‘Tax credit problems may outweigh gains’

Problems with the family tax credit system are threatening to
outweigh the benefits it offers poorer families, a new study has

In a review of the first year of the tax credits, the Child Poverty
Action Group has found that problems, such as poor understanding of
the system and overpayments, could undermine gains in child

CPAG chief executive Kate Green said claimants were being paid
incorrect amounts through no fault of their own and were then
having money taken back, leaving them and their children

The report says the complexity of the system, which consists of
child tax credit and working tax credit and was introduced in April
2003, hinders people’s ability to understand what they are entitled
to. Rules about which year’s income counts towards the credits,
adjustments made to awards and the way overpayments are handled
were all found to contribute to misunderstanding.

It recommends immediate changes to the administration of
overpayments including clearer award notices so that people know
the amount they are entitled to and what circumstances might alter

“While of course we welcomed the additional resources provided by
the new system last year and have been pleased with the impact it
has had for many low income families, the system remains riddled
with problems that are not being addressed,” said Green.

– Tax Credits: One Year On from www.cpag.org.uk

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