Source · Select Committees · Work and Pensions Committee
Recommendation 38
38
Paragraph: 169
Repayments of tax credit overpayments can compound hardship for people who may already be struggling.
Conclusion
Repayments of tax credit overpayments can compound hardship for people who may already be struggling. The evidence that some people are left unaware of these debts, which can be several years old, until they make a claim for Universal Credit, is particularly concerning. Despite HMRC’s assurances that people are routinely informed of overpayments, the evidence we have heard suggests that there are gaps in how this is being communicated.
Paragraph Reference:
169
Government Response
Not Addressed
HM Government
Not Addressed
We understand the impact that debt can have on the wellbeing of claimants and we endeavour to ensure that the recovery of any overpayment is managed in a way that takes account of the claimant’s individual circumstances. Work Coaches are trained to gauge claimants’ financial needs from their first contact and can refer them to more specialist support for personal budgeting, money guidance and debt advice if required, including through the Money and Pensions Service (MaPS). Ultimately, the Department has an obligation to ensure that public funds are administered responsibly and to abide by the principles set out in Her Majesty’s Treasury’s guidance on Managing Public Money. Consequently, the Department writes off small amounts of recoverable debt. As mentioned earlier in our response, we believe our deductions policy, which includes a 30% reduction cap from the Standard Allowance, provides the right balance between a claimant’s need to meet their financial obligations and their ability to ensure they can meet their day-to-day needs. Unlike UC, tax credits are based on an estimate and only evaluated annually, leading to under and overpayment. Clearly it would be better if the estimates and evaluations were more accurate and timely to avoid such historic debt. While tax credits are still in place, we will continue to encourage HMRC to reduce historic debt.