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Welfare Tax Credits

Volume 463: debated on Wednesday 12 September 2007

To ask the Chancellor of the Exchequer how many finalised tax credit awards for (a) 2003-04 and (b) 2004-05 were re-opened under the notification procedure set out in section 19 of the Tax Credit Act 2002. (155263)

As enquiries under section 19 can only be opened once an award has been finalised, no inquiries were opened in 2003-04 which was the first year of tax credits.

In 2004-05 around 54,000 inquiries were opened, relating to 2003-04 awards. In 2005-06 around 38,000 inquiries were opened, relating to both 2003-04 and 2004-05 awards.

To ask the Chancellor of the Exchequer pursuant to the written statement of the Financial Secretary of 25 July 2007, Official Report, column 62WS, on tax credit administration, (1) how many tax credit cases were re-opened incorrectly in (a) 2003-04, (b) 2004-05 and (c) 2005-06; (155264)

(2) what estimate he has made of (a) the amount to be repaid to claimants and (b) the administrative cost to HM Revenue and Customs of remedying the errors described;

(3) when he was first aware of (a) the administrative errors described in the written statement and (b) the necessity of repaying amounts to claimants;

(4) when he expects the process of remedying the administrative error identified in the written statement to be completed.

To ask the Chancellor of the Exchequer pursuant to the written ministerial statement by the Financial Secretary to the Treasury on 25 July 2007, Official Report, columns 62-63WS, on tax credit administration, when the administrative problem with tax credit awards was first identified; which ministers were informed about the problem; and when those ministers were informed. (155306)

I was advised by HMRC officials in July that there was a potential issue on the finalisation of awards and that they were seeking legal advice.

My July written statement identified that an estimated 160,000 2003-04 and 2004-05 cases were impacted by this issue. Separately HMRC estimated that they would need to write to 90,000 households about their 2005-06 awards.

Since then HMRC have done further work to refine these estimates. Although the total number affected has not changed, HMRC now estimate that as a result of this issue around 100,000 cases in 2003-04, 75,000 cases in 2004-05 and 75,000 cases in 2005-06 will need to be reviewed.

HMRC has started a planned programme of work to review the tax credit awards that may be affected. In all but a small minority of the cases HMRC will be able to correct the procedural error without any change to the payments already made. In an estimated 20,000 cases, HMRC will need to make a repayment. The cost of this is estimated to be £20 million. No family will see their award revised downwards as a result of these reviews.

While any administrative error is deeply regrettable, and must be addressed, the fact remains that tax credits are helping six million families including 10 million children, and have helped to lift 600,000 children out of poverty.