Rush to meet tax credit deadline

Diana Hunt explains her family's confusion over tax credits

A last minute rush by people trying to renew their tax credit claims has made it hard to get through on the hotline run by HM Revenue & Customs (HMRC).

The deadline for claimants to confirm the details of their income for 2007-08 is the end of Thursday 31 July.

Failure to do this, or renew a claim for this year means tax credits will be cancelled and overpayments reclaimed.

HMRC said the hotline is still working and anyone having trouble phoning in their claim should keep on trying.

"It's the busiest time of year," said an HMRC spokeswoman.

"People are still getting through and the hotline will be open until 2200 BST, but we apologise for any delays," she added.

Complex system

More than £65bn has been paid out to millions of families since the tax credits system was set up in 2003 with the aim of lifting low-paid people, particularly those with children, out of poverty.

Failure to renew a tax claim could provoke a demand to repay money

However, the system has been plagued by complexity, bureaucratic errors and fraud.

There have also been systematic over-payments, though not on the scale seen in earlier years.

This has led to the HMRC demanding the repayment of money that claimants thought was theirs.

As a result some families have been plunged into financial hardship, which has led to scathing criticism of the HMRC's administration of the system by MPs, charities and accountancy bodies.

John Whiting, tax partner at the accountancy firm PricewaterhouseCoopers, and a member of the Low-Incomes Tax Reform Group, said bad publicity was still putting off potential claimants.

And this was the reason why more than £4bn a year was going unclaimed.

"It does take a good deal of effort to claim," he said.

"The HMRC do try hard to help people, but they require a lot of information.

"Because it is geared to your income they need all your income details, and not just for you but for your partner," he said.

Tax credits are currently paid to 20 million people, including 6 million families and 10 million children.

Last year just over 200,000 claims were cancelled because claimants failed to renew, though in some cases this may have been because the person knew they were no longer eligible for the money.