Rt Hon Alistair Darling, MP
Chancellor of the Exchequer
HM Treasury
1, Horseguards Road
LONDON SW1A 2HQ
OUR REF: MA/TAX CREDITS/ADMINISTRATION
16 September 2009
Dear Chancellor,
I am writing to you about Tax Credits and continued problems with their administration and in particular overpayments. As you may be aware there is a considerable body of opinion that there should be amnesty for those that have been overpaid Tax Credits. I particularly bring to your attention the report by the Parliamentary Ombudsman in 2005 and the following recommendations that she made: “10. Consideration should be given to writing off all excess and overpayments caused by official error which occurred during 2003-04 and 2004-05. (Paragraph 5.61). 11. Consideration should be given to the adoption of a statutory test for recovery of excess payments and overpayments of tax credits, consistent with the test that is currently applied to social security benefits…” In addition, the Ombudsman made three recommendations about additional tax credits.
I am sure like me, you have many of your constituents coming to you still with problems over tax credits. I also gather that the percentage of overpayments increased in the most recent year for which figures are available 2006/07 from 19.77% to 19.82%. While this is down from the figure of 2005/06, it is felt that this was mainly due to a change in a technical change between 05/07 and 06/07 of increasing the “income disregard” from 2005/06 to £25,000. That approximately 1 in 5 of tax credits result in an overpayment is still a very high level. There is also a feeling that the availability of the possibility of additional tax credits for people who experience hardship when their entitlement falls is not widely enough to people.
As I said the Ombudsman in 2005 report made three recommendations about additional tax credits: Those were: “5. Steps should be taken to ensure that all Revenue staff who have contact with tax credit customers are alert to the circumstances when Additional Tax Credits (ATCs) might be appropriate, so that they can invite an immediate claim. (Paragraph 5.30). 6. Where in-year recovery of excess tax credits is justified, the Revenue should take steps to pay ATCs automatically to families in receipt of Income Support and income-based Jobseeker's Allowance. (Paragraph 5.30). 7. Details of the availability of ATCs should be printed prominently on the 'payments' page of an award notice (where details of in-year recovery also appear); and the issue of financial hardship (and how the Revenue can help) be given greater prominence in the guidance notes which accompany an award notice. (Paragraph 5.30.).”
I have to say that I don’t think that the points about Additional Tax Credits have been taken on board by HMRC and certainly in my work helping constituents, I have found they haven’t. I, for example, have a notice to a constituent, saying that they owed money dated the 22nd June 2009 – and this seems to be fairly standard of the letters that are being sent out which makes no mention of the possibility of additional tax credits. The standard leaflet COP26 “What happens if we’ve paid you too much tax credit?” makes no mention of the possibility of additional tax credits either.
I note that it is estimated that £4.24 billion is not claimed each year. In contrast the overpayments are estimated at under a quarter of this - £940 million. There is of course an issue of people being getting too much when others are not getting the money that they are entitled to. I also welcome additional help given to people in need but also working. However it is clear from these facts that the administration of tax credits is still going seriously wrong As has been pointed out, benefits such as Housing Benefit and jobseekers and unemployment benefits seem to work much better with fewer problems with overpayment. I hope that you will take a better and more lenient attitude to overpayments. I also hope that you will take greater steps to implement the changes recommended by the Parliamentary Ombudsman – including making it more widely known that people may be able to get additional payments. And finally take greater steps to increase the take-up of tax credits.
Finally the Parliamentary Ombudsman said in her report: “12. The Revenue should reconsider the way it organises delivery of tax credits in order to deliver a better, more complete service to the customers it now serves. A different model is needed in complex cases and where something has gone wrong. More sustained and informed
communication with customers about their case is essential, as is a 'whole case' approach to investigation to ensure a tax credits award is correct. (Paragraph 7.14).”
I have to say that I don’t think that the Government has taken on board those recommendations either yet – that the administration of tax credits needs to be radically overhauled and improved. With one in five tax credit claimants still receiving overpayments and many receiving under-payments or not receiving a payment which they are entitled to at all, it is clear that urgent and concerted action needs to be taken by the Treasury.
I look forward as to my constituent and millions of people up and down the country to receiving your reply that you will now do that.
Tax Credit Casualties (TCC) is a voluntary, unfunded, not for profit
organisation run by members for members. We cannot take any responsibility for
decisions made by HMRC, The Parliamentary Ombudsman, The Adjudicator, or any
other organisation, regarding claimants cases. We offer free advice on how to
dispute unfair overpayments based on our own experiences, the experiences of
other claimants and HMRC guidelines.
Please note that we are not tax professionals and are working on a voluntary
basis, unpaid, in our ‘free time’. Between us, we have a lot of experience and
knowledge in this area, gained over the last few years of supporting victims and
helping them fight for justice and their rights. Legislation, operating
practices and individual cases change all the time, and while we aim to be
professional and accurate at all times, please understand the circumstances we
are working under and accept our support, guidance and information in the sprit
it is offered; goodwill and camaraderie.
Our Standards
TCC was established to provide advice and guidance on disputing recovery of
non-fraud tax credit overpayments and to lobby for fundamental change on the
inbuilt flaws and inequalities of the tax credit system. Whilst TCC provide
guidance and information on how to handle disputes and even provide an advocacy
service in some instances, neither TCC as an organisation not any participating
members are responsible or liable for outcomes of disputes which remain wholly
the remit of HMRC, the Adjudicator and/or the Parliamentary Ombudsman, as
appropriate and dependent on the stage of dispute. TCC operate in a professional
manner and endeavour to give accurate and appropriate advice based on
information provided by members. TCC endeavour to respond to members as quickly
and efficiently as possible, given the voluntary nature of the organisation and
limited resources available. TCC is an inclusive organisation and will treat all
members in a fair and equitable manner.
