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Paula Dean, of Tax Credit Casualties, highlights serious problems with the Tax Credits system, and outlines the work of Tax Credit Casualties, a national self-help group.

Background

In setting up the Tax Credit system, the Labour Government had high ideals and good intentions, aiming to address two Government priorities:  employment and poverty.  The Government recognised that one of the many problems facing parents returning to work was the amount of income needed to make coming off benefits viable, and so began tax credits with such slogans as ‘pick it up, it’s yours’ and ‘money with your name on it’. 

Though the Treasury estimated one million people would be overpaid tax credits each year and knowing that Australia had implemented the same system and seen people facing huge debts, tax credits came with no warnings. Claimants believed this was a helping hand, but some feel that they were gambling with their futures.

Overpayments arose for a number of reasons that were not the fault of claimants:

• HM Revenue & Customs (HMRC) errors
• faulty software
• incorrect advice from tax credit staff
• lack of consistency from helpline staff
• incorrect data inputting
• incorrect operation of software
• deleted/lost information
• insufficient staff training

HMRC have started to address these issues, to the extent of obtaining compensation from the software developer, yet they continue to pursue claimants for repayment of tax credits, with cases from 2003 still being fought.  It is questionable whether claiming twice, once from the software developer and then from claimants, does anything to alleviate these issues.

In overpayment cases the burden of proof sits with the claimant, despite HMRC holding much needed evidence in the form of correspondence and taped calls. Surely there is a potential human rights issue here (see articles six and seven of the Human Rights Act)?

The Current Position

Today the facts are:

• Two million claimants every year overpaid by approximately £2 billion
• an estimated £1.7million ‘lost’ by HMRC since the inception of tax credits
• an estimated £100million stolen by criminal gangs
• an estimated £5 billion in tax credits not taken up by claimants afraid of finding themselves in an overpayment recovery situation

HMRC are responding by:

• continuing not to advise claimants of the risk in applying and accepting tax credits
• using potentially misleading language to misinform claimants of their rights
• the issuing of court summons and referral of cases to debt collectors whilst appeals are ongoing
• non-tax credit trained staff handling tax credit calls
• unrealistic targets set for the length of phone calls
• rewarding tax credit staff with bonuses totalling more than £60,000 between December 2005 and September 2006

A judge recently ruled:

• A taxpayer has no right to claim damages for public law breach by HMRC nor is any private law claim available
• HMRC owes no direct duty of care to taxpayers nor is it vicariously liable for negligence of HMRC officers
• HMRC is immune from damages claims arising from its negligence and/or delay caused by its officers

Does all this mean that HMRC are above the law? 

The Future

Overpayments leave claimants feeling isolated, ashamed, frightened and unaware of how to fight their case.  But there is help: Tax Credit Casualties - a national self-help group to offer support, raise awareness and achieve urgent reform. The Casualties are seeking urgent write-off of all non-fault overpayments, as recommended by the Ombudsman, Child Poverty Action Group and other charities.