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Last Updated: Saturday, 10 September 2005, 13:49 GMT 14:49 UK
Warning on tax credit opt-out
By Louise Greenwood
BBC Radio 4's Money Box

A father and daughter
Some families appear to want to give up on Tax Credits altogether

Households receiving Tax Credits are being warned they could face serious consequences if they opt-out of the system by not renewing their claim.

Almost a third of claimants were overpaid Tax Credits in 2003-04 and had their later payments cut as the Revenue attempted to claw the money back.

Now, some Citizens Advice bureaux are reporting that angry, disillusioned claimants are planning not to return their renewal forms, which are due by the end of September.

But tax experts have warned that these households will have to pay back all the Tax Credits they have received so far this year, plus any outstanding overpayments.

A report from an all-party group of MPs, the Public Accounts Committee, has described Tax Credits as a "nightmare" and claimed vulnerable people had been "seriously mistreated" because of the way the system works.

Their income is substantially reduced and they are facing hardship
Hazel Morrison, Buckingham Citizens Advice
Chancellor Gordon Brown and the Revenue itself have defended the system saying it has benefited six million people, the vast majority of which have not faced any problems.

They added that improvements are being put in place.

But Hazel Morrison from Buckingham Citizens Advice told BBC Radio 4's Money Box programme:

"There is such a high level of overpayment being taken off their Tax Credits that their income is substantially reduced and they are facing hardship. People are now deciding that it's too difficult and saying: do I actually want this?"

'Problem after problem'

Jan from Wolverhampton, who is married with two children, has been told to pay back 11,000 in overpayments.

She said: "We were sent the forms, my husband filled them out, and from then we've just had problem after problem.

"We will not be renewing any claim because we cannot afford to put our finances into any greater jeopardy than they are already."

By just not sending the forms back in September you've actually given yourself a double debt
Anita Monteith, ICAEW

She currently receives no Tax Credits and is being pursued by the Revenue for the outstanding debt.

Anita Montieth from the Institute of Chartered Accountants (ICAEW) has warned that for most people "opting out" will not work.

"By just not sending the forms back in September you've actually given yourself a double debt," she told the programme.

"You have not only to pay back the amount you have received between April and September in the current year, but you've also got to pay back anything that you have been overpaid in previous years.

"That really will hurt a lot of people."

BBC Radio 4's Money Box was broadcast on Saturday, 10 September, 2005 at 1204 BST.

The programme was repeated on Sunday, 11 September, 2005 at 2102 BST.



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SEE ALSO:
Tax credits a nightmare, say MPs
08 Sep 05 |  Business
Q&A: Tax credit problems
22 Jun 05 |  Business


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