The botched introduction of tax credits continues to bedevil the benefit system. Beyond the administrative chaos caused by missed or incorrect payments, however, lies what appears to be a deeper problem: how equipped is the Inland Revenue (IR) to run what is effectively a weekly benefit rather than an annual tax calculation? It is certainly clear from reports by social workers and welfare rights workers that at least part of the problem stems from the IR’s inability to think through the full implications of taking on a part of the benefit system.
Here are just a few of the difficulties that we’ve encountered so far.
- Working tax credit notification letters have been sent to claimants that state there is no entitlement to WTC even though childcare credits (which are part of WTC) have clearly been awarded.
- There is a mistake on the tax credit claim form, which could lead to families with disabled children missing out on additional benefit.
- Some new parents have lost the right to claim a £500 maternity grant because of delays in WTC processing.
- The IR’s online calculator keeps making mistakes. Recently, an adviser checked entitlement for family with three children (including a baby) on joint income of £25,600. It gave a child tax credit entitlement of £860.58. This didn’t appear to take account of the fact that the family and baby element are paid in full until gross income exceeds £50,000.
- There are problems about gaining access to the child care element of WTC where one of a couple is working and the other is incapacitated. In its definition of “incapacitated”, the regulations appear to have missed out people on the short-term lower rate of incapacity benefit.
- Where a child is in residential care only because of their disabilities, the parent is able to include that child in their tax credit claim (even if looked after). It seems that the Inland Revenue is even less knowledgeable about the care system than its colleagues at the Department for Work and Pensions, and we are getting reports of parents being wrongly advised that tax credits can’t be claimed for these children.
- The rules about child care costs are proving to be a nightmare. Few parents seem to have appreciated that any reduction in child care costs of more than £10 a week for more than four weeks in a row have to be reported. And any increases in costs must be reported within three months if they want to get full help with them. Over the summer months, when child care costs can fluctuate, this problem will be accentuated.
All this illustrates the shift in culture involved for the IR now that it has taken over a major part of the benefit system. Bearing in mind, too, that families on income support begin to migrate over to tax credits in less than nine months’ time (April 2004), it is obvious that the IR has to become much more familiar with its role as an income maintenance agency. If it does not, the implications for social services are plain to see – families will be applying to the DWP for money for the adults but will also be dependent on the IR providing child tax credit for the children. With two agencies involved (three if you count the local authority housing benefit section), the potential for error is huge.
Gary Vaux is head of money advice, Hertfordshire Council. He is unable to answer queries by post or telephone. If you have a question to be answered please write to him c/o Community Care.