tax Credits is to phone up and ask, which is exactly what Lisa-Marie did.

Under what doesn’t count as work HMRC say:

You work in a scheme where you get a training allowance, rather than pay – unless the allowance is taxable.

HMRC have contacted Lisa-Marie this week (funnily enough after a journalist wrote an article about her case) to say that the money may not be recovered as she may have been entitled to it after all.  I’m sure Lisa-Marie will feel as though a weight has been lifted from her shoulders to not have to repay £11k, but any joy she may feel at that news will be tempered by the fact that she has still lost her apprenticeship.  If she was entitled to the money, Lisa-Marie has lost the apprenticeship opportunity for nothing.

Either way HMRC have, without any doubt, had a terrible effect on Lisa-Marie’s life.

Tax Credits were set up to help those on low incomes, address child poverty, and help those who are out of work to return to work.  In this case, HMRC have failed on all 3 ambitions.

The system set up to help her work, and HMRC incompetence, has just cost her a job.

Categories: HMRC | Top | 3 Comments So Far