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The government should not automatically claw back overpayments of tax credits, according to a report published by Citizen’s Advice today, writes Clare Jerrom.

The national charity claims that the recovery of overpaid tax credits has left families in severe hardship with incomes as low as £56 a week plus child benefit with no tax credit payments.

Families’ basic financial security has been threatened and in extreme cases, Citizens Advice Bureau clients have been threatened with repossession or eviction.

“Some have had to give up work because they were unable to pay for childcare,” the report says. “CAB advisers have had to arrange Salvation Army food parcels for families left without enough money to eat.”

Tax credits staff have even told some families to take out high-cost loans to repay overpayments.

Payments are supposed to be responsive to falls in income but the system is complex to administer and incomprehensible and contradictory award notices have meant people cannot understand their entitlement or spot errors made in their payments.

The report calls for adjustments to payments to be limited to ensure families are not left with weekly incomes below minimum levels. There should also be a statutory independent right of appeal against Revenue decisions instead of claimants having to pursue the issue through the complaints procedure, it argues.

“Tax credits are intended to combat poverty by providing a guaranteed stable income, and many of the poorest families rely absolutely on them,” said David Harker, chief executive of Citizen’s Advice.

“But our report shows the system  is failing the very families most in need of extra money, causing hardship the system is designed to prevent and making it more difficult for people to save or to hold down a job, rather than supporting saving and employment.

Around 6.1 million families containing 10.3 million children have been awarded tax credits.

‘Money with your name on it’ from http://www.citizensadvice.org.uk/