There are few surprises in the figures of the latest parliamentary report on tax credits, tax expert Robin Williamson has claimed.
The technical director of the Low Incomes Tax Reform Group (LITRG) has also broadly agreed with a number of the paper's points, including HMRC's methods of collection of overpayments.
The report by the Public Accounts Committee comes to several conclusions, including:
- HMRC have overpaid £6 billion in tax credits in the first three years of the scheme.
- The Revenue has yet to succeed in clarifying its procedures for recovering overpayments.
- Software errors continue to affect some payments, and HMRC still have to fallback on manually processing certain awards.
- Levels of claimant error and fraud remain unacceptably high, and the department is still losing £1 billion each year.
Mr Williamson stressed a common ignorance of the tax credits system: that it is designed to take in overpayments, as well as underpayments.
However, he went on to acquiesce with the parliamentary paper's querying of HMRC's methods of collecting funds.
The Revenue is frequently too harsh in its treatment of overpayment recipients, treating them as if they were wilfully defaulting on taxes, he said.
Robin added: 'There is also huge resentment about the collection of overpayments as a result of computer error…. As the report says, the system has never been robust.
'The sheer scale of computer problems in the early days [of tax credits] means there are still problems and, combined with the approach to collections, there is cause for concern.
'HMRC's explanation for overpayments by the computer system has always been poor.
'And the method of collection of such overpayments is not related to a person's ability to repay.'
Robin cited a likely scenario in which someone on income support may unwittingly receive thousands erroneously over a number of years, and then, once the error is discovered, be expected to pay back the entire sum immediately.
The LITRG technical director was optimistic about the future of the tax credit system, saying that new objective testing should offer a more fair and accurate decisions.
Although, he went on to say that it is difficult to estimate what overpayments will total in the future because — as in the Public Accounts report — it is unclear what reasons account for what amounts.
'I'm not sure HMRC know the reasons either,' said Robin.