Appendix B: HMRC’s response to the recommendations in the Special Report: Tax Credits: Putting Things Right (June 2005)
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HMRC’s response to the recommendations in the Special Report: Tax Credits: Putting Things Right (June 2005)
| Recommendation | Response |
|---|---|---|
1 | Steps to ensure staff recognise the situations where interim payments of tax credits are appropriate. | Implemented. • Guidance sent out to all staff in 2005. |
2 | HMRC should not seek to recover until it has come to a decision on whether it should be recovered under COP 26 (the ‘pause’). | Work in progress. • Suspension of recovery of disputed overpayments became possible from November 2005. From November 2006 this became automatic. • Government accepted the case in principle for a period of notice before recovery of any overpayment begins and said that HMRC would continue to look for opportunities to implement this. However, in a letter dated 25 June 2007 to the Chairman of HM Treasury Committee the Paymaster General said that it was now clear that the necessary change could not be delivered in the short to medium term. |
3 | On the ‘payments page’ of an award notice, customers should be alerted to the fact that recovery can be disputed under COP 26. | Implemented. • Clearly displayed in the one-page notes accompanying the award notice. |
4 | Recovery should be at the same rate as those for previous year overpayments. | Implemented. • Part of package of measures announced at Pre-Budget Report 2005. |
5 | Steps to ensure that staff who have contact with tax credit customers are alert to the circumstances when Additional Tax Credits (ATCs) might be appropriate. | Implemented.
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6 | Where in-year recovery of excess tax credits is justified, HMRC should take steps to pay ATCs automatically to families in receipt of income support and income-based jobseeker’s allowance. | Implemented. • This recommendation has been overtaken by the announcement in PBR 2005 to align cross and in–year recovery rates. This will occur for all in-year recoveries, whether or not the claimant is in receipt of income support or income-based jobseeker’s allowance. • In January 2007 HMRC introduced a manual process to identify where a restricted rate of recovery was appropriate and to apply that rate without the claimant having to ask for it. • [Automated restriction has been available from June 2007.] |
7 | Details of the availability of ATCs should be printed prominently on the ‘payments’ page of an award notice and the guidance notes. | Implemented. • More prominent on both these documents. Overtaken by the announcement in Pre Budget Report 2005 to align cross and in–year recovery rates. |
Overpaid customers to be sent a letter outlining: • the total amount they owe; • the reasons why the overpayment occurred and the date or dates when it happened; and • the repayment arrangements which will apply in their case. The letter to enclose a copy of COP 26 and draw particular attention to the circumstances when recovery can be waived and the availability of ATCs in cases of hardship. | Implemented. • Revised award notice explains in more detail how the award is made up, the payment schedule and details of how payments are affected by recovery action. The guidance notes give greater prominence to overpayments and recovery, the availability of COP 26, waiver and ATCs. • A full `playback’ introduced in November 2006, as part of the latest computer release , will mean that a claimant’s finalisation/renewals notice from April 2007 will contain information on their award throughout the previous tax year. This will help to explain ‘why did this overpayment occur’. | |
9 | Whenever a HMRC mistake is identified which has led to an overpayment, the customer should be immediately notified of exactly what has happened and informed of the circumstances when recovery can be waived. | Implemented. • When an IT system problem is identified which has led to an overpayment, HMRC will contact those affected. • Award notice contains the amount and how it will be recovered on the notice. The accompanying guidance notes tell customers that HMRC’s approach to overpayments is outlined in COP 26. • HMRC cannot always identify where a mistake has been made as it often needs individual contact from the customer to identify it. |
10 | Consideration should be given to writing off all overpayments caused by official error which occurred during 2003-04 and 2004-05. | Considered, but not accepted. • The Government considered this but decided that it would not be appropriate because of the need to balance the duty of care to tax credit customers with their duty to all taxpayers and the public purse. |
Statutory test for recovery of overpayments consistent with the test that is currently applied to social security benefits, with a right of appeal to an independent tribunal.
| An alternative approach is being piloted. • Customers can complain if they disagree with the decision or matters are not resolved to their satisfaction. • HMRC are planning with the Adjudicator to provide a fast track independent review for disputed overpayments. A pilot will start in the next few months to test arrangements. | |
HMRC should consider the way it organises delivery of tax credits in order to deliver a better, more complete service to the customers it now serves. A different model is needed in complex cases and where something has gone wrong. More sustained and informed communication with customers about their case is essential. | Implemented but will always be subject to ongoing work. • A special team has been set up in the Tax Credits Office to deal with more complex cases (known as ‘Group 33’) who adopt a whole case approach. • Tax Credits Office have reviewed their complaints processes and made a number of changes. In particular to have a named caseworker who will take ownership of the complaint until it is resolved. • More generally HMRC have taken a more radical long term look at the way they deliver tax credits. This now forms part of HMRC’s Transformation Programme. |
