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Today's Revenue figures show need for tax credit reform
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01/06/05 One Parent Families is today pressing for reform of Her Majesty’s Revenue and Customs' (HMRC, formerly the Inland Revenue) method of recovering tax credit overpayments as HMRC figures out today show an unacceptably high number of overpayments for 2003-04.
The figures show that out of a total of 5,670 000 tax credits awards made to families in 2003-2004, 1,879 000 were overpaid, including 353,000 lone parents. This means that around 33 per cent of families receiving tax credits in the first year of their operation were overpaid. 40,000 of these overpayments were of over £5,000 and 1,018,000 were of over £1000. While the charity welcomes last week’s written statement from the Paymaster General outlining plans to improve tax credits administration, it wants to see more specific reforms soon.
Research among One Parent Families’ members last year showed the HMRC’s system for recouping tax credit overpayments was pushing many lone parent claimants into serious hardship. And the charity is currently receiving a steady stream of calls from single parents who are suffering because HMRC has made an overpayment and is recovering the money through deductions to their current entitlements. Given the scale of overpayments, the Government must bring in a fairer approach to their collection the charity says.
One Parent Families wants to see: - A limit on the amount of tax credit that can be recovered from a claimant. Currently if an overpayment is discovered at the end of the tax year, for people on Income Support a 10% limit is placed on how much can be taken off their ongoing award but if an overpayment is discovered within the tax year no such limit applies, so claimants can see their awards drastically cut to below Income Support levels. The same limits should apply irrespective of when a claimant discovers she/he has been overpaid.
- An independent right of appeal of the decision to recover an overpayment. At present claimants can only ask the Revenue itself to look again at a decision to recover.
More than three-quarters of respondents in the charity’s 2004 research who were paying back an overpayment reported financial difficulties as a result. The most common of these were not being able to pay utility bills, and general problems with day to day living expenses, but other lone parents had had to give up work or to borrow money, and had had to miss out on essentials for their children such as new clothes or shoes.
Responding to today's figures, One Parent Families Chief Executive Nicola Simpson said: “Tax credits have huge potential to deliver real financial gains for families but at the moment the way the system operates is too often leaving lone parents in hardship. We believe the system can be made to work for all families but reform is needed soon.”
We received coverage in a number of newspapers which you can see at the following links:
www.guardian.co.uk/business/story/0,,1494361,00.html
http://money.guardian.co.uk/tax/story/0,1456,1497270,00.html
www.timesonline.co.uk/newspaper/0,,173-1637110,00.html
http://news.ft.com/cms/s/52aa0870-d304-11d9-bead-00000e2511c8.html
Our policy and research officer also appeared on Radion 4's Money Box to talk about the system. You can listen to the interview, and to the Paymaster General talk about the steps they are taking to reform the system, here: http://news.bbc.co.uk/1/hi/programmes/moneybox/4607461.stm
Notes to editors. - Overpayments can arise either because someone’s circumstances have changed, or because the Revenue has made an error. In 2003-04 one computer error caused 455,000 people to be overpaid. New Figures have been published today by the HM Revenue and Customs Analysis Team in the publication Child and Working Tax Credits Statistics, Finalised awards 2003-04, Supplement on payments in 2003-04. The report is available at http://www.hmrc.gov.uk/stats/personal-tax-credits/cwtc-payments-0304.pdf
- One Parent Families research report, The New Tax Credits System: Knowledge and Awareness among Recipients by Julia Griggs, Robert Walker and Fiona McAllister, involved interviews with 100 lone parents.
- One Parent Families is the leading national charity providing direct services for single parents and campaigning on their behalf. It runs a free Lone Parent Helpline on 0800 018 5026. The One Parent Families website includes Top Tips for dealing with tax credit offices as well as pointers for advisers whose clients are having tax credit problems. Single parents can also get help with tax credits queries on the charity’s online interactive helpdesk at www.oneparentfamilies.org.uk/helpdesk
Press contact: Jane Ahrends on 020 7428 5416/0788 195 1138.
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