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Citizens Advice demands tax credits review

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26th Jan 2005
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A leading charity has called for a review of Inland Revenue decisions to claw back tens of thousands of overpayments of tax credits.

The charity told the Commons public accounts committee this week that its national network of bureaux has dealt with thousands of cases of overpayments "resulting from mistakes by the Inland Revenue, or as a result of the Revenue failing to respond to claimants reports of changes to their circumstances".

The Revenue will only write these off, the charity said, if it considers that it was "reasonable" for a claimant to believe that their tax credit award was correct.

Citizens Advice said: "This itself is unreasonable, because inadequate information provided in award notices has made errors very difficult to spot and entitlement very hard to understand".

A recent Commons written answer revealed that by the end of December about 78,000 taxpayers had returned Form TC846, or had otherwise been recorded as requesting the write-off of their overpayments on grounds of official error.

Paymaster general Dawn Primarolo said about 41,000 requests had been decided by that date, and "about 1,600 families had their overpayments written off for that reason".

Citizens Advice added: "A series of computer errors have led to hundreds of thousands of tax credit overpayments. One problem that occurred in the spring of 2003 caused 450,000 households to be overpaid a total of £94m. Another has affected thousands of couples by deleting one partner's income entirely from the records."

In many cases reported by Citizens Advice Bureaux it was unclear how overpayments had arisen. People did not understand by how much their future payments would be reduced to recover overpayments.

"In some cases where people have queried the payment of large lump sums, they have received reassurance from the tax credits helpline, only to be later asked for the money back," the charity claimed.

"One couple with two children returned the £3,500 lump sum they believed they had received in error, but the Revenue insisted it was due and paid it a second time. When the couple once again returned the money, the Revenue contacted them insisting it was theirs and paid it a third time. A few months later the couple was informed they had been overpaid by £4,900."

Citizens Advice director of policy Teresa Perchard said: "Citizens Advice Bureaux have seen thousands of cases where attempts to claw back overpayments on tax credits have left families distressed, confused and in serious hardship. With little or no information available on how their awards have been calculated, it does not seem reasonable to expect people to know when these are wrong, or by how much.

"We believe that a more sympathetic approach is needed in dealing with the recovery of overpayments. Where people are disputing recovery on the grounds that there was official error involved, we are not confident that the current decisions are being made fairly.

"There needs to be an independent audit of Inland Revenue decisions that looks more closely at whether in the circumstances it was really reasonable for people to know they were being overpaid tax credits. At the moment, the way in which this test is being applied is itself unreasonable."

Earlier this month, Citizens Advice was one of seven tax and welfare bodies that sent an appeal to every MP in an effort to press Treasury ministers to change the Inland Revenue's approach to recovery of tax credit overpayments.

Andrew Goodall
[email protected]

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By mikewhit
16th Feb 2005 15:08

Annual accouting
The annual accounting nature of Tax Credits also adds to the confusion, whereby you can be impoverished for the first 6 months of a year and be paid TCs, and then get a job, become ineligible, and they want it all back at the end of the tax year.

If the circumstances had changed on a tax year boundary instead, they wouldn't want any of it back.

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