Ernst and Young Slams Brown's New Tax Credits

by Robert Lee, Tax News.com, London

25 March 2003

The UK's largest accounting firm Ernst and Young has severely criticised the government's plans to overhaul the tax credit system which come into force next month. Although the measures are intended to partly offset the 1% increase in National Insurance contributions, E&Y argue that Chancellor Gordon Brown is merely "giving with one hand and taking with the other."

The new tax year will see the Working Families Tax Credit replaced with the Child Tax Credit and Working Tax Credit which also includes a Childcare Tax credit. Any family with an income below £50,000 per year can claim these credits, though Ernst and Young says the new system is so complicated that it is likely to deter many from applying.

"Unfortunately, people pay NICs automatically whereas they have to fill in a complicated 16-page form in order to get the tax credit," Anne Redston, a tax partner at Ernst and Young revealed. She also expressed concern that the requirement for both husbands and wives to give details of their income will be tantamount to a return to joint taxation through "the back door."

On pensions, the government has also come in for much criticism recently, not least over its intention to introduce a Pensioner Tax Credit. The recommendation, one of many set out in last year's green paper on pensions, has been attacked by the Pensions Policy Institute for not being radical enough. In particular the government's record on taxing pension savings schemes has acted as a disincentive for people to save for their retirement, critics have argued.

Recommended