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Tax Credits: Why So Complex? discussion
edited 7 September 2009 at 9:43AM in Benefits & tax credits
80 replies 11.1K views
Former_MSE_Wendy Former MSE
edited 7 September 2009 at 9:43AM in Benefits & tax credits
It's misleading, it's a misnomer, but don't miss out.
Millions are eligible for tax credit, yet having just interrogated the system to work on our new tax credit guide (see below) in time for this Friday's 'renewal' deadline, I could almost cry at the sheer unfathomable, unnecessary complexity. These are just three of the problems...
- Tax credits aren't tax credits. The name is ugly and misleading. These aren't a credit off tax owed, they're simply a benefit paid into bank accounts to help families with children, or those on lower salaries.
- Renewal isn't renewal. The TV adverts shout "RENEWAL", implying it's only about assessing your eligibility for tax credits over the next year. This leaves those who don't plan to claim this year thinking they needn't do anything, yet the form is also to CHECK you were correctly paid over the last year. Fail to reply and you can face fines. So why call it renewal?
- Overpayments are unavoidable. Nothing creates more tax credits angst than overpayments. Getting too much money may sound good, but if not when you spend it then the govt says "pay it back." Yet overpayments happen even if you do nothing wrong, as what you're paid is an estimate based on last years earnings, so even small changes can leave you overpaid.
Yet for now as the payouts are so huge, we have to live with it, and that's the reason we've done a full guide Guides: Tax Credits, Childcare Tax Credits, Benefits Check Up
A note to forum regulars. We normally ask site users to discuss benefits policy on other boards and not here, yet the aim of official discussion threads from articles is to also get people new to the site who've read that article to see other relevant discussions and get help. To do that this thread needs to be on this board.
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You see, there's this thing called the "personal allowance". It's meant to represent an amount of money that is required to live on. If you have children, obviously they require financial support so the personal allowance could be increased to account for this.
Here's a simple idea to replace the ridiculous mess that is the tax credit system:
Determine a realistic minimum NET income required to live in the UK. Let's say this is £10,000. You then set the minimum wage such that if someone works for 40 hours a week, they'll earn £10,000, and set the personal allowance to £10,000. Then, determine the income required to support a child; if someone has children, their personal allowance is then adjusted to account for this.
I have worked in financial admin jobs for many years, including as a lending manager in the past - but have never been able to understand how our tax credits award is worked out. So there's never any chance of knowing if they have made an error unless it's something obvious they have recorded wrongly in your income or number of children, etc.
And why is it called 'Tax Credits' when it's just a Benefit? Why can't it be paid through your personal allowance as suggested above by Mr. H, or at least claimed in a much less fussy/difficult way than filling in that 'form' (which is like reading War and Peace...).
I always think that if I find it difficult to fill the flippin' form in then how on earth do people cope who have no admin background or have English as a second language?
We have also (apparently) been overpaid in the past - but whether or not their calculations were right was anyone's guess.
CLICK at the top of this/any page where it says:
Forum Home»Motoring»Parking Tickets Fines & Parking - read the NEWBIES THREAD
Once this became an issue for us, we spoke to many friends who it turned out had the same experience. Overpaid, then demanded repayment, threatened with court action etc...
We' ve now gone three years without any payment, so by my reckoning they owe us money. We just took the view that it was better if they left us alone (and since the CDs were lost with everyone's data on them, they've been surprisingly quiet). We appealed but were sent some b***s**** letter that ignored the fact they hadn't paid us anything in years.
As we're not married we got two sets of forms sent out every time they needed to contact us: probably cost more in admin than they were paying out...
The galling aspect of all this is that it's a system set up ostensibly to benefit kids, so - by inference - they're the ones missing out.
This is the next 'bank charges' scandal waiting to happen. A con, an absolute con.
Mr. H: you're suggesting something dangerously close to socialism... and I like it! :-D
PS Thank the Lord! It's about time this site got back to campaigning issues, instead of telling me where I can save 20 quid on a Wii or get a free luxury burger. Meh.
(Sorry, site won't let me post full link - just add the necessary...)
Sending their URL to everyone I know who's been battered by this mess.
Check out their forum and post your queries / problems in the new members section.
If you've got an overpayment (OP) look in the How to Dispute section of the main website (use links on left hand side of page) for advice on what to do.
I don't think there is any doubt that the system is intended to be as off-putting as possible to minimise the number of claimants.
Further, the notes give misleading or incorrect guidance regarding how to factor in contributions to pension schemes, ref: Renewal Pack book (TC603R), pg 22, top box re deductions for pension contributions; it states “Do not include pension contributions you paid through your employer. Your employer will have already deducted your contributions from the pay figure entered on your P60 or P45”. I believe that the pension scheme I am in is fairly typical these days; a defined contribution (i.e. not final salary), group personal pension scheme, where my contributions are all detailed on my payslips, administered via my company’s payroll, but they are not deducted from the total pay on my P60. So I do have to deduct the gross contributions, apparently contrary to the guidance.
Thankfully I figured it out and know I have to deduct the gross contributions, but it is contrary to the guidance “Do not include pension contributions you paid through your employer”. The fact that this specific deduction will likely affect the bottom line total income figure by thousands makes it all the more significant. Yes, they say “phone the helpline if you’re not sure”, but with guidance this specific it, I’m sure many just take it at face value. The subtlety is probably in the “paid through your employer” wording, but it beats me!
I went to the HMRC web site last night to feed this back to them, but there does not appear to be any easy way to do so. The only feedback option I found was regarding the web site itself.
And as for figuring out 'gross' figures, don't get me started...
Go Martin – take on HMRC!
Yes, go on, Martin, we need your help here