Tax credits: tax and welfare bodies call for change
The Low Incomes Tax Reform Group (LITRG) have joined with other tax bodies and welfare rights organisations in submitting to the Inland Revenue a list of necessary changes and improvements to the tax credits system. These measures, they say, are the minimum needed to eradicate the common difficulties which tax agents and welfare rights advisers encounter daily, and which in many cases are causing hardship, distress and anxiety to claimants.
John Andrews OBE, Chairman of LITRG, said:
'It is disappointing that 18 months after the implementation of the tax credits system we are still discussing fundamental deficiencies which we, and other bodies, identified as needing modification right at the start.’
The bodies which have joined LITRG in submitting the Tax Credits Agenda for Improvement have all been closely involved with the tax credits scheme from the outset, both consulting with Government and advising claimants. They are:
- the Chartered Institute of Taxation,
- Child Poverty Action Group,
- Citizens Advice,
- the Institute of Chartered Accountants in England and Wales, and
- One Parent Families.
These bodies have supported, and continue to support, the policy initiative that produced the tax credit system, and the Government’s drive to eliminate child poverty. But they are disappointed by what they see as critical failures in the implementation of the policy, even though they recognise the work being done by the Inland Revenue to achieve some of the required changes.
Among the changes which the signatories regard as priorities are:
- making award notices more intelligible so that claimants can understand how their tax credit awards are made up;
- better training for staff operating the contact centres and helplines, to reduce the risk of wrong answers being given to callers;
- a greater willingness to remit overpayments which arise through Revenue error, particularly where, because award notices are so difficult to understand, it is impossible for claimants to check whether they are being paid the right amount;
- better practical guidance to all claimants to help them with difficult areas of the system.
The Agenda for Improvement is set out in the Annex to this press release.
NOTES FOR EDITORS:
The Low Incomes Tax Reform Group was established:
‘to target for help and information those least able in the community to afford tax advice and make a real difference to their understanding of taxation, and to work to make the tax system more friendly to their needs.’
All other bodies are leaders in the fields of professional tax practice and welfare rights advice, and have been involved in consultations on the development of the new tax credits from the outset.
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation.
The Citizens Advice service helps people resolve their legal, money and other problems by providing free information and advice from over 3,200 locations, and by influencing policymakers.
The Child Poverty Action Group (CPAG) is the leading charity campaigning for the abolition of poverty among children and young people in the UK and for the improvement of the lives of low-income families.
The Institute of Chartered Accountants in England and Wales (ICAEW) is the largest professional accountancy body in Europe, and its Tax Faculty is the focus for tax within the Institute.
Gingerbread provides a platform for lone parents, to enable them to have a voice; offers information and advice to lone parents by telephone, publications, website and special events; acts as a centre of expertise; and works with others to improve services, raise awareness and change attitudes.
Low Incomes Tax Reform Group:
First Floor, Artillery House, 11-19 Artillery Row, London SW1P 1RT
Tel: 0844 579 6700
Fax: 0844 579 6701
E-mail: post [at] ciot.org.uk
CHARTERED INSTITUTE OF TAXATION
CHILD POVERTY ACTION GROUP
ICAEW TAX FACULTY
LOW INCOMES TAX REFORM GROUP
ONE PARENT FAMILIES
TAX CREDITS AGENDA FOR IMPROVEMENT
AGENTS, INTERMEDIARIES AND REPRESENTATION
1.1 a straightforward and workable system whereby the Revenue will deal with authorised advisers and representatives by phone and all contact and correspondence can be directed or copied to the authorised representative if requested;
1.2 all new 64-8s and TC689s to be logged on IR tax credits system within 5 days of receipt, and agents sent copies of all key documentation whenever form 64-8 already held by Inland Revenue;
1.3 quick (within 24 hours) response to faxed authorisation in emergency cases, as already agreed;
1.4 Revenue to adhere to deadlines set for responses to letters from advisers which recognise the need for swift responses in urgent cases;
2.1 a system of case management where all appeals are logged upon receipt, promptly acknowledged and turned around within three months;
2.2 a system within the Revenue for monitoring and responding to enquiries on progress of individual appeals;
2.3 a system whereby all contact and correspondence is copied to appellant’s authorised representative if requested;
2.4 adherence to proper procedures when the IR decide to settle an appeal, rather than merely ‘cancelling’ the appeal and issuing revised decisions outside the appeal process;
2.5 statistics on numbers of appeals submitted, numbers of appeals given hearing date, numbers of appeals resolved, and time taken, to be published each quarter;
3.1 award notices should convey sufficient information to enable recipient to understand their award;
3.2 until the above is possible all claimants should be sent a ‘crib sheet’ or a Q&A note that would help to explain different figures etc. This could be with the claimant newsletter or separately;
3.3 requirement in COP26 - that claimant should ‘reasonably believe the award notice to be correct’ before overpayment can be remitted on grounds of official error – to be suspended until award notices are designed in such a way as to be reasonably comprehensible by claimants;
3.4 integrating award notices with other Government departments to facilitate passporting of benefits;
BETTER OFF CALCULATIONS
4.1 Revenue and DWP to work with representative bodies in making available ‘what-if’ calculations for tax credits claimants during 2005, and researching the feasibility of ‘better-off’ calculations for claimants of both benefits and tax credits;
