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Last Updated: Wednesday, 22 June 2005, 11:23 GMT 12:23 UK
Tax credit woes hit home
A baby in a cot
The tax credit system has proved to be problematic
As the government's flagship tax credit system comes under fire, BBC News talks to three families who have experienced problems with the system.

The Citizens Advice (CAB) report says that HM Revenue & Customs (HMRC) makes substantial overpayments and then forces families into poverty by making them repay the money on demand.

Laura Smith, 28, Falkirk, Scotland

Laura Smith and her family were due to move into their new home in August 2004 when they received the letter from HMRC.

She and her husband were told that for the last two years they had been overpaid by 400 a month.

As a result, their tax credit payments were to completely stop until the money was repaid.

The tax credit payments had been made through Laura's monthly wage slip, but HMRC had mistakenly believed she was unemployed, hence the overpayment.

As a result, Laura and her husband had to pull out of moving house at the 11th hour - they simply could not afford the bigger mortgage without the tax credit payments.

"We have a 12-year-old who was so looking forward to moving to the new house, and then we had to break the news that we couldn't," said Laura.

"It also completely messed up the housing chain we were in.

"We also had a new baby at the time and it was just devastating.

"We had done everything the HMRC had asked off us and always filled in our forms as honestly as possible, but we had no idea that anything at all was wrong until we received that letter.

"We only started to receive tax credit payments again in April of this year, but it has been such a struggle up until then.

"With the new baby I only ever wanted to go back to work part-time, but without the tax credits I had to go full-time.

"I didn't have enough time with my new baby."

Mark Preston, 30, Abergele, north Wales

When church minister Mark Preston got his new job 18 months ago, it was wonderful news for him and his family.

Mark Preston
Despite the hassles, Mark Preston is still able to smile

In addition to moving to picturesque north Wales, he had a rise in salary.

With two young children, Mr Preston and his wife were receiving tax credits.

Due to his increased wage, he phoned HMRC to tell them about his change in situation.

HMRC said that despite his rise in salary, he was still in the same tax credit bracket and his payments would continue as normal.

"It just didn't seem right to me," said Mark.

"So I kept phoning them up to question whether I was being paid too much.

"I phoned again and again, but they always said I was fine.

"Until by November 2004 I was told I had been paid about 400 too much each month.

"I was rather cross to say the least, and having to pay back that amount was a serious chunk of our monthly budget.

We have now paid off much of that shortfall and are apparently receiving the right amount, but it has been a pain.

"I have phoned through so many times, and it has to be said that the staff do not seem very well trained."

Maurice Leigh, 47, Medway, Kent

With two disabled children, tax credit payments were always invaluable for Mr Leigh and his wife.

Originally self-employed when he first received tax credits for the business year 2003/2004, he then got a new job as a policeman and his wage doubled.

"I phoned them up to tell them that I'd doubled my salary, and they said that because I had been honest, I could keep the extra cash I was being paid for that year," he said.

"I thought this was a bit odd, so questioned it with quite a few other members of staff, only to be told the same thing - I could keep the money.

"I then got a letter saying I had been overpaid 4,000 and demanding the money back.

"So I phoned them back again only to be told that the letter was a mistake. But then I got another letter demanding the money back.

"It has just continued from there - over the phone they say I don't owe the money, but by letter they say I do.

"The letters are still chasing me for the money."

How one family was affected by the tax credit claw back

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