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HM Revenue & Customs 2009-10 Accounts

Paula29th 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 casesawaiting 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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