Further supplementary memorandum from
In my letter of 12 June I promised to write
to you again on two matters: (i) the eligibility rules for the
additional payments that go to lower income families and (ii)
the problems that have meant that some additional payments have
At the hearing the committee raised two particular
areas of concern:
Firstly that HMRC's literature did
not make clear enough the impact on the additional payment to
the Child Trust Fund of not applying for tax credits within three
months of the Child Trust Fund start date.
Secondly that people, particularly
those with health problems such as post-natal depression, might
be missing out on additional payments to Child Trust Fund accounts
because they didn't claim tax credits in time.
I have considered the points made at committee
and sought ways of ensuring that children who are otherwise eligible
for the additional payment do not miss out because a tax credit
claim is not made within three months.
I intend therefore to tie the additional payment
eligibility window to the CTF voucher window, so that if there
is a claim for CTC within 12 months of the CTF start date, and
the claimant meets the other eligibility criteria (such as income),
then an additional payment will be made into the CTF. The time
limit will therefore coincide with the expiry of the CTF voucher.
I propose therefore to introduce regulations
to extend the additional payment eligibility window in the autumn
for Parliamentary approval, and they will provide for the rule
change to come into effect for children who become eligible for
the Child Trust Fund from the 08-09 tax year onwards. I have looked
at whether it is possible to make the changes retrospective to
cover the specific cases raised in the Select Committee hearing
but this would not be possible without primary legislation.
I will also extend the eligibility window for
receiving additional payments to a year for those that receive
the child allowances of Income Support and Job Seeker's Allowance
in a similar way to that proposed for Tax Credits claimants. This
will ensure that the rules are consistent across both routes by
which children become eligible for additional payments.
I am grateful to the Committee for raising this
issue with me. As regards HMRC's marketing literature, rather
than change it to reinforce the need to claim tax credits within
three months of the CTF start date we will instead ensure that
it is updated to reflect the new rules.
When I gave evidence to the Committee on 14
May I mentioned that HMRC had been experiencing a number of issues
that had been preventing some additional payments being made on
The IT programming error that we discussed has
caused in total some 50,000 additional payments to be delayed.
The cause has been identified and rectified and the outstanding
payments are already being made. The CTF accounts affected are
in respect of children born in 2006-07, and they will receive
their additional payments around a year later than would normally
be the case. Therefore I have agreed with HMRC that these accounts
will receive an additional £20 in lieu of the lost investment
growth for that year. This has been set in line with the top yield
available in this period from mainstream CTF products. HMRC's
IT contractor has agreed to pay appropriate compensation to HMRC
for financial losses caused by the IT programming error.
I also told you that there were a number of
other technical problems preventing the making of additional payments.
A total of around 80,000 additional payments have been held up
because of these other issues, in respect of children born from
the outset of the Child Trust Fund scheme. HMRC is able to identify
the CTF accounts affected, and will pay the additional payment.
These accounts will receive an additional £20 for each year
of lost investment growth as above.
It is of course highly regrettable that these
errors have occurred but once the outstanding payments are made
along with the further payments in lieu of missed investment growth,
no child or family will have suffered a financial loss. HMRC is
putting systems in place monitor CTF payments more closely and
prevent such problems recurring. The outstanding payments will
be made automatically so no CTF provider or customer needs to
take any action.
Kitty Ussher MP
17 July 2008