Third of all tax credits overpaid

Almost £2bn of tax credits have been overpaid to nearly two
million hard-up families – an average of £1,000 per household,
government statistics reveal.

An HM Revenue and Customs report shows that a third of all child
and working tax credits awarded in 2003-4 were overpaid. And almost
£500m in credits, payable to 713,000 households, was
underpaid.

The Treasury claws back the money by reducing future payments or
seeks direct payment where there is no further entitlement to
credits. A spokesperson said that in cases of extreme hardship a
payment plan would be agreed depending on a person’s
circumstances.

She said £1.3bn of the overpayments were due to people
improving their earnings during the year but not informing the
government. The remaining £700m was due to computer errors
when the tax credit system was first set up, she added.

Child Poverty Action Group chief executive Kate Green called the
figures “deeply concerning”.

She said: “More than half the overpayments errors made affected
those in the lowest income group – the very people who will
struggle to pay them back.”