The date of commencement of a tax credit award, on a new claim, is specified in regulations 4 and 7 of SI 2002/2014 Tax Credits (Claims and Notifications) Regulations 2002 pursuant to section 4(1) Tax Credits Act 2002.
This legislation acknowledges that a claim may be backdated by a period of up to 3 months provided that the qualifying conditions subsisted throughout that period. Regulation 4(c) specifies that by default (in the absence of a claim to backdate) the award shall commence on the date of receipt of the application by the Tax Credit Office.
In my estimation, reg 4(c) is very rarely the appropriate authority to determine the award commencement date. An individual is very unlikely to hand-deliver an award to the tax credit office on the very day that entitlement first arises, probably is not entitled to file a claim in anticipation of future entitlement, and relying on Royal Mail will inevitably generate a couple of days' delay even if the form is completed and posted on that initial date.
However I am not concerned about a couple of days' delay occasioned by postal mechanics, which will only make a few pounds' difference to the claimant. In my experience claimants do not get around to filing the claim until several weeks after entitlement arose, frequently beyond the maximum 3 month backdating entitlement. This is not entirely surprising, as the change in circumstances which give rise to entitlement probably results in some upheaval and they have a lot of other things on their minds. This delay can make a difference of several hundred pounds. The self-employed who were in past years means-tested out of entitlement and who (perhaps poorly advised) did not file protective claims are particularly vulnerable to this effect in recessionary times with reducing profits that are only identified well after the expiry of 3 months.
There is no facility in the claim form to apply for the award to be backdated. This legislation and the shortcoming in the design of the claim form are unchanged in the 7+ years since the law was introduced (although the claim form is redesigned each year). The form is machine-read without human involvement and reg 4(c) is invariably applied in the first instance despite that it is unlikely to be appropriate. I have tried without success various techniques to try to get the award issued from the correct date at the outset. I now resort to getting claimants to sign a pre-completed automatic appeal on form TC623, at the same time as completing the initial claim, on which I simply have to enter the appropriate dates and submit when the inevitable incorrect award is issued.
As a professional adviser I am alert to the possibility of backdating the claim, and while I am personally dismayed by the bureaucracy in correcting the award I can cope with it (at a modest additional cost to the claimant). I am less confident that unrepresented claimants are likely to be alert to their loss. This is one of the reasons why I was particularly outraged to have received from the Tax Credit Office a rebuttal of my claim for that office to reimburse excessive costs on a particular case on the grounds that (inter alia) the claimant had contributed to those costs by engaging a professional adviser, as mentioned on AccountingWeb here:
http://tinyurl.com/ylpe37h
I felt that this issue was a matter of public interest so I put in an application under the Freedom of Information Act for some national statistics on the extent of the problem. If the above bureaucratic mess were not sufficiently disgraceful I am now informed in response that the requested statistics are not available. A redacted copy of their response (which repeats the questions posed) is contained here, for your digestion:
http://tinyurl.com/yjqsh6n
This exercise highlighted a possible shortcoming in the FOI Act. It is I think entirely reasonable that the legislation provide for the possibility that the applicant be required to pay a fee, when it would involve the civil service in costly research to comply. While I personally would not in this case have been prepared to pay more than £600 for the satisfaction of my curiosity, I might have been. Had I been prepared to pay whatever it took for this information, what public interest is served by denying me that opportunity?
With kind regards
Clint Westwood
Replies (10)
Please login or register to join the discussion.
A very interesting situation, Clint
I will flag this for LITRG, Tax Faculty, TaxAid and any other interested parties. I share your concerns.
Backdating Tax Credit Claims
Some very good points raised by Clint regarding backdating claims to 3 months before the form is sent in. When we talk to new clients, one of the first things we mention is tax credits and whether they are in the system or not. In most cases those people we talk to are eligible to make a claim even if it only entitles them to the family element of £545. The reasons we get for people not claiming vary from "I can't be bothered" to "I didn't think I qualify for them". When we explain that we can deal with their tax credits for them, for a fee of course, they are more than happy for us to put them into system, becuase we make it clear they will laways receive more than they pay us. Where we can we will always look to backdate an award notice by 3 months and do this by sending in a covering letter with the application form requesting that it be backdated. I must say that in most cases when the award notices are issued they have been backdated and those that aren't, a simple phone call to the TCO has resolved that issue and yet another 'rain forest' of documents is sent to the clients.
With regard to the filing of protective claims for the self employed, it is certainly an area that we have considered for clients and we do address the issue with all our clients and ask them if they would like us to submit a claim on their behalf. The problem is that accountants in general do not deal with their clients tax credit affairs and have never done so since they were introduced. I find it strange that accountants (I am one in practice as well!) are quite happy to prepare their clients tax returns a work out tax liabilities etc, but when it come to tax credits claims, which after all is simply another tax return with similar figures that are entered on the SA Return, they shy away from them completely. As accountants we all do tax returns because most of our clients need one and there is a statutory requirement to complete one. This is no different to tax credit claims and I think you will find that most of your clients are either in the system and really do need help with them or if not in the system, they should almost certainly be in the system.
Clint raises some good points about dealing with the TCO and I can say that over the years there are cases where it is like 'banging your head against a brick wall' when trying to resolve the particular issue with the TCO. Thankfully, I have to say there are only a few of them, but nevertheless still very frustrating.
With regard to the tax credits system, I agree with Clint that it is extremely complex and for a lay person to understand what figures to include in the application form and also the annual declaration is I believe almost impossible. There is simply to much information for the lay person to digest and understand. As accountants we can help our clients by understanding how tax credits work and also earn extra fees from it, which from my own practices perspective, on tax credit compliance fees alone are better than the tax return fees.
Steve Marsland
Some statistics please
Does anyone know where I could find (on public record) statistics for the years 2003/04 and 2004/05 of:
(i) Total number of Tax Credits awards paid, of which
(ii) Total number of cases in which overpayments arose, and
(iii) Total number of cases in which underpayments arose?
I am trying to get a 'feel' of the volume of cases in those years and the proportion of awards paid in the wrong amount. I appreciate that an award in the 'wrong' amount may be made even where both claimant and Revenue have acted promptly and have done everything correctly (for example where the claimant's income fluctuates from one year to another).
I would like to quote the figures in a report I am preparing for a court case and therefore I need not just the figures themselves but to be able to point to an unimpeachable source for those figures (such as Hansard or a government report).
Also where can I find the wording of the qualified audit report on the accounts of the Inland Revenue for 2003/04, please?
(Sorry I cannot say anything about the court case as it is sub-judice, but it will NOT be a cause celebre.)
Many thanks.
David
Qualified Audit Opinion
Around page 20 of the full report I think.
http://www.nao.org.uk/publications/0304/inland_revenue_report_2003-04.aspx
An update on the court case
Many thanks for the information on here in relation to tax credits, calls relating to tax credits not recorded, and the auditor's concerns about the operation of tax credits in the early years.
I mentioned that I needed this in relation to a court case. I can now give a bit more information.
An employee of HMRC working on tax credits, let's call him 'D', was charged with the criminal offence of tax credit fraud. It was alleged that he altered the record of tax credit claims of his ex-girlfriend (the mother of his child), call her 'M', by dishonestly inputting false data via his HMRC terminal resulting in excessive payment of tax credits to her in the early years of the tax credits regime.
His defence was that 'M' had complained to him that she was unable to get her tax credits sorted out despite repeated attempts to do so by telephone. In desperation she asked 'D' to sort it out. He checked her record and found that payment had been stopped due to an apparent inconsistency between the claim data and other data held by HMRC, which was pending resolution. He amended her record with the intention of resolving the inconsistency but was not fully familiar with the computer system for individuals' tax credits claims himself and may have made entries which had unintended consequences.
Clearly it was relevant to that defence to show if it was likely that 'M' would have experienced difficulty resolving her tax credits problem through the normal channels at that time, whether the HMRC tax credit computer system was likely to throw up apparent inconsistencies which may not have been quickly resolved, and whether the system was complex and not entirely free of 'bugs' at the time so that an HMRC employee not fully familiar with it might make entries which could have had unintended consequences.
It was important for me to have not just anecdotal 'evidence', but verifiable and authoritative relevant factual information to put forward. Respondents on here guided me directly to information published by HMRC itself and other unimpeachable government sources.
I prepared at report covering these and other matters on the instruction of the solicitors for 'D'. A copy of my report was forwarded to the prosecution.
I have recently been informed that, having reviewed the case again, the prosecution have decided to offer no evidence against 'D' (i.e. they have dropped the criminal case).
'D' will still face HMRC disciplinary proceedings for accessing 'M's tax credit record in breach of in-house HMRC rules and procedures, but he no longer faces prosecution in the Crown Court (and the risk of imprisonment).
So, once again, many thanks to those of you on here who led me to the relevant information.
David
Nice result David.
Without knowing the ins and outs of the case I suspect that probably losing his job is a "result" - it could have been a lot worse.