Tax credit overpayments down to £1bn

Finalised tax credit awards for 2007-08 were overpaid by £1 billion according to newly released figures from HMRC.

The figure is a 45% reduction on overpayments made in 2003-04, show the statistics, which also reveal that the number of families entitled to end-of-year top-ups increased to 1.29 million (£798 million) in 2007-08.

This rise, said the Revenue, was as a result of one of the components of the package of measures announced in the Pre-Budget Report 2005 to reduce tax credit overpayments.

In 2007-08, 5.98 million families received tax credits, with the average award increasing by £200 to £3,611 per year, compared with 2006-07.

This does not take into account further increases in the child element of £390 and in the basic element of the working tax credit of £160 from 2007-08 to 2009-10, said HMRC.

The department’s figures also show that the number of childless people on low incomes receiving tax credits rose by 10% (to 336,000) on 2006-07.

There was also an 8% increase (to 414,000) in families benefitting from the childcare element of the working tax credit, and 108,000 families received extra help for workers with a disability: a 9% rise.

The Liberal Democrats were dismissive of the Revenue's latest data, saying that it showed 'how many families [were] failed by the tax credits system through overpayments or underpayments in 2007-08'.

A Revenue spokesperson said: ‘Overpayments are not wrong payments. Responsive systems mean that awards can be changed in-year, adjusting to customers’ changing circumstances.

‘The level of overpayments is now… 5% of finalised entitlement paid out by HMRC.’

Categories: News , tax credits , Income Tax