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Tax credits: the CAB view John Wheatley

Tax credits: the CAB view John Wheatley. Improving delivery, reducing complexity, resolving overpayments. Money with your name on it?. Citizens Advice published its report in June 05, because: Insufficient response to clear administrative and policy problems

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Tax credits: the CAB view John Wheatley

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  1. Tax credits: the CAB viewJohn Wheatley Improving delivery, reducing complexity, resolving overpayments

  2. Money with your name on it? • Citizens Advice published its report in June 05, because: • Insufficient response to clear administrative and policy problems • Large numbers of complaints from CAB • Clients in severe difficulties • Bureaux having trouble resolving problems IFS Tax Credits - the CAB view

  3. Our central recommendations were: • Families should not suffer excessive TC payment cuts – clear limits on recoveries • Right of appeal to independent statutory tribunal • Waive recovery, in cases of Revenue error, whether claimant challenges O/P or not (degree of consensus with other reports) IFS Tax Credits - the CAB view

  4. Initial Response and Reaction: “we accept entirely the problems that the Citizens Advice service report and the ombudsman’s report identified, and it is important that we address them.” “We apologise for the hardship and distress that has been caused to some families and we are taking action”. PMQs, 22 June 2005 IFS Tax Credits - the CAB view

  5. Initial Response and Reaction 2: “…the CAB are saying that the administrative issues need to be dealt with, and I agree; that the IT problems need to be finally sorted, and I agree; and that steps should be taken, and I agree and have taken those steps. I will be taking more steps.” Paymaster General Statement 22 June 2005 IFS Tax Credits - the CAB view

  6. Initial Response and Reaction 2 • Ministers are determined to retain annual, inclusive system • Officials acknowledge that adjustments need to ensure the system works for the most ‘vulnerable’ IFS Tax Credits - the CAB view

  7. Subsequent Activity: • Meetings with Minister and HMRC officials, and continuing group discussions. Outcomes include: • Review of COP 26 on overpayments: • Working with Citizens Advice’, ‘including surgeries/support/trusted intermediary/joint research IFS Tax Credits - the CAB view

  8. Review of COP 26 • Now with PMG for decision: • Current rates used for ‘cross year recovery’ should be applied to ‘in year adjustments’. • Limits should be absolute - recovery rates should not be compounded for any additional overpayment either in year or at the year-end. IFS Tax Credits - the CAB view

  9. Review of COP 26 (2) • Suspend recovery of disputed cases • Suspend automatic recovery without explanation • Independent right of appeal of decisions to recover • Reasonableness – O/Ps arising from Revenue error should not be recovered – remove test of ‘reasonableness’? IFS Tax Credits - the CAB view

  10. Joint HMRC/CAB Working? • ‘Work together’ to increase take up, improve understanding, reduce overpayments by encouraging reporting of changes of circumstances – • HMRC staff at CAB ‘surgeries’? • Support for CAB outreach work? • ‘Intermediary’ access to tax credit database? IFS Tax Credits - the CAB view

  11. Current position • Feels like ‘wait and see’: • Waiting for responses on COP26 • In discussion on joint working • MPs waiting for further meetings with PMG IFS Tax Credits - the CAB view

  12. What next? • Current CAB cases show many continuing & worrying problems:- • people ‘ending’ tax credit claims despite large entitlement • Substantial overpayments - £5-10k common • Leading to inability to pay for childcare and pressure on jobs • Changes of circumstances reported but not recorded • Multiple award notices • Payments not being made, or to wrong a/c or e/r IFS Tax Credits - the CAB view

  13. Key issues? • Is an annual system ever going to work? • Will the scheme ever be comprehensible? • Can an inclusive system continue? IFS Tax Credits - the CAB view

  14. Possible solutions? • Treat tax credits as savings – spend only in year 2… • Retrospective awards for previous year? • Move to more proof of circumstances, less self-declaration? • Renew more frequently – 6 months? • Or is current scheme better in theory? IFS Tax Credits - the CAB view

  15. Reality • ‘Administration’ problems – suggests there should be an easy solution • Biggest problem remains reliance on computer – which is decision-maker, payer and debt collector • Not just delays, but operation of computer system which lacks any flexibility • Computer changes expensive and extremely slow – e.g nine months+ to suspend recovery in disputed cases IFS Tax Credits - the CAB view

  16. IFS Tax Credits - the CAB view

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