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"Harsh" tax credit decisions attacked

09/10/2007

Many low-income families are suffering "extreme worry and anxiety" because of the government's inconsistency over tax credits, parliamentary ombudsman Ann Abraham has reported.

The follow-up to her 2005 report on the issue questions the ability of the tax credit system to meet the needs of vulnerable groups like poor families because of the "unduly harsh" demands for overpayment repayments enforced by HM Revenue and Customs (HMRC).

The report, titled Tax credits: Getting it Wrong?, says that complaints over the issue continue to increase and warns that many are struggling to understand the "basic principles of an annualised system".

But the biggest criticisms are saved for unfair or unreasonable recovery of overpayments, which related to 91 per cent of tax-credit complaints referred to the ombudsman.

"In such instances, the impact on those concerned, typically those on the very lowest incomes who are the most vulnerable in society, is huge and highly distressing. It is essential, therefore, that these matters are addressed as quickly as possible," Ms Abraham said.

A spokesperson said the HMRC would respond "positively" to the report's findings and pointed out that the tax credit system is beneficial to the vast majority of its recipients.

"HMRC is already consulting on changes to the code of practice on recovery of overpayments to improve outcomes for their customers," she said.

"The ombudsman welcomes this development and her recommendations will help make this change successful."