Tax Credits: Why So Complex? discussion

TotallyBroke

Brisbaneroad wrote: »

I have never had much of a problem with tax credits - each year I check the form (duplicated of course!), check my earnings, and conlcude that I don't need to do anything as they will be automatically renewed. This year I kept hearing dire warnings in adverts on the radio "You MUST renew your claim by July 31st or your payments WILL stop". So I rang them up, and nope, I don't need to renew (just as I thought). So why the alarmist adverts? Do they have nothing better to spend our money on than spreading false information?

Now that is interesting because I telephoned them with my P60 information as others here have said they renew via telephone. They took my details and said it was provisional until I sent the renewal form back that has my signature. Because they needed the figures in writing.

Although I must admit I do not find the system too difficult. I have estimated this years earnings to be £1000 more than last year as fingers crossed I may get a pay rise next January.

Kytkat

For yrs I was hounded, and hounded is the appropriate word, for over paid tax credits. I called and told of any increase/decrease etc as soon as