Citizens Advice records 14 per cent increase in debt problems caused by HMRC overpayments
29 May 2014
The number of issues reported to Citizens Advice of people falling into debt as a result of repaying overpaid tax credits increased by 14 per cent in the 2013/14 tax year.
Tax Credit debts arise when HMRC over-estimates a person’s entitlement to financial support and ends up having to recoup overpayments.
In the 2013/14 tax year, Citizens Advice dealt with 29,366 problems relating to debts from overpaid Child and Working Tax Credits, 14,157 of which were about helping those affected to budget effectively so they can repay money owed to HMRC, a 19 per cent increase on the previous tax year.
The Tax Credit system has previously come under fire for its complexity and administrative delays, leaving many families unsure of how much they are entitled to and facing confusion as they try to resolve disputed payments.
The Treasury Select Committee has raised concerns that HMRC’s new powers to recoup money owed directly from people’s bank accounts could lead to money being taken from people mistakenly. The Government has said that safeguards around the new powers will ensure money is only taken from an individual’s account correctly and when they can afford it.
Citizens Advice Chief Executive, Gillian Guy, said:
“For thousands of families, Whitehall calculations are leading to household debt. Tax Credits are there to make sure people get a decent standard of income, but the sharp rise in debts from overpaid tax credits suggests this policy is having the opposite effect.
“Seeking to improve the accuracy of Tax Credit payments is sensible but HMRC needs to tread carefully with its new powers to reclaim money directly from people’s bank accounts. HMRC has a poor track record in managing people’s data and dealing with overpayments.
“The safeguards put in place look sensible on paper but with such huge pressure on household budgets, it does not take much to push families into financial trouble and mistakes by HMRC will be harmful. As the economy recovers and welfare reforms are phased in, ministers and Government agencies must ensure people trying to make ends meet are supported through the upheaval.”
Notes to editors:
- The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
- The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
- To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
- You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
- Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014 service statistics see our quarterly publication Advice trends
- Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.