HM Revenue and Customs: Tax Credits and Income Tax - Public Accounts Committee Contents

2  Service to Claimants: The Tax Credits Transformation Programme

12.  The design of the tax credits system is complex, leading to problems for claimants.[26] The Department believes that the obligation placed on claimants to report changes in circumstances as they occur is the main reason why tax credits are difficult to administer.[27] For example, claimants faced with household breakdown are unlikely to give their highest priority to contacting the Department about tax credits.[28] At the time it was developing the tax credits system, the Department failed to appreciate the variety and frequency of changes in claimants' circumstances that would occur in practice.[29]

13.  The Department has not supported claimants adequately when they are making claims and reporting changes in circumstances.[30] Too many claimants have had to cope with the anguish and irritation of trying to get reliable information out of the system.[31] For example, claimants have had to cope with contradictory letters from the Department, and find that staff providing the phone service do not have the necessary information to deal with their enquiry.[32]

14.  In May 2008, the Department and the Treasury issued a discussion document setting out proposals for:

  • reducing the scope for error by tailoring support more closely to claimants' needs and making it easier for them to claim, receive and renew tax credits;
  • giving claimants greater certainty and more control over how they manage their tax credits affairs, while continuing to support those whose income falls or whose circumstances change, and
  • improving financial support for childcare through tax credits and simplifying the system for claimants.[33]

15.  As part of its Tax Credits Transformation Programme, the Department is doing more to identify and understand those claimant groups with more complex circumstances who have a history of getting their claims wrong.[34] The Department aims to provide more targeted help to these groups by providing more assistance when they make a claim, report changes in their circumstances or renew their claim.[35] The Department is contacting people it has not heard from for a while to check whether there have been changes in their circumstances that the Department needs to know about. It is also improving the documentation it sends to the different categories of claimants.[36] These changes, to be introduced progressively up to April 2009, also involve providing training in new skills for operators in the Department's contact centres.[37]

16.  Some claimants have found dealing with the Department sufficiently difficult not to claim the tax credits to which they are entitled.[38] The Department estimates that in 2005-06 only 82% of families entitled to receive child tax credits, and 61% of those entitled to receive working tax credits actually claimed them (Figure 4). The Department believes that take-up is very high for people on low incomes or with families. Take-up levels are lower for other groups, such as people without children and people living in certain parts of the country, particularly London.[39] The Department estimates that only 64% of families in London who were entitled to working tax credits claimed them in 2005-06. It also estimates that the highest levels of take-up were in Yorkshire and Humberside, where 86% of families entitled to working tax credits claimed them.[40]Figure 4: Child and Working Tax Credit Take up (based on 2005-06 awards)
Estimated Possible Recipients Actual Recipients Estimated non-recipients Estimated Take-up rate (and range estimate)
Child Tax Credit
(80 to 84%)
Working Tax Credit
(59 to 63%)

Source: HM Revenue & Customs[41]

26   Qq 12, 33 Back

27   Qq 54-55, 101, 136 Back

28   Qq 33, 54 Back

29   Q 101 Back

30   C&AG's Report, para 2.7 Back

31   Qq 23, 33 Back

32   Qq 26, 27, 30, 124 Back

33   Qq 104, 136; HM Treasury and HM Revenue & Customs, Tax Credits: improving delivery and choice, May 2008 Back

34   Q 33 Back

35   Q 13 Back

36   Qq 12-13 Back

37   Q 35 Back

38   Q 124 Back

39   Q 121 Back

40   HM Revenue & Customs, Child Tax Credit and Working Tax Credit Take-up rates 2005-06 Back

41   HM Revenue & Customs, Child Tax Credit and Working Tax Credit Take-up rates 2005-06 Back

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