September 2007

Recent news has been about allegedly illegal recovery by HMRC, this seems to be clarified by HMRC’s own letters to many claimants saying……

My understanding of the current situation is that an investigation has been demanded in light of news that recovery of some cases was illegal. Cases where HMRC reopened claimants 'old' claims to check them and then billed for a newly discovered overpayment are illegal because HMRC should not have reopened the claim without at least informing the claimant (hence the letters received recently, because they have to tell you they are doing it if they reopen your case.)

If pushed right this will get investigated and the result should be very good news for the relevant cases, as I can't see a way of defending illegal recovery. We (TCC etc) need to then capitalise on this finally public proof that HMRC have acted illegal in many areas to have a knock on effect to other cases.

As yet, it is understood that 'recovery will be suspended on all cases that fit the bill' (but we may have to challenge TCO first to get the recovery stopped by arguing that it fits) while they panic plan a way to handle this, so its going to be a bit of a waiting game really.

Regarding the handling of those cases affected by the issue outlined in the recent Ministerial Statement, we need to do some work on some older tax credits awards. We are still drawing up the detailed processes and guidance, and the programme of work

We did not follow the correct procedure when reopening some older tax credit awards. Although the revised award was an accurate reflection of the households’ new circumstances, the process by which we dealt with the new information was not correct – we should have notified customers in writing, at the time, that we were examining the award after finalisation, but did not do so in certain cases.

We intend to review those cases where we think we have incorrectly made decisions which have reduced entitlement. If we do come across any underpayment situations, we will put them right, as normal. As we review the cases concerned and set aside the incorrect revision we expect that, in all but a small minority of the cases, we will be able to correct the procedural error without there being any change to the payments already made. The fact that a customer may be affected for 2003/04 (for example) does not necessarily mean that following years’ awards are affected too - customers will have had independent decisions made on awards for each year as those years have been finalised.

TAX WAR Mothers united in battle against credits chaos 12/09/2007

See the scanned article here. (sorry for the poor quality)

http://www.mirror.co.uk/news/money/city/2007/09/12/tax-war-89520-19777065/

Four mums are battling to help families tangled up in the tax credit shambles. They united after all of them suffered through a system that has left millions of families in despair. In common with many others, they faced demands from the taxman to hand back alleged overpayments said to add up to £2billion a year overall.

The quartet - Alison Myers-Ward, Paula Dean, Sarah McCall and Lisa Weatherley - started the Tax Credit Casualties group to help others caught in the chaos.

When the government unveiled its new Child and Working Tax Credit system in April 2003 it was supposed to simplify welfare benefits by bringing them together with the tax system. But it was fatally flawed. For while the tax credits paid are based on last year's income, you're entitled to less if your income goes up, resulting in overpayments and demands for refunds. Worse still, the forms are so baffling and the calculations so complicated that families have no idea whether they are getting too little or too much.

The government now says you will not have to hand back cash if any overpayment was the fault of the taxman, so long as it was "reasonable for the customer to think their payments were right". But that's a matter of opinion - and proving you did not know you were getting too much has proved to be a nightmare. Most families who were overpaid have already spent the cash - they were not well-off in the first place. Now they are falling into debt as they struggle to repay money they genuinely thought was theirs.

Tax Credit Casualties founder Alison Myers-Ward faces a bill for £5,800 for alleged child tax overpayments for her two daughters Lauren, 15, and Debbie, 14. She was initially asked to repay £2,500 in August 2004. She fought the order, but then a change in her circumstances resulted in her case being reviewed again - and the taxman then decided she owed £5,800.

Alison says: "The system is so complex that normal people cannot understand what they are supposed to get and how it is calculated. It is impossible to tell if you have received too much, so you spend it. Then when you are asked to repay the money you can't. It's not your fault." She was told there was no complaints process. She tried in vain to contact the Revenue, but every time she called or visited her local tax office she was fobbed off. "It was always a different person and I'd have to make my complaint from the start again," adds Alison. "They'd ask me to send different forms, but they never replied. Sometimes forms got lost. It was very frustrating."

