Summary
The current tax credit system was introduced in April 2003
with the aim of helping families with children and working people on low
incomes. Despite its aims, the tax credit system suffers from the highest rate
of error and fraud in government.
This Report,
'Tax
Credits' (HC 487), is the Public Accounts Committee's fourth report on the
system.
The Committee concludes that the cost - in terms of the
unforeseen level of overpayments and the scale of error and fraud - continues
to be significant and beyond the levels that Parliament was lead to expect.
Edward Leigh MP, Chairman of the Committee of Public Accounts, said:
“Billions of pounds, far more than those who thought up the system ever
envisaged, are still routinely overpaid to claimants. Very large amounts have
to be written off. And the attempts to recover overpayments from genuine
claimants have caused significant suffering to many vulnerable families.”
The Government has made some recent changes to the scheme in an attempt to
reduce overpayments. The most important change involves raising the threshold
for increases in income in-year, which are ignored when awards are finalised,
from £2,500 to £25,000.
This change will reduce the level of
overpayments and increase the overall cost of the scheme by some £500 million
each year. However, the Committee finds that HM Revenue and Customs does not
yet have an adequate response for error and fraud.
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How does it affect
me?
If you receive tax credits, this affects you.
The Committee
examine levels of fraud and error within the system, particularly regarding
over-payment and the recovery of overpayments.
See more on the work of the
Public
Accounts Committee.
Find out more about
Tax
Credits on Directgov.