Another 250,000 families to receive a tax credits review

Published on 7 July 2007

The new Financial Secretary to the Treasury (Jane Kennedy) got off to a difficult start last week by announcing further problems identified with the tax credits system in the years 2003-04 to 2005-06. However it appears as if HMRC are going to take these mistakes on the chin and not seek recovery from claimants.

HMRC have estimated that they need to review around 160,000 awards in total from 2003-2004 and 2004-2005. These are cases where information that reduced the households’ entitlement came to light, either from the claimant or HMRC themselves, after the award for that year had been finalised and closed. We have been led to believe that although the information held in these cases is correct, HMRC did not follow the correct administrative procedures when revising the award at the time.

HMRC will shortly be writing to these households to inform them that their case is being reviewed in order to correct these administrative errors. HMRC will contact them again once they have completed their review.

Those affected will not need to take any further action themselves, and no household who has their case reviewed as a result of this issue will have any resulting overpayment as HMRC have assured us that any overpayments that arise as a result will be written off. In some cases claimants may be due repayments from HMRC.

As part of this exercise, HMRC will also write to around 90,000 households about their 2005-2006 awards to make sure they are finalised correctly. It is not entirely clear at this point what the result of these reviews will be.

These actions will undoubtedly cause confusion amongst a population of people who have already been confused by tax credits. The problems of going back in time for people in the tax credits system are numerous; not least of which is the many changes to the family composition that may have occurred since the awards were made.

Finally, many of the 250,000 claimants affected by this error may be currently disputing, complaining or appealing against their earlier awards. We have been assured that the review will not affect the way HMRC deal with disputes, complaints or appeals in the majority of cases.

LITRG will be trying to encourage HMRC to ensure that the impact on families is kept to a minimum

(30-07-2007)

Contact : John Andrews (Tel: 0844 579 6700 Fax 0844 579 6701)

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