For the number of tax credits overpayments remitted on the ground of official error, I refer the hon. Member to the answer I gave the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) on 10 October 2006, Official Report, columns 730-31W.
For the value of tax credits overpayments written off on the ground of official error between June 2004 and March 2006, I refer the hon. Member to the answer I gave the hon. Member for Yeovil (Mr. Laws) on 14 July 2006, Official Report, column 2116W.
The value of overpayments written off on the ground of official error from March 2006 to August 2006 was:
Value of disputed overpayments written off on ground of official error March 2006 l,659 April 2006 111 May 2006 1,368 June 2006 928 July 2006 986 August 2006 853
Value of disputed overpayments written off on ground of official error
The value of overpayments remitted on the ground of hardship is compiled annually to the end of October and shown in the table:
Year to end of October Amount remitted 2004 0 2005 287 Note:Details for the year to end of October 2006 are not yet available.
Year to end of October
Note:Details for the year to end of October 2006 are not yet available.
This information gives working tax credit (WTC) and child tax credit (CTC) remittance. Figures given on 4 July 2006, Official Report, column 998W, in answer to a question from the hon. Member for Yeovil (Mr. Laws) and on 9 October 2006, Official Report, column 301W, in answer to a similar question from my right hon. Friend the Member for Birkenhead (Mr. Field) provided figures for WTC only.
For details of the criteria applied by HMRC in deciding whether an overpayment should be written off, I refer the hon. Member to the answer I gave the hon. Member for Yeovil (Mr. Laws) on 9 October 2006, Official Report, column 299W.
The estimated cost of the payments in 2005-06, the latest period for which details are available, is: tax credits £2.78/payment; child benefit £0.74/payment.
The variation in cost is a reflection of the frequency of contact between the Department and its tax credit and child benefit customers being significantly different. Tax credits are responsive to a household's changing circumstances and require annual renewal, whereas once entitlement to child benefit has been established no further contact is normally needed until a child leaves school.
HMRC have responded positively to the recommendations set out in the ombudsman's report. In respect of recommendation 10, current policy is for overpayments to be written off where there was a mistake by HMRC and it was not reasonable for the claimant to have spotted the error. The Government believe this strikes the right balance between being fair to those claimants who have been paid the incorrect amount and being fair to the taxpayer in general.
(2) how many tax credit claims are being adversely affected by IT problems within his Department’s responsibilities; and if he will make a statement.
(2) in how many cases of false or fraudulent tax credit claims HM Revenue and Customs intervened in (a) 2003-04, (b) 2004-05, (c) 2005-06 and (d) 2006-07 (from 1 April 2006 to 30 September 2006).
Information on tax credit compliance interventions for 2006-07 will be available at the end of the year. Information on compliance interventions for earlier years can be found in the Comptroller and Auditor General's Standard Reports on HMRC’s Accounts.
[holding answer 1 November 2006]: The increase in the tax credits income disregard is part of a package of measures announced in the 2005 Pre-Budget Report. The Government have always been more confident about the overall cost of the PBR package which is based on the total level of overpayments. The estimates were based on data from the first year of the system and provisional information from the second year.
The Exchequer effect of the changes to the tax credit system depends crucially on the source of overpayments. At that stage there was only limited information available on the sources of overpayments as HMRC only had complete data on 2003-04 overpayments, which were not representative of the system in steady state. This difficulty in accessing good quality data in the past made costing the individual elements of the package difficult.
However following publication of the 2004-05 overpayment statistics in May 2006, HMRC now has two years of overpayment statistics to inform this costing. And crucially, unlike in 2003-04, awards in 2004-05 were based on the previous year’s income making them much more representative of future years awards. In addition the first stage of the finalisation process for 2005-06 was completed in August 2006, adding to this body of knowledge. This additional information has not led the Government to change the costing of the disregard—or the package as a whole—however it has allowed it to feel more confident in the costing of the individual elements of the package.
There are still some uncertainties surrounding the costing. In particular it remains the case that while the overall cost of the package is not affected by the order with which the changes are modelled, these interactions mean that the costs of the individual elements of the package are affected by the assumed order.
Subject to these uncertainties, the costing of the £25,000 disregard over the period 2006-07 to 2010-11 is provided as follows:
Income disregard of £25,000 2006-07 -50 2007-08 -100 2008-09 -150 2009-10 -250 2000-11 -300
Income disregard of £25,000
One needs to carefully distinguish between the change in claimants’ entitlement from the change in the disregard and the cost to the Exchequer. The cost of the disregard is not the change in entitlement, but the forgone recovery of overpayments. The basic principle is that when money is paid out to tax credit claimants, it scores as a cost to the Exchequer. On the other hand, when any overpaid tax credits are recovered, there is a yield. The higher disregard does not necessarily affect the amount of money paid out to claimants in any one year. But by reducing the amount of overpayments, the higher disregard will mean there is less money to be recovered in future years. Hence the profile of costs shown above.
HMRC has robust procedures in place to identify abuse of the tax credits system, and all other types of fraud. Prosecutions will be pursued against the very small number of HMRC’s 98,000 staff who abuse their position of trust. Since 2003, there have been 12 cases of tax credit fraud involving HMRC employees.
HMRC has taken a number of steps to ensure its communications are more claimant friendly and forms are easier to complete. This has included revising the tax credits award notice from April 2006 to give the claimant more information about entitlement, overpayments and recovery arrangements and improving the guidance note sent to claimants with their award notices.
Going forward, the finalisation/renewal notice claimants receive at the end of the year will include a “playback” of the information held by HMRC about their income and circumstances for the previous year. Building on these important steps, HMRC will continue to monitor the claimant experience and review the form based on feedback from claimants and those who represent them.
Individuals can make subject access requests for recordings of calls made to the tax credits helpline, the Tax Credit Office’s director’s hotline and the MP hotline and those requests are dealt with in accordance with the Data Protection Act 1998.
Between 1 October 2005 and 30 September 2006 HM Revenue and Customs received around 2,600 subject access requests for recordings of such calls from individuals in the UK. Information at constituency level is not available.
For published information on the number of tax credits overpayments in 2004-05, I refer the hon. Member to
Information is not available on how many 2004-05 overpayments were due to official error or how many of those will be written off.
The latest available average number of in-work benefiting families in each band of income is given in Table 2.9 in “Child and Working Tax Credits Statistics. Finalised annual awards 2004-05.” This publication can be found on the HMRC website at:
There were on average around 3,000 benefiting families in 2004-05 with household income of more than £60,000.