HMRC Announces Drop In Overpayment Of Tax Credits

by Jason Gorringe, Tax-News.com, London

23 May 2008

Overpayments of tax credits have fallen by GBP700mn since 2005-06, and are now at less than half the level they were in 2003-04, according to statistics published on Tuesday by HM Revenue & Customs (HMRC).

The reduction is the result of measures introduced from 2006, including reducing the period in which people have to renew claims, increasing the number of changes in circumstances reported to HMRC, and allowing an increase in income of up to GBP25,000 before there is a change to families' entitlement.

The figures also show that in 2006-07:

• 5.96 million families were benefiting from tax credits;
• 305 thousand childless individuals were benefiting from tax credits (a 12% increase in the number benefiting since 2005-6);
• 384 thousand families benefited from the childcare element (a 13 % increase since 2005-6);
• 129 thousand families benefited from extra help for workers with a disability (compared to 117 thousand in 200506); and
• Between 2005-6 and 2006-7 720 thousand families benefited from extra support from tax credits when they faced a fall in income.

Commenting on the data, Financial Secretary to the Treasury Jane Kennedy stated that:

"The improvements we have made to the administration of the tax credits system have significantly reduced overpayments, increased the flexibility of the system and provided certainty to families."

"Tax credits are providing much needed financial support to six million families, and have helped lift 600,000 children out of poverty since 1997."

"We will continue to build on this success through further improvements to the tax credit system, which I am setting out today."

A joint Treasury-HMRC discussion document "Tax Credits: improving delivery and choice", published on Tuesday set out proposals for:

• Tailoring support more closely to individuals' needs and making it easier for customers to claim, receive and renew tax credits, to reduce the scope for error;
• Giving customers greater certainty and more control over how they manage their tax credits affairs, whilst continuing to provide more timely support to customers whose income falls or whose circumstances change; and
• Improving the delivery of financial support for childcare through tax credits, further simplifying the system for customers.

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