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Last Updated: Friday, 16 September 2005, 08:39 GMT 09:39 UK
Threat over tax credit payments
Hands and coins
Revenue automatically reclaims tax credit overpayments
A pressure group has threatened Revenue and Customs with legal action unless it changes the way it recovers overpayments from tax credit claimants.

The Child Poverty Action Group (CPAG) said the policy of recovering overpayments automatically was illegal.

A Revenue spokesman said officials aimed to balance the duty to recoup public money with the need to protect families from hardship.

Debts could be rescheduled or written off, the spokesman added.

Credit cut

Tax credit claimants can be overpaid if they fail to report a change in circumstances or often because of errors by the Revenue.

Whatever the cause, the computer takes immediate action to reclaim the overpayments, cutting or sometimes stopping payments with little or no warning.

The way the Revenue recovers overpayments has caused great hardship to some of the poorest families
Kate Green
Child Action Poverty Group

CPAG wants the Revenue to give claimants a chance to say why an overpayment should not be recovered.

"CPAG supports the aims of tax credits scheme and the additional financial support these have brought, but we are worried that problems with overpayments are putting people off claiming money they are entitled to," said chief executive Kate Green.

"The way the Revenue recovers overpayments has caused great hardship to some of the poorest families," she added.

"CPAG believes the government to be acting unlawfully in doing this."

Unless the Revenue responds to the group's demand for change by 30 September, the group said it would issue legal proceedings.

It wants Revenue and Customs to alter "its procedures for recovering overpayments of tax credits so as to enable it to properly and consciously consider its discretion prior to recovery".

Nightmare

Last week, the powerful Public Accounts Committee of MPs denounced the government's tax credit system as a "nightmare".

The committee claimed that the system may be fatally undermined by its complexity.

The old Working Families and Disabled Person's tax credits were replaced in April 2003 by Child Tax Credits and Working Tax Credits.

During the 2003-2004 tax year, 16bn was handed out to 5.7 million families.

But the MPs say 1.8 million of the claimants were routinely overpaid.


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