Select Committee on Public Accounts Fourteenth Report


3  Compensation for claimants and recovery of overpayments of tax credits

18. Problems caused by the new tax credit system resulted in hundreds of thousands of the most vulnerable people in society being put to inconvenience and not receiving the tax credits to which they were entitled and which they needed. Members of Parliament were inundated with constituents' complaints and the Department's helpline had to be changed because it was overwhelmed. The problems were extremely time-consuming and frustrating for many people. The Department have compensated about 1,600 people who could demonstrate that they incurred expenses as a result of delays and to recognise worry and distress.[22]

19. The Department referred to their compensation arrangements for claimants as being voluntary and spontaneous. But they have not run a campaign to draw attention to the availability of compensation for people who felt that they had suffered from not receiving what they were due. The Department consider that a specific campaign would be counterproductive and involve huge expense sorting out the resulting bona-fide claims from the others. They are relying instead on arrangements set out in their booklet "How to complain about the Inland Revenue".[23] In addition, the training of officials dealing with tax credit cases will cover their duty to draw the attention of colleagues to cases where individuals may be entitled to compensation. The Department have undertaken to reinforce that message.[24]

20. The Department have procedures designed to recover overpayments of tax credits. But they recognise that individuals having to repay significant sums each week should not be left destitute. They will not therefore recover overpayments if it would involve hardship and they have published a code of practice entitled "What happens if we have paid you too much tax credit?"[25]

21. From April 2004 the Department will adjust tax credit awards for the past year and make new awards for the next year which will take account of changes in claimants' circumstances. The process will probably bring to light further overpayments which the Department will seek to recover.[26]

22. Some recipients of tax credits realised that they were being overpaid and tried to repay the money. But the Department declined the offer and told them that the family would need to repay next year. The Department have since recognised that such people should not be left to worry about a bill in the future and that if they want to repay they should be allowed to.[27]

23. Tax credit payments can have implications for individuals' entitlement to Income Support, Housing Benefit and Council Tax Benefit. In some cases substantial overpayment of tax credits has resulted in a level of income which has led the Department for Work and Pensions to cancel other benefits. Recipients then face the prospect of the Inland Revenue recovering the tax credit overpayment in the next tax year, potentially leaving them out of pocket.[28]


22   Qq 22, 27, 61 Back

23   Qq 109-110, 112, 114 Back

24   Q 115 Back

25   Qq 131, 63-64 Back

26   Q 135 Back

27   Qq 28-30, 135  Back

28   Q 137 Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 22 April 2004