Legal action threatened over tax credits

Friday, 16 September 2005 12:00 AM

The Child Poverty Action Group (CPAG) is taking legal action against the government for the way it recovers overpayments through the tax credits system.

Almost two million households are thought to have been overpaid by HM Revenue and Customs last year, an oversight that has been condemned by opposition parties, the parliamentary ombudsman and the public accounts committee.

But in the latest installment of what has become a political farce, CPAG is now saying the way Revenue recovers overpayments from claimants is illegal.

The child tax and working tax credits were introduced in April 2003 to replace the more complicated working families and disabled person's tax credits.

However, a public accounts committee report earlier this month warned that the new system "routinely overpays large numbers of claimants" and more importantly, showed "no kindness" when it came to getting these people to pay the money back.

And CPAG chief executive Kate Green today said that the failure of Revenue to take into account people's often dire financial situation into account when recovering overpayments could be against the law.

"One of the things the Revenue is required to do before it makes a recovery of an overpayment is consider information about the circumstances - that doesn't happen," she told Today.

"As soon as it detects an overpayment the computer immediately begins recovery and it's only after that that the claimant will know that that's happening and then the initiative will have to be taken by him or her to complain."

According to Ms Green, the recovery can be made via a reduction on future tax credit payments, or by varying the amount paid from week to week.

"What we're talking about at the moment is the process that they're using to recover, which is unlawful, but there is also of course very considerable financial hardship being caused in some situations," she continued.

"That is a factor that the Revenue does and should take account of in what way and whether to recover at all."

Critics of the scheme have called for the Revenue to write off many of the overpayments caused by official error, and an Early Day Motion has been put forward to this effect.

Signed by 46 MPs, it calls on Revenue to "introduce an amnesty in respect of all overpayments of tax credits made in the 2003-04 and 2004-05 tax years unless the overpayment was caused by fraud on the part of the claimant".

Tags: