The Working Families' and Disabled Person's Tax Credit schemes administered by the Inland Revenue (the Department), ran from 1999 to 6 April 2003 distributing some £6.4 billion in 2003-03 and £17.8 billion in all.[1] The Government replaced these schemes with new tax credits from April 2003 which are estimated to cost about £16 billion in 2003-04. The introduction of the new scheme has brought a number of problems for several hundred thousand claimants who were not paid on time, for employers who made some of the payments and for the Inland Revenue. The problems were due in large part to deficiencies in IT systems.
The Department examined samples of 2000-01 tax credit applications and estimated the level of overpayments at between 10% and 14% by value, equivalent to between £510 and £710 million for a full year. The Department did not disclose these results until August 2003. As the procedures were not changed significantly in subsequent years, it is reasonable to assume overpayments continued on broadly the same scale.[2]
On the basis of a Report by the Comptroller and Auditor General we examined the Department on responsibilities for the problems with the new tax credit system and lessons to be learned; errors and overpayments of tax credits; and compensation for claimants and recovery of overpayments of tax credits.
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