Examination of Witnesses (Questions 160
- 172)
WEDNESDAY 18 JANUARY 2006
MS JEAN
JESTY AND
MS JANE
MOORE
Q160 Lorely Burt: Finally, if I could
ask Jean, you say: "it behoves HMRC to ensure that claimants
are fully aware of the possibility that an overpayment may still
arise even if they fully notify all changes at the earliest possible
time." Given the fact that the disregard threshold is going
up to £25,000, what circumstances do you think now exist
where overpayments could still be incurred even if changes are
notified as early as possible?
Ms Jesty: If you were to estimate
a reduction in your income and that estimation was excessive.
Also, provisional claims by the self-employed; many self-employed
can only do provisional claims, especially if they have a 31 March
year end, so until you get to the following January when you have
to self-certify it that will still be inherent in the system.
The £25,000 disregard will certainly make a big difference.
Ms Moore: I would say that childcare
is going to be the big thing, and even more so next year when
the percentage goes up to 80% because people get the calculation
wrong and it is quite sensitive; for a small error you can have
quite a big overpayment. I think that might be an issue even if
income is not.
Q161 Mr Newmark: This is to Jane,
I think. With respect to the reasonable test and the right of
appeal, what information would you like to see made available
to claimants about disputing the decision to recover an overpayment
and in what form should this information be provided?
Ms Moore: I think people need
clearer information about how to dispute. There is the form TC846
at the moment, as I am sure you know, but it is a little bit unclear
about what you use that for. For example, if you appeal that does
not necessarily constitute a dispute which will get your overpayment
suspended. I think that the TC846 is being revised, as you probably
know, HMRC are working on it, and it may be better when that is
finished. People do not particularly want to be bothered with
terms like "appeal dispute, suspension, official error",
they want a clear process in non-jargon.
Q162 Mr Newmark: My second question
to you is you have argued that some overpayments are caused by
maladministration and that tribunals, therefore, need a judicial
review function to enable them to consider aspects of administrative
justice. Can you define what you mean by "maladministration"
and what recourse do claimants currently have in such cases of
maladministration?
Ms Moore: Obviously at the moment
if you have an item that you can appeal against then you can appeal
and it will go up to the tribunal. If you have a problem about
the way in which the Revenue have followed their own code of practice
or whatever it is, you can go to the Ombudsman or adjudicator,
or you could go to judicial review at the High Court which is
obviously out of the question for just about all tax credit claimants.
More and more administrative justice things like this are cropping
up because increasingly HMRC's guidance is in leaflets of codes
of practice and so on rather than codified. We would like to see
judicial review but at a lower and cheaper level, if you like,
so available at tribunal level. It seems to us, particularly since
the tribunals are being reformed at the moment, which is another
area that I work on, this would be a good time to see whether
the judicial review function could be put into the first or second
tier of the tribunals and brought down from the High Court.
Q163 Mr Newmark: With respect to
future solutions, families may still be entitled to the family
element of Child Tax Credits at incomes of £58,000 a year.
What would be the pros and cons of removing the family element
of Child Tax Credit and adding it to Child Benefit?
Ms Jesty: That would take somewhere
in the region of two million claimants out of the system which
has to be a benefit, I would have thought. If you consider that
the first child element of Child Benefit is £17 a week and
for subsequent children £11, the maximum you are getting
on the family element is £10.45. Although you would be widening
the population who would be entitled to the family element if
you added it to Child Benefit, it might be possible to tweak the
figures. It is actually less than the normal Child Benefit for
the second child.
Q164 Mr Newmark: With respect to
the administrative burden on the Tax Credit Office, is it possible
to estimate what difference removing the family element of Child
Tax Credit would make on this?
Ms Jesty: I have to say I would
not like to hazard a guess, but I would have thought removing
a substantial number of people from the system would free up in
IT terms, if nothing else, benefits for those who did remain in.
Q165 Mr Newmark: Do you agree with
the organisations, such as One Parent Families, that removing
the childcare element from the Working Tax Credit would be beneficial?
If a childcare tax element is left within the tax credit system,
are the rules capable of being simplified?
Ms Moore: Just the childcare element?
Q166 Mr Newmark: Yes.
Ms Moore: At least it should be
open for wider discussion. I would like to see it also joined
up more with some of the other government childcare policies because
there were a lot of issues about childcare, such as the fact that
there is not much support for the self-employed through the tax
system and so on. I am not sure I know exactly the answer to that
but it is something we would like to see explored more than it
is at the moment.
Ms Jesty: There are wider policy
issues surrounding childcare. There are different ways of delivering
support for childcare and certainly I think they ought to be explored.
Q167 Mr Newmark: With respect to
the simplification, if childcare is left within the tax credit
are there some thoughts you have on simplifying the system at
all or not?
Ms Moore: Calculation, I think.
If you look at the leaflet there are six different ways you can
calculate childcare. As the people said in the earlier session,
you have to be quite numerate in order to do it. The examples
in the booklet choose nice, tidy situations where people have
predictable childcare costs for the coming year and this is not
realistic, and I am sure this is what people get wrong.
Q168 Mr Newmark: It is really too
complex in many ways for those people?
Ms Moore: It is, yes.
Q169 Mr Newmark: What scale of undertaking
would be required of HMRC if it were to enable information provided
by claimants and taxpayers to be shared across the whole of HMRC?
Are you aware whether the Department is considering such an undertaking?
Ms Moore: These are issues such
as if you notify one part of HMRC that should be good enough?
Q170 Mr Newmark: It is the general
theme of sharing of information but with respect to this issue.
Ms Jesty: I think one of the problems
is that there are still different computer systems within HMRC
dealing with different areas. It still requires a manual input
to get from one system to the next. One would have hoped that
with intranet it should be possible to send information from one
area of the Department to another, but it would probably have
to be inputted twice on to a different system.
Q171 Mr Newmark: Which leads to the
possibility of clerical error which would probably necessitate
quite a lot of investment in information systems if one was heading
in that direction.
Ms Jesty: I think it would require
considerable investment in a system that would do that.
Ms Moore: It is vital that it
should join up because it does not seem acceptable to me that
people are told, "Oh no, you have to tell the Tax Credit
Office as well as these other places", and they could even
risk a penalty for not notifying the Tax Credit Office of something
when they think they have filled in a form and sent it somewhere
else and that is all they need to do.
Q172 Mr Newmark: You recommend that
a longer period of backdating should be allowed to reduce the
number of protective claims which claimants need to make. Why
are such protective claims necessary? How long a period of backdating
should be allowed?
Ms Jesty: They are necessary because
even if your income is such that you would not even qualify for
the family element, if your income subsequently falls and you
become eligible but only know about it towards the end of the
tax year you can only go back three months, therefore the advice
is that anyone should put in a claim because if they subsequently
find that they are eligible it will be backdated to the date of
the claim even though they would have had a nil award up to then.
This is particularly relevant to the self-employed where it can
fluctuate wildly. I would think that you should be allowed to
backdate to the beginning of the tax year.
Chairman: Thank you both very much.
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