Desperate for help, Alison trawled the internet for advice. That's how she met Paula Dean, of Rotherham, South Yorks. Inspired by the online campaign against bank charges, they decided to set up their own website. It has latest news, advice and a forum for those with tax credit problems to share tips. Two other mums, Sarah McCall also of Rotherham, and Lisa Weatherly from London, have also joined their campaign. Now they travel the country getting people to sign petitions, giving advice, and campaigning for a change to the system.

Visit their website at www.taxcreditoverpayment.pwp.blueyonder.co.uk

Have you a problem with your tax credits? Email money@mirror.co.uk or write to Tax Credit Troubles, Daily Mirror, One Canada Square, London E14 5AP.

Who Overpaid Who?: To see a scanned image of this Press Release, click here.

Gordon Brown faces the humiliating prospect of having to return hundreds of millions of pounds that has been reclaimed in overpaid tax credits in the latest blow to the complex benefit system he introduced.

George Osborne, the Shadow Chancellor, is demanding an inquiry by the independent spending watchdog into the affair. A whistleblower in Revenue & Customs has told the Tories that the final bill could top £500 million.

Almost £6 billion has been overpaid in tax credits because of fraud and error since they were introduced three years ago. Critics say that the system’s complexity explains why so many families fall foul of means-testing rules and face repayment demands often running into thousands of pounds. Familes are supposed to tell the taxman when their circumstances change and hand back any overpayments. In reality many forget, do not understand the rules or simply try to cheat the system.
Now it has emerged that 160,000 repayment demands made between 2003 and 2005 may have been illegal and will have either to be abandoned or, where the money has already been clawed back, repaid. Another 90,000 more recent cases are also to be reviewed. Elizabeth Barlow, a paediatric nurse and single mother from East Yorkshire, won her two-year battle to prevent Revenue & Customs clawing back £2,500, after The Times took up her case. She had been overpaid after officials wrongly entered her child-care costs as £1,800 per week, rather than per year. Miss Barlow said: “I have no doubt that it will take them years to sort this out, and whether others who didn’t manage to successfully appeal will ever see any money is another point. It was a massive stress.”

Jane Kennedy, the Financial Secretary to the Treasury, told MPs of “an administrative problem with a number of older tax credit awards” in a parliamentary statement slipped out in the last days of the summer session. “It has come to my attention that officials did not follow the correct procedure when reopening some of these cases.” Ms Kennedy said.

The Tories say, however, that the situation is far worse than is being admitted and could take three years and more than half a billion pounds to resolve. The whistleblower told them that Revenue & Customs has been found to have been routinely breaking Section 18 of the Tax Credit Act 2002 by reopening tax credit awards without notification, even though there is no evidence of fraud. The Government now faces repaying money that was subsequently clawed back.

The official’s account, passed to The Times, states that Alistair Darling, the new Chancellor, was told about the issue shortly after taking over from Mr Brown. “New ministers are furious as they realise that the full extent of the issue would be a major political embarrassment. It has undermined ministers’ confidence in officials at the Treasury/HMRC [Her Majesty’s Revenue & Customs] in their first days,” states the anonymous official. “The fiasco was ‘announced’ to the House in an obfuscating written statement in the run-up to the end of session. Everyone at the Treasury/HMRC are congratulating themselves that the announcement was unnoticed.”

Mr Osborne said that Mr Brown must take responsibility. “Look at the small print and you will see that this latest tax credits fiasco happened on Gordon Brown’s watch,” he said. “He must take responsibility and he must answer the key question: when did he first know there was a huge problem and how long did he keep it secret?”
Revenue & Customs confirmed that the problem related to section 18 of the Tax Credit Act 2002. “This is an administrative issue, affecting a small proportion of older tax credit awards, which were revised in the light of new information after the award had been finalised,” a spokesman said. “We have written to all households affected, explaining that we are reviewing their award, and that they will not be disadvantaged as a result.” He added that it was impossible to put a figure on the amount that would have to be repaid but that £500 million was a massive overestimate.