Sunday, 17 February 2013

My Tax Credit nightmare

Hi, my name is Mark Smith and I'm a victim of the Tax Credit system.

My wife and I signed up for Tax Credits way back in 2002 or 2003. Long enough ago that I don't think we have the original paperwork. At the time we were at a low point as a family. Prior to 2002 we had been volunteering in Central Asia for a charitable organisation and had been supported by family and friends.

We returned to the UK in October 2001 due to uncertainty over whether a war in Afghanistan would affect us. We had planned to return to Central Asia and continue volunteering for a couple more years but eventually we had to admit that repeated illness while abroad had left us exhausted and unable to return.

I took a part time job working for a travel agency sending people on adventure holidays in Central Asia and friends advised us to apply for Tax Credits.

I found 2002 and 2003 to be difficult years. Family and friends continued to support us financially but I was brought up to provide for myself and I struggled with guilt that we were unable to continue the work we had committed to; and now were unable to provide for ourselves.

I had concerns about the Tax Credits system: their method of estimating income seemed dangerous but we were assured we would not be penalised if we followed the rules.

Tax Credits proved to be a great help to us over the next few years. We needed time as a family to recover and to decide on future direction. I realised that I had struggled when abroad while others had coped far better. I was reluctant to admit it but I eventually decided that I needed to consider some form of Higher Education.

Through receiving Tax Credits we were eventually able to survive without support from family and friends: their kindness and generosity was overwhelming but it was right that we aimed to stand on our own.

After one year of college night classes I had gained enough knowledge and skill for a tutor to recommend me for an IT contract. Overnight I went from struggling to get a job interview for a minimum wage role to being paid over £2,000 a month. My Tax Credit nightmare had just begun.

I had believed the Labour Government when they sold Tax Credits as a way of encouraging people into work. The general concept seemed admirable: the poorest in society should be encouraged to work, instead of trapping them in benefits - subsidise and reward them for working.

The concept was admirable, the execution of Tax Credits has been flawed. The moment we told the Tax Credit Office our income had increased we started to receive letters telling us we had been overpaid and owed them money. Our monthly payments were then reduced to repay the overpayments.

The execution of Tax Credits by HMRC has been miserly and short sighted. When individuals and families make the effort to better themselves, strive to gain better jobs, to earn more: this effort should be rewarded. The failure of HMRC Tax Credit Office has been in their decision to punish us and thousands of others when we succeed in our efforts to wean ourselves off State help.

It was 2004 that I started that first IT contract and since then I have completed my HNC and gone on to graduate with a degree from the Open University. My wife and I have both worked as we have been able (at times we were unable to work and I have claimed Job Seekers Allowance for short periods of time.) Like many thousands in the UK we have made every effort to improve our situation but every success has been met with an unforgiving letter from the Tax Credit Office telling us we have been overpaid.

I am reluctant to comb back through all the letters received but I am not exaggerating to state the Tax Credit Office have clawed back thousands of pounds in alleged overpayments over the last eight years. I'm unsure now whether I should have fought those decisions by the Tax Credit Office. Perhaps I should; except that I never wanted to be in a position where I was dependent on the State. Although the Tax Credit Office made our lives harder through their implementation of a flawed system, I desperately wanted to work our way to a point where we received no Tax Credits.

I was too busy studying, too busy working, too busy trying to be a father and a husband to thoroughly question the repeated Tax Credit Office decisions. It seemed wiser to work at earning more than fight a decision I did not fully understand.

Last year was a turning point. Despite telling the Tax Credit Office in advance that I would be earning more in 2011/12, they refused to record this fact. They subsequently paid us Tax Credits based on our much lower previous years income. What did we do with this money? We spent it!

We may have been increasing our income year on year but this has been while many of our expenses have increased at a similar rate. The Government's stated inflation figure has consistently been significantly lower than we seem to experience.

In addition, like many people who are moving from a lower to higher income, we have put off buying and paying for needed items for years. When we have money we spend it, usually not because we want to but because we have no choice.

In September 2011 my wife got a job. Overnight we went over the earnings limit for Tax Credits. We were delighted. We had, we thought, finally reached a point where we no longer needed Tax Credits. This increase in income was offset though. There was no public transport available so my wife needed a car and we had to pay child care costs.

In April 2012 we chose not to renew our claim for Tax Credits. We expected to continue to earn above the threshold and it seemed, in the midst of a recession, the responsible act.

Then, in September 2012 we received letters from the Tax Credit Office:
The total amount of Child Tax Credit overpaid to you is: £1311.53

This is a significant amount of money. We may be earning over the Tax Credit threshold but we still have to very carefully budget our income and watch our expenditure.

I complained and disputed the notice. I carried out some research online and came across Tax Credit Casualties - a website I highly commend for their detailed overview of the flaws of the Tax Credit system and efforts to help people avoid injustice.

In recent weeks I have been accused by HMRC Tax Credit Office of failing to meet my responsibilities with regards to informing them of changes in our circumstances. Following advice from Tax Credit Casualties I requested and received copies of correspondence and recordings. I can now prove that not only did we consistently inform Tax Credit Office of changes in our circumstances, they actively prevented us from recording that our income was increasing and so are directly responsible for deciding what to pay us.

Even though HMRC Tax Credit Office have now admitted we fulfilled our responsibilities, they are still denying responsibility and are now claiming, and I quote: "there is no provision to cancel the overpayment since it did not arise as a result of a mistake on our part."

I would agree with part of this statement: it was not a mistake that HMRC Tax Credit Office paid us £1311.53. They paid us based on a system they were running. They said we were entitled to this money and accordingly paid us. I agree we were entitled to receive the money and I accept it. There was no overpayment.

There may be no provision in HMRC Tax Credit Office systems to change this status from overpayment to resolved but if so there is a simple solution: I call on HMRC Tax Credit Office to implement such a provision.

I do commend previous Labour Governments and our current Government for encouraging families like our own to work. But this Government must put an end to the injustice of penalising citizens when they do succeed in earning more money. 

If you have also been a victim of the flawed HMRC Tax Credit Office system and you would like to work together to change and improve HMRC Tax Credit Office systems, I would like to hear from you.

I have no desire to publish this blog post. I don't like discussing or publicising what I perceive to have been some of the hardest years we have faced as a family. But I set myself a goal - Goal 89: To change laws for the better. I hope that by publicising my own situation I can do something to bring about a change that will benefit thousands directly and ultimately everyone: if the poorest are encouraged and not penalised for earning more, more people will be be incentivised to get themselves off Tax Credits.

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