Is the Revenue paying adequate compensation for tax credit errors?

Published on 4 February 2004

Recent figures suggest that those who are claiming compensation for errors or delays in handling their tax credit claims are receiving much less than they are entitled to. The number of claims is also surprisingly low. The LITRG asks whether the Revenue are following their own policy in assessing the amounts of compensation they pay.

In May last year, the LITRG urged tax credit claimants on a low income, who lost out because of delays in getting their awards, to claim compensation from the Revenue for the costs they incurred because of the delay.

In a statement to Parliament on 19 November 2003, the Minister responsible for tax credits, Dawn Primarolo MP, reported that in the first six months of the new system, the Revenue had paid 1,600 claims for compensation, the average payment being £30. The 1,600 figure, she said, represented 'one thirtieth of one per cent of all claims received for tax credit awards'.

These extraordinarily low figures do not appear to match either the number of claimants affected by problems when the new tax credits system began or the actual losses many claimants may have suffered.

LITRG are concerned that claimants are unaware of the Revenue's policy on paying compensation, or of how much they should expect to be paid, and this is leading to the low, and small, number of payments.

John Andrews, Chairman of LITRG, said:

"It is up to the Revenue to ensure that all claimants with a complaint about tax credits are aware of the department's policy and are properly informed about what they are entitled to claim. In the absence of adequate publicity from the Revenue LITRG are seeking to highlight these issues."

How much to claim

The Revenue's policy on complaints and compensation is set out in Code of Practice (COP) 1 (follow the link at the foot of this article). This document sets out the type of expenses which the Revenue will reimburse, if incurred because of their error or delay.

  • The Revenue will repay postage, phone calls, travelling expenses, professional fees and financial charges. They may also pay interest on money they owe if the problem was one of delay.
  • They will not usually pay for lost time, but will reimburse lost earnings as a 'direct result' of their mistake.
  • The Revenue will also make payments to reflect worry or distress, and these payments can range from £25 to £500.

The current average pay-out of £30 does not seem to reflect the worry or distress element of the typical claim, let alone the direct costs listed above. LITRG urges claimants to itemise all their costs and put in a full claim to the Revenue.

How to claim

Claimants should write (keeping a copy) to:

The Customer Services Manager, 
Tax Credits Office, 
Cop Lane,
Preston PR1 0SB

(or at Dorchester House, 52-58 Great Victoria Street, Belfast BT2 7WF if they live in N Ireland)

quoting their National Insurance Number (NINO) and that of their partner if they have claimed tax credits jointly.

The letter need not be long but should say when the claim form was sent in (an approximate date will do) and what the delay in receiving the tax credit payment has meant in terms of:

  • financial hardship
  • the need to borrow money
  • lost earnings (or income for self-employed people) and costs in trying to get through to the helpline or visiting a tax office
  • worry and distress over the whole episode.

Compensation should then be requested based on this information.


Contact Name: Robin Williamson (Contact tel: 0844 579 6700, Fax: 0844 579 6701)

Relevant Link: How to complain to HM Revenue & Customs (complaints guidance was formerly given in leaflet COP 1)