Rightsnet published a news article on 9th June that gave a summary of a Parliamentary debate on tax credits during which PMG Dawn Primarolo stated:

'Clearly ... there is an issue as to whether claimants appreciate the fact that under the new system HMRC must be notified of changes in-year ... However, that is not a mistake of the system, officials, or the computer, and it accounts for the lion's share of problems.'

LITRG note that income changes do not have to be notified in-year and claimants who do notify HMRC of increases in income in-year can have their tax credits stopped. However if they wait until after the year-end they would benefit from the limits on deductions from ongoing awards.

There is also a system 'fault' in that, even if claimants notify HMRC of rises in income immediately (ie as they occur), overpayments can still arise due to the fact that part of the increase in income is spread back to the previous 5th April (because of the annual income measure). This can result in an overpayment of tax credits for the period before the rise in income occurred. Such an overpayment cannot be avoided even by the most diligent of notifiers of changes.

Summarised in rightsnet news on 9 June, the Paymasters Generals full contribution to the parliamentary debate is available here.

Also, a lot of us know that the Tax Credit system is simply too difficult for a lot of people to understand or manage! The fact that only a small proportion of the problems can be put down to system, official or computer errors is evidence of a system that does not work for the people who need it most.

Is there any analysis of the two thirds of correct claims - i.e. how many of these are family element only awards? It's so much easier to manage Tax Credits if you've got a decent steady income coming in each year, and renewal doesn't involve doing anything...