Citizens Advice calls for review of tax credit overpayments recovery
24th January 2005
Citizens Advice is calling for a review of Inland Revenue decisions to claw back tens of thousands of overpayments of tax credits.
The problem-solving charity has told the Public Accounts Committee, which meets today (Monday 24 January), 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.
Inland Revenue will only write these off if it considers that it was 'reasonable' for a claimant to believe that their tax credit award was correct.
Citizens Advice says this itself is unreasonable, because inadequate information provided in award notices has made errors very difficult to spot and entitlement very hard to understand.
Official figures show that by the end of December the Inland Revenue had received 78,000 requests for the recovery of tax credit overpayments to be reconsidered on the grounds of official error, but in the 41,000 cases so far decided, only around 1,600 families had had them written off.
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 £94 million. 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 is unclear how overpayments have arisen, and people do not understand by how much their future payments will be reduced to recover these 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.
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."
Last updated: February 23, 2007