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Disabled Children: Tax Credit

Volume 777: debated on Wednesday 30 November 2016


Asked by

To ask Her Majesty’s Government what plans they have to compensate families looking after disabled children who lost the opportunity to claim the higher rate of tax credit between 2011 and 2014 due to an administrative error.

My Lords, claimants were able to claim the higher rate of tax credits and many did so at the time. Although it is the claimant’s responsibility to inform HMRC of their eligibility, HMRC’s back-up practice was to take information from DWP to update awards automatically. Last week, we announced that HMRC would issue lump-sum payments to families affected by a breakdown in this back-up to cover what they would have received from 6 April 2016 and ensure that they get their entitlement in future.

My Lords, I thank the Minister for that reply, but I am sure he would agree that we are dealing here with a major injustice: some 28,000 low-income families with disabled children have lost up to £4,400 a year for five years, all because, between 2011 and 2014, the DWP omitted the box from the relevant form for people to indicate whether or not they received tax credits. As the law currently stands, as the Minister has said, the onus is on the claimant to claim what they are entitled to. However, the system of tax credits is extremely complicated for anyone to understand. Does the Minister agree that the law should be changed to place the onus on the Revenue to pay claimants what they are entitled to, so long as they provide the right information about their circumstances? Will he give serious consideration to this?

I am grateful to the noble Lord for that suggestion. HMRC will be contacting the 28,000 families directly, automatically adjusting their award and by the end of January making a lump-sum payment backdated to April 2016. I am sure his suggestion of a future change to the law will be looked at sympathetically in order to try to streamline the system and to avoid the problems that he has identified in his Question.

My Lords, the Government acknowledge the administrative error in the failure to pay the full entitlement for five years. I want to know, as I am sure does the House, on what principle the decision was taken by the Government, knowing that the families have no recourse to law, that the Treasury should shoulder something less than 10% of the total cost and the families should bear 90%.

That is a question that I asked myself earlier this morning. The answer is that HMRC cannot by law backdate beyond the present tax year except in exceptional circumstances, and the circumstances where someone has failed to claim do not qualify. So there would be a risk of legal challenge were HMRC to compensate people in the way that the noble Lord has suggested.

My Lords, when people have been denied five years of benefit and the Government are willing to backdate that for only six months, who would make that challenge, should HMRC do what is right?

I understand the problems of these 28,000 families, by definition with a disabled child and on low incomes, who have failed to get up to £5,000 a year. All I can say is that, if I were still in another place and one of those 28,000 families came to see me at my advice bureau, and I knew there was a legal problem, my advice to them would be to refer the matter to the Parliamentary Ombudsman.

My Lords, does my noble friend agree that this is precisely the type of case for which the ombudsman was set up? I hope those who, like the Minister and myself, have served in the other place as Back-Bench MPs—although my noble friend has come to high office once again—will take note. This is just the type of case that any Back-Bench MP could present to the ombudsman, and I hope the Treasury—my noble friend has certainly shown himself to be a man of honour—will abide by the ruling of the ombudsman in such a case.

I am grateful to my noble friend. I have probably gone way beyond my negotiating remit already, but if it were to be referred to the Parliamentary Ombudsman, I suspect it would be resisted by the Treasury or DWP on the grounds that they were complying with the law but, were the Parliamentary Commissioner to uphold the complaint then, following precedent, I imagine that the government department would then honour the compensation proposed.

My Lords, is the noble Lord, Lord Low, correct to say that a box was omitted from the form? If a box was omitted that should have been there, it seems to me that the department was at fault and therefore a question of law preventing compensation would not arise.

The noble Baroness knows much more about the law than I do. It was indeed the case that, when a parent applied for DLA for a disabled child, they could tick a box indicating whether they were claiming tax credit. If they ticked the box, HMRC was automatically told and the benefit was automatically uprated. That is described as a back-up cover, and the law is quite clear that none the less, notwithstanding the box, it is still the responsibility of the claimant to notify HMRC of the change in circumstances. When you apply for tax credit, it says on the form that if your circumstances change you should advise HMRC. I have looked at this extensively this morning. I have given the reply that I have about the Government’s ability to make compensation for earlier years and the advice that they cannot under the legislation; and I have suggested in good faith a way through that might meet the injustice that many noble Lords feel has occurred.