The Tax Credit Casualties (TCC) was set up in 2005. TCC is run by, and for, the victims of tax credit overpayments. We are a small team of volunteers offering support and advice to people with tax credit overpayments, to enable them to know their rights to dispute or appeal.
Where appropriate, TCC encourages those effected to dispute (or appeal) overpayments. Our view is that it is not reasonable to expect the claimant to have been aware of the many errors, failures and risks of the system, especially from the earlier years (2004 to around 2010) when the system was even more flawed than it is now.
No other benefit in this country's history has ever run such huge risks with low-income families' financial security. Claiming tax credits turned out to mean people had unknowingly applied for what's actually a badly calculated loan.
If it needs saying: we do not support or condone fraud. Overpayment is not fraud (those accused of fraud are prosecuted, not sent a bill), and if you think overpayment is about fraud - you just haven't been overpaid yet!
We used to do a lot of campaign and media work. Including demanding meetings with HMRC senior staff, lobbying MP's, getting Early Day Motions raised, working with other debt & poverty organisations, seeking legal advice, public meetings, campaigning for change and regularly being interviewed by the media.
And we have had many successes, including:
When we started there wasn't even a defined dispute route, and HMRC hid from victims that they even had the right to challenge being made responsible for the flaws of a system that caused huge unexpected debts.
Nearly a decade later we have wound down a lot of the campaign activities for several reasons:
As victims of the system ourselves we knew the utter desperation, frustration and shock getting landed with an overpayment caused and were determined to help others. Especially because we were well aware that in the midst of trying to deal with HMRC creating hell, many overpayment victims are also going through other huge struggles, from ill health and disabilities, to personal trauma to abject poverty.
So we took the decision to focus solely on the advice and support for victims. If those with the power to affect change won't help the victims, TCC damn well will, even if it's one victim at a time. We developed the first (and still the most comprehensive) tax credit overpayment dispute guide, and an ever evolving website covering all the issues overpayment victims need to know.
What started off as a one page 'rant in cyber space' by an incensed but lone individual developed quickly and massively by sheer weight of numbers alone. Just how many people were being so badly affected was a complete surprise to the accidental founder. Very quickly other volunteers offered their support and by pooling our resources, skills and research, a coordinated and functional website and guide emerged.
Once we started researching the TC system, we very quickly learned how it had become a dangerous farce of previously unheard of scale. Hindsight may well be 20/20, but you would have had to have been blind (and stupid) to not have seen problems coming with the model HMRC rolled out live to an unsuspecting public. In fact the same system had already caused huge debt in Australia but UK politicians and civil servants carried on anyway.
Below, you will see just a few snippets about some of the fundamental flaws of the system:
For whatever reason, when the then Inland Revenue was put in charge of delivering this anti-poverty measure to vulnerable families, it was 'overlooked' that this Credit would have to operate on a tax system calendar.
This meant that entitlement could not be worked out until up to 12 months after TCO had started paying the award. Because they didn't have the current year's earnings until the end of the year, they based the entitlement on the previous year's income and circumstances. So before an award had even started they were using the wrong income figures for the claimant's entitlement for that year.
Basically you were gambling that your income wouldn't go up, and if it did, your forfeit was owing back up to ALL the award they had paid you over the current year. The Tax Credit Office now accept that no other benefit operates like this, and subsequently landing you in debt, and have introduced a higher allowable income increase called an Income Disregard.
HMRC's entire organisation is purpose-made to collect revenue from those on a higher level of income. This makes them an entirely inappropriate organisation to be delivering this system. Inadequate research was done into what type of system and delivery was needed, especially in the light of several high profile failures of similar systems internationally. They had no understanding of the Tax Credit client base.
This is why it was expected that any overpayment could just be 'settled at the end of the year' (i.e. repaid). HMRC are used to dealing with high income earners who 'balance' their accounts on a yearly basis and have the savings and income to be able to do this.
It is also the reason HMRC did not anticipate the fact that claimant's income would vary so much 'in year'. Lower income families do not have the luxury of stable and predictable financial circumstances, and the system was not designed to cope with such changes. It operates retroactively, and is too slow to keep up to date with entitlement compared to the Award that has already been or is being received.
Because such changes were not anticipated, to amend information on a claim caused numerous and confusing paperwork, and claimants were being told to "ignore while the system catches up" most of the time. Claimants are now being told they should have responded to these Award notices, even ones they never actually received.
The assumption, again, is that income is predictable and stable. Provisional payments are made between the end of one claim and the processing of another. By now the income details used to 'calculate' these payments could be 2 years out of date, and were not even being supplied by the claimant on which to base any current payments. So awards have not even started for that year and may already have been overpaid.
The I.T. company HMRC hired (E.D.S.) had previously spectacularly failed to deliver adequate I.T. infrastructure to other government contracts, causing additional expense and error. Despite this, E.D.S was given the contract to supply the technology for the delivery of the Tax Credit system.
As such, many and numerous I.T. problems have surfaced that in some cases have caused overpayment bills all on their own. Overly complex, highly fallible I.T., coupled with untrained and harassed staff has resulted in data going missing, claimants income being reset to zero, incorrectly adjusted claims, manual lump sum awards and ‘invisible’ payments.
HMRC as a whole, and the staff in general, were used to dealing with higher income earners. They had no understanding of the importance of reliable and secure awards, nor the empathy or experience to deal reasonably with frustrated, confused claimants who had variable circumstances and little previous experience of taxation.
Bizarrely, the Tax Credit Office initially took the decision to not to require or act on claimant’s notification of circumstance changes ‘in year’ (during earlier years of the system), and instead saved up this information until the end of the year to factor into entitlement calculations. This meant that claimants had no idea this was causing overpayments because they had reported all changes as requested (N.B. claimants are now obliged to report all changes ASAP) and any overpayment that could have been stopped before it started was now unavoidable.
Because research was not done, uptake of Tax Credit was far higher than expected and staff were working under pressure with fixed deadlines, little training, backlogs, confused claimants and inadequate facilities. Errors were bound to happen but were not planned for.
Untrained and private sector staff were answering claimant’s calls, and callers were not advised of this. Employees of private call centres were masquerading as Tax Credit Office employees, answering questions and advising on tax law they hadn’t been trained in, and deciding which information needed logging.
Information and data to and from claimants has routinely gone missing and is not logged. Award notices that claimants are supposed to check are not posted or received, information supplied is not recorded, or only on ‘one system, but not the other’.
Seemingly, the infrastructure of HMRC is not capable of this work. Post in and out is not handled effectively, different and unsynchronised systems cause duplication and ‘false readings’, and staff don’t seem to know what or where to record information, nor have a complete understanding of the system or process.
Currently one of the most common types of overpayments involves HMRC accusing single claimants of having undeclared partners and (attempting to) terminate their single claim and recover several years worth of previously paid award.
This happens because HMRC fails to acknowledge that now-separated couples with have multiple old and outdated 'links' within their systems. An ex partner may have registered their phone, car and / or credit card at that address WHEN they lived there, but years later HMRC use this to imply the ex-partner now lives there.
So basically any single person claimant who has split from a partner in the last few years is at risk of being accused and pursued for a huge overpayment.