More than a million universal credit payments cut over the past year because of historical overpaid tax credits | Business News
The government is cutting pension payments to some of Britain’s poorest families or threatening them with debt collectors in a crackdown that “pushes people into poverty”.
More than a million people have had their universal credit payment cut off in the past year because they were previously overpaid by HMRC in tax credits.
Some of these debts have existed for decades, and in many cases the claimant is not at fault for overpayment or is aware that debt exist.
Campaigners and MPs called on the government to immediately halt the deductions, an approach they warned would cause widespread shortages at a time when people are struggling. with the financial crisis. Cost of living crisis.
Millions docked because of historical excess payments
Official figures obtained by Sky News show that last year 1.3 million global credit claimants made payments due to historical tax credit overpayments.
That is a growing number.
In total, the Department for Work and Pensions (DWP) deducted £372,576 million on behalf of HMRC from claimants.
Tax credits were introduced in 1999 by the then Labor government to incentivize people to work by providing grants to parents and low-income earners.
The system is being phased out gradually, and those receiving the tax credit will switch to Universal Credit by the end of next year.
In 2014, the Treasury agreed with the DWP that, when former tax credit claimants switched to Universal Credit, their old tax credit liabilities would be transferred and collected under the new system.
Blame the complainant for the HMRC . error
Although HMRC asserts that many of these erroneous payments are due to fraud or the fault of claimants, a significant number is due to the fault of officials.
Charities warn that in some cases HMRC has blamed claimants for their own fault.
Michelle Welch from Bromley, south London, is one such case. She faces a deduction of £20 a month to recover an eight-year debt of £2,379.26.
The mother-of-three, who works part-time at a British Heart Foundation charity shop, was hospitalized in October 2015 after suffering a mental health crisis.
Although a support worker called HMRC to explain that she was no longer looking after her three children, HMRC did not stop the payments and the money continued to be deposited into the account. the bank her spouse is visiting to support her children.
After several attempts to notify the agency, payments were finally stopped on January 28, 2016.
Years later, in August 2021, HMRC wrote to Ms. Welch asking her to repay the amount the agency overpaid in the interim. They claim that she failed to promptly notify them of her change of circumstances and that her universal credit was lost as a result.
Many of Ms. Welch’s appeals were denied.
“I just get through the day. I can’t save. I can’t go out… I can spend that extra money on gas and electricity,” she said.
“I just feel like I’m not going anywhere. I’m not getting anywhere fast.”
After Sky News intervened, HMRC agreed Mrs Welch was not at fault and has now forgiven the debt.
“We apologize to Ms Welch for the inconvenience and discomfort caused by our mistake,” HMRC said. “We have taken action to correct her payments and an offset payment will be made.”
Ms Welch said her dealings with HMRC and the DWP have left her feeling depressed, ignored and trapped in a difficult time in her life.
“It’s hard for a mother to give up one child let alone three children because they’re unwell. It’s not an easy thing. [It takes me back to] A place I will never want to go again. It made me feel ashamed and terrible.
“I’m busy so I don’t have to think back to what I’ve been through and what my kids have been through. That’s something I should be talking to a psychologist about, not people I don’t know.” [at HMRC and DWP].”
It’s not an isolated case
Sky News spoke to dozens of claimants who said they were paying back debts they didn’t believe or realized they were owed.
Many people have struggled to get a clear analysis or explanation from HMRC when they objected to the claims.
Vicky Timlin, from Cheltenham, ended claiming the tax credit in September 2021 after moving in with a partner.
She was then asked to refund the £909.29 that had been overpaid to her. When she sought an explanation, an HMRC representative told her the overpayment could only be explained by a “computer glitch” but she would have to repay it despite .
Ms. Timlin does not claim Universal Credit so her payments have not been updated.
However, HMRC has warned her that the debt will be recovered through any future universal credit claims. Her debt has now been transferred to a private collection agency and she is planning to pay it off over the next seven years.
Sky News understands that 29,000 cases are currently being handled by private collection agencies.
“I felt completely helpless. I turned off my phone and burst into tears because I felt this was unfair.
“Why do I have to pay this money just for a computer glitch and I can’t really do anything about it and they don’t seem to care at all,” she said.
“They shouldn’t do that to people. They need to be able to explain to people exactly why they owe this money and not give them different excuses each time.”
HMRC accepts that Vicky did nothing wrong and apologizes for not explaining the debt clearly to Ms. Timlin.
It asserted that she was overpaid because previous recalculations of her benefits caused the system to generate duplicate payments.
It says this is a feature of the system and that these overpayments will be balanced out for the rest of the fiscal year if she continues to claim.
“To ensure customers receive regular payments of the same amount, tax credits are calculated over the 12-month financial year,” HMRC said.
“Customers are required to let us know of any change in circumstances, and when they do, the bonus will be recalculated and balanced for the remainder of the period. This means upon request for termination during the fiscal year, in some cases an overpayment may be due.”
Official bug in disguise
Official reports released by HMRC show that the error of officials accounts for a very small percentage of overpayments, compared with fraud and error by claimants.
However, charities have pointed out that in many cases officials contributed to the error by giving poor advice over the phone. In Ms Welch’s case, the official fault was disguised as the claimant’s fault.
Campaigners say the system is causing widespread hardship at a time when the cost of living crisis has pushed families into poverty.
Food bank tourists indebted to the government
The Trussell Trust, which oversees a network of more than 1,300 food banks across the UK, says the majority of its visitors are in debt to the government.
MPs from across the political spectrum have called on the government to halt collections while the cost of living crisis is still raging.
Stephen Timms, MP for East Ham and chair of the work and pensions selection committee, said: “People were completely unaware of these debts when suddenly money started coming out of the payments. Universal Credit’s monthly payments and in a cost of living crisis with inflation at its current rate, it’s a real hardship for people.
“So I have chosen a committee, which is an all-party committee with a Conservative majority, that has recommended that the government suspend these deductions while inflation is at its current level.
“Unfortunately the government has rejected that recommendation, but I think it would be very helpful just to support people through this really difficult time.”