5.1 simplify the system so that it is easier for those who have fluctuating childcare costs;
6.1 automatic calculation of three months backdating where claimants are entitled to it;
6.2 processing of claims pending an interview with DWP for issue of NINO, as provided for by regulations;
6.3 Revenue to notify parent or other person with responsibility for a child reaching 16 asking them to say whether the child intends to stay on in further education;
7.1 interpretation of ‘negligence’ – confirmation that IR will follow DWP in applying a subjective test;
7.2 access to interpreters – confirmation that IR will provide such access for meetings and interviews (c.f. Human Rights Act 1998 Sch 1, art 6, para 3(a), (e));
7.3 examinations and enquiries not to be generated where only risk factor is a discrepancy attributable to claiming gift aid, pension contribution or trading loss relief (space on TC600 and TC603 to indicate that relief claimed);
7.4 publication of answers to questions identified as FAQs by representative groups and notified to Revenue;
7.5 tax credits and self assessment enquiries to be worked together (where both are opened) so that the enquiry is not protracted and the claimant/taxpayer has finality;
FACE-TO-FACE ADVICE PROVISION BY IR
8.1 the right for claimants to a face-to-face interview with IR or DWP staff, in accordance with undertaking given by Baroness Hollis in Grand Committee on the Tax Credits Bill (see Official Report, 21 May 2002 at CWH 80);
9.1 better training for helpline staff in the tax credits system generally not just their particular scripts;
9.2 involvement of representative groups in training programmes for staff;
9.3 dedicated technical helpline(s) for agents and intermediaries, giving access to specialist staff at all times;
9.4 all claimants to be advised by helpline staff to keep a record of time, number from which call made and date of call to enable it to be checked in the event of a later dispute;
10.1 IR to track and date changes to their published manuals in the text;
10.2 accessible list of amendments and dates of change;
10.3 better printing and search facility;
11.1 proper use of Revenue discretion in deciding whether and how much to recover;
11.2 clarity about effect of top-up payments on payments in subsequent years from which end-of-year overpayments are also being deducted;
11.3 recognition for housing benefit and pension credit purposes that tax credit overpayments not recovered from a continuing award;
11.4 postponement of overpayment recovery and in year award adjustment, pending appeal against underlying decision;
11.5 official error write-offs where IR have failed to act on notification by claimant – confirmation that IR will write off such overpayments where failure transparent, regardless of whether claimant could ‘reasonably have believed’ award notice to be right or wrong. This needs to also apply when an overpayment resulting from official error has occurred in-year. If such a decision cannot be made in-year a top-up payment should be made;
11.6 official error write-offs where error arose from mistake on TC600 claim form for 2003/04 – IR to publish areas where form was incorrect, so claimants know that overpayment write-off might apply to them.
11.7 the requirement in COP26 - that claimant should ‘reasonably believe the award notice to be correct’ before overpayment can be remitted on grounds of official error – to be suspended until award notices are designed in such a way as to be reasonably comprehensible by claimants (see Award Notices above);
11.8 notification of overpayment – IR should comply with law and with COP26 in notifying the claimant of (a) the amount of the overpayment, (b) the way in which it is to be recovered and in the case of a couple from which member, and (c) why the overpayment arose.
11.9 Revenue to issue ‘picture’ of typical 2004/05 initial award notice where there is overpayment recovery to explain what all the figures and terms mean;
11.10 automatic despatch of form Request to reconsider recovery of overpaid tax credits with all notices of overpayment for this year at least (the form to be accompanied by a clear explanation of when it might apply);
12.1 there should be the option of being paid by cheque rather than into a bank account, as with pension credit;
13.1 a swift and responsive system for relating tax credits awards with entitlement to passported benefits and immediate notification of the claimant, failing which cash payments in lieu until passporting can be activated;
13.2 for the Revenue to work with other Government departments to review the eligibility for passported benefits (e.g. including access to the social fund;
POINTS OF LAW
14.1 Clarification of:
- interpretation of co-habitation rules;
- responsibility for a child if no child benefit in payment;
- whether in full-time work during periods of variable weekly hours of work;
- right to reside – when the test is applied, when EC law overrides domestic legislation;
- implications of Tax Credits (Payments by the Board) Regulations, reg 12A, on set-off of overpayments;
PUBLICITY AND LEAFLETS
15.1 practical guidance should be aimed at helping claimants through what are known to be the pitfalls and shortcomings in the system rather than as a marketing exercise;
17.1 IR should guarantee a response within five working days to people on combination of IS/IBJSA and CTC to meet expectations of those who budget on a weekly basis (i.e. present guaranteed response time of one month is inadequate (even if it were always met).
18.1 while the system is responsive to changes in circumstances, the annual income measure means that it is not at all responsive to changes in income – the rules about calculating income should be reformed to restore the responsiveness which was originally the aim of the system;
18.2 official notifications for tax, CHB or NI purposes should also serve as official notifications for tax credit purposes, and vice versa;
19.1 easier navigation;
19.2 FAQs in one place;
19.3 complete set of updated statutory instruments (like DWP);
19.4 more informative front page (e.g. separate links to old tax credits leaflets, not amalgamated with new);
19.5 restore area for children’s tax credit which can still be claimed.
Contact Name: Robin Williamson (Contact tel: 0844 579 6700, Fax: 0844 579 6701)