Tax credit overpayments - the road to recovery

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The findings of an online eConsultation, facilitated by adviceNI, into the causes, consequences and possible solutions regarding the tax credit overpayment issue.

What would you do if you were living on a low income, and overpaid (through no fault of your own) by thousands of pounds by the Inland Revenue? Kevin Higgins, adviceni, describes how adviceni has facilitated advisers and tax credit recipients to comment on their experiences and views on the issue of tax credit overpayments via their online forum - advicenet.

To view the eConsultation, please go to www.adviceni.net.

To register an interest in receiving a copy of the report on the eConsultation, contact Kevin at adviceni, phone 028 9064 5919 or email kevin@adviceni.net.

By way of background, adviceni developed an online forum with the aim of encouraging participation by advisers and others in social policy debate; and building capacity, skills and confidence as regards using new information communication technologies - through an interactive online forum. A pool of eModerators were trained by the Hansard Society, and in fact the team of eModerators were the first candidates in Northern Ireland to successfully complete the Hansard Society course.

In relation to the issue of tax credit overpayments, such has been the demand on advisers from tax credit recipients experiencing problems with tax credits, that adviceni decided to run a public access eConsultation focused on the issue of tax credit overpayments. The eConsultation ran from Monday 7 February until Friday 4 March and the eModerators were Caryl Williamson, Age Concern NI, Kevin Higgins adviceni, with support provided by Patricia Donald, adviceni.

The interest in the eConsultation has been tremendous, both in terms of messages posted and hits viewing the discussions as they progressed. In the four week period, there were over 180 messages posted in 22 threads on issues including:
- are you advising on tax credits
- has the Inland Revenue overpaid you
- tax credit information sources
- what should be done (to help resolve the overpayment issue being experienced by so many people).

In terms of the substance of the issues discussed, there have been many messages highlighting the impact of overpayments on people's lives.

"Please someone reply, if not with experience of working at TCO then perhaps personal experience of large overpayments. Please."

"The system has really let us down, hasn't it? It was designed to help us meet a standard of living which as workers we should all have ... the TCO need to listen to people, as now honest people such as us, who work hard but struggle anyway are suffering."

"When the first notice came advising us of the amount we were to receive we wrote back, telling them they must have made a mistake and re-advising of our circumstances, they wrote back saying the money was indeed due to us. I was not happy and corresponded again (four times in all) and received EIGHT letters confirming that we were entitled to the money, so having kept it safe, just in case, we started to spend. Now that it is spent they want it back! We will fight this."

"I contacted the tax credit department in early July 2004 to inform them that my son would not be returning to full time education in September 2004. I thought by informing them well in advance it would solve any overpayment situation arising. To date after numerous phone calls from myself asking why I was still receiving tax credit I was informed in January 2005 that due to an error on the system I was and will continue to receive monthly payments into my account ... staff suggested I open another bank account and start putting the monthly payments into that as I would be contacted in the future regarding paying back this money. I have recently made a written formal complaint regarding the handling of my tax credit payments."

"I had a simple benefits to employment calculation that was calculated so badly by the Inland Revenue (Northern Ireland) that I have been in serious debt since June 2004 as they have recouped their losses at my expense. They made the error and I paid for it. I have been unable to disentangle it even now 8 months later and with the assistance of my MLA, the adjudicator and the Director of Inland Revenue. Tax Credits are a law unto themselves. I too am a single parent. A waiver should be made when the tax office is blatantly and patently wrong!!!"

"The Inland Revenue claim they have overpaid my husband and myself by £2,500 and that it will be taken from our award in the future years. I have stopped trying to understand how they arrive at their figures or calculate awards."

"I am completely disillusioned with the Tax Credit system. My husband and I work hard to provide for our daughter, and have never once given incorrect information to the TCO. Yet I feel I am being accused of fiddling the system, when all the time it is errors made by the IR. In accordance with their Code of Practice 26 they have absolutely no justification for trying to reclaim the money they have overpaid."

"The system seems to be beset with IT problems although the onus seems to be on the claimant. The Revenue seems to be insensitive to those reliant on these benefits ... there appears to be little consideration to the plight they enforce when clawing back and extensively reducing benefits at a punitively high rate."

"I really wish I could take a senior representative from Inland Revenue with me to visit a family with infants, no nappies and little food to explain the law for them."

"With one client they have been in limbo for six months now with the Inland Revenue unable to make a decision despite complaints being made to their complaints departments. Clients asked if they can go to the [Parliamentary] ombudsman only to be told to give the Inland Revenue a chance to sort it. I would say six months is sufficient time - wouldn't you"

"I have just received word from the Adjudicators Office in a case not resolved since July that they will not have involvement until the complaint has been fully considered by the Tax Credit Office and the complaints procedures is exhausted."

"There is a mindset in the eyes of a lot of clients I see that because it's the Inland Revenue it's a foregone conclusion they'll recover on overpayments 'so what can I do'".

"I think the thing that frustrates me most is that a system designed to alleviate poverty is often pushing people further into it. Working tax credit often makes the difference between being able or unable to accept low paid work. It is a lifeline, not a bonus. A potentially excellent benefit is being ruined by poor execution."

"I do want to raise the issue that more and more of our clients in receipt of tax credits are being overpaid and as a result are becoming more indebted. We are finding that this is now being cited as a reason for the financial situation becoming unmanageable, which, in my opinion, is quite shocking."

adviceni is currently sifting through all the many posts we have received to put together a report which will be delivered to the Inland Revenue and other key stakeholders. We will also put this report up on the website for everyone to see.

This piece of work is ongoing, but some issues coming to the fore include:

  1. doubts as to the ability of the Inland Revenue to make the change from being an enforcement and collection organisation, to a support and distribution agency;
  2. complexity of the tax credit scheme, including a widespread lack of understanding about how awards are calculated;
  3. service delivery problems in relation to Telephone Helpline, including appropriateness, effectiveness and accessibility;
  4. problems associated with the computer system, including an apparent inability to process change of circumstances information in many cases;
  5. ineffective communication between Tax Credit Office and tax credit recipients;
  6. the eConsultation has highlighted an inability of the tax credit scheme to adopt to real life scenarios in many cases, including changing jobs, promotions, moving from benefit to work, relationship breakdown - despite information being provided by tax credit recipients;
  7. shortcomings in relation to Award notices, multiple Award notices;
  8. Awards not based on current circumstances;
  9. the fact that overpayments are an integral part of the tax credit system. Awards are made on a yearly basis, therefore any change in circumstances during the year may already mean that there is an overpayment situation;
  10. strong sense that recovery should be suspended, pending the outcome of the disputes process;
  11. Inland Revenue must take responsibility for their contribution to the overpayment problem, recovery should not be sought where the overpayment is due to Inland Revenue error;
  12. recovery rates need to be reviewed (both in-year and end-of-year) so as to reduce hardship;
  13. ineffective disputes process, including issues such as delays and lack of independence.

The report on the eConsultation will highlight the views expressed, in particular the hardship being placed upon those experiencing tax credit overpayments, and will seek specific assurances in order that the situation may be improved. This report will be widely circulated, but if you would like to register an interest in receiving a copy please contact Kevin at adviceni, telephone 028 9064 5919, email kevin@adviceni.net.

To view the eConsultation, please go to www.adviceni.net.


Advice NI | Kevin Higgins | 21 Apr 2005
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