HMRC has brought in up to 12 debt collection agencies (DCA) to reclaim £1.6bn from overpaid tax credits, according to an investigation by campaign group False Economy and The Independent.
The joint investigation revealed there were 4.7 million cases of overpaid tax credits, totalling debts of £1.6bn, with hundreds of thousands of Britain’s poorest people likely to be targeted.
According to a freedom of information (FOI) request, in addition to writing to taxpayers, the DCAs have made contact by mobile phones with calls and texts.
The Independent reported that some of those targeted say they feel harassed and frightened, and in at least 80 tax credit cases, assets have been seized directly.
Another FOI request revealed HMRC made 215,144 referrals to debt collection agencies in 2013/14 to secure direct recovery of overpaid personal tax credits.
Chaminda Jayanetti, a researcher at False Economy, said this was the big scandal that no one is talking about and it was affecting millions of people.
“People are hit by a system that persecutes people with trumped-up demands for money they don’t have, creating heavy debts where none existed, effectively indenturing them while private debt collectors circle like sharks,” Jayanetti said.
Tax credits are calculated according to estimated earnings and if people earn more than they expected to, they may only realise they have been overpaid at the end of the tax year.
An HMRC spokesperson said over and under-payments have always been a consequence of the tax credits system as HMRC calculates awards based on the current information it holds.
“Many overpayments result from people failing to tell us about a change of circumstances as soon as possible, so customers should tell us of any changes straight away,” they said.
Dame Anne Begg, chair of the Work and Pensions Select Committee, said she was worried about the use of DCAs because it often means tactics used to collect debt are not tactics a government should use.
“Obviously it’s taxpayers’ money and if there’s been an overpayment then there should be efforts to recover it. But in recovering that money we shouldn’t be plunging people into poverty and it’s that sensitivity the HMRC needs to exercise.”
Earlier this month outrage went up another notch over HMRC plans set out in the Budget to recover unpaid tax directly from bank accounts without a court order. The Commons Treasury Committee put a spotlight on the proposed “draconian powers” in its report into the Budget, and pointed out HMRC’s history of mistakes.
The committee said taxpayers could suffer “serious detriment” if officials are able - either by mistake or through an abuse of power - to take money from people who have done no wrong.
