PARLIAMENTARY AND
HEALTH SERVICE (OMBUDSMAN) News Release issued by The Government
News Network on 9 October 2007
In her second
special report on tax credits, Tax Credits: Getting it wrong?,
published today, the Parliamentary Ombudsman, Ann Abraham, says
that despite the considerable improvements which HM Revenue and
Customs (HMRC) has made in its administration of tax credits since
her last report in 2005, it still has a very long way to go.
Complaints to the Parliamentary Ombudsman about tax credits
continue to rise; they currently form more than 26 per cent of all
complaints to the Ombudsman. The complaints fall into three key
groups: the design of the system; failures in complaints handling;
and unfair or unreasonable recovery of overpayments.
Ms Abraham says that the design of the system is a matter for
Government and Parliament to consider. However, it was very clear
that many people remained unable to grasp the basic principles of
an annualised system, and complained about what was effectively
the system working as it was intended to.
Overpayments and underpayments are unavoidable aspects of the
system which will occur however well it is administered, and the
report says that they will therefore continue to generate
dissatisfaction and complaints. However, the report also shows the
distress which can be caused to some of the most vulnerable
families (those on the lowest incomes) when they find themselves
with such a debt to repay - often unexpectedly, and sometimes a
very long time after the money has been received and spent. Ms
Abraham said that this again raised the question of whether the
current tax credit system could truly meet the needs of this
particular group.
Ms Abraham went on to say that, whilst there had been some
improvements in their complaints handling, HMRC was also still
failing to take opportunities to get its decisions on complaints
right first time. The report shows that HMRC still has a lot of
work to do in providing 'fit for purpose' complaints
handling arrangements.
However, Ms Abraham's main criticisms in the report are of
the application of the guidance, Code of Practice 26 (COP 26),
which HMRC uses when deciding whether to waive overpayments. Some
91 per cent of the tax credits complaints referred to the
Ombudsman relate to this issue.
Ms Abraham said that the unfair and inconsistent application of
COP 26, and the unduly harsh nature of some of the decisions taken
on recovery, caused extreme worry and anxiety to many low income
families. The outcomes of some of those decisions seemed to fly in
the face of the aims of the tax credit policy.
Ms Abraham said today: 'In such instances, the impact on
those concerned, typically those on the very lowest incomes who
are the most vulnerable in society, is huge and highly
distressing. As one complainant put it: "Tax credits are
supposed to help families, not cause them money worries." It
is essential, therefore, that these matters are addressed as
quickly as possible.'
The report features a number of case studies that clearly show
how distressing - devastating even - the effects of overpayments
can be on some of these families. Indeed, for a number of families
their experience was so bad that, regardless of their entitlement,
they said that they would never again apply for tax credits.
The report acknowledges that HMRC is currently revising COP 26,
which could go some way towards ensuring that more appropriate
decisions on the recovery of overpayments are made. However, the
Ombudsman said, the proposed revisions will not be enough to deal
with all the problems identified in this report or to prevent
harsh and unfair decisions in the future.
Tax Credits: Getting it wrong? accordingly makes six
recommendations that include a clear and comprehensive guide on
the application of the revised COP 26, together with training for
staff in its application and the desired outcomes. It also
recommends that HMRC develops feedback mechanisms to enable staff
to learn from complaints about the unreasonable application of COP
26, and that HMRC ensures that proper consideration is given to
the impact of recovery decisions on the individuals and families concerned.
Notes to Editors:
* The Ombudsman investigates complaints about government
departments and a range of other public bodies in the UK. She is
independent of the Government and the Civil Service. Her services
are free and confidential.
* The Ombudsman's first special report on the administration
of the tax credits system was Tax Credits: Putting Things Right,
HC 124, 21 June 2005, The Stationery Office.
* Code of Practice 26 is the guidance HMRC uses to determine
whether to waive overpayments. It applies a 'reasonable
belief test' as to whether a complainant could have
reasonably thought that their tax credit award was correct.
* Press copies: the Ombudsman's reports are available from
the Communications team, Parliamentary and Health Service
Ombudsman, Millbank Tower, Millbank, London SW1P 4QP, telephone:
020 7217 40 64, email press@ombudsman.gsi.gov.uk
You can also
read the reports on the website at: http://www.ombudsman.org.uk
where you can also find other Ombudsman publications.