Tax credit system delivers £1.8bn overpayment

The number of families receiving overpayment of tax credits from Her Majesty’s Revenue and Customs rose during 2004/2005.

The number of families receiving overpayment of tax credits from Her Majesty’s Revenue and Customs rose during 2004/2005.

 

Although the total overpayment of £1.8bn was down from £2.2bn in 2003/2004, the number of families given tax credit overpayments rose during the 2004/05 financial year, to 1.96 million claims, compared to 1.88 million claims in 2003/04.

 

Once new measures are "fully implemented", the government expects to reduce overpayments in future years by around a third, it said. The new measures first take effect during the 2006/07, current, tax year.

 

The Citizens’ Advice Bureau said that the recovery of overpayments has caused significant hardship to many families as payments have stopped without warning or explanation.

 

Earlier this year, witnesses giving evidence to the Treasury Subcommittee said problems with the tax credits computer system meant changing claimants’ details was difficult, and exacerbated the problems of overpayments.

 

Dawn Primarolo, the paymaster general, said HMRC told the committee that changes to the tax credit computer system had to be introduced gradually so that it also remains stable.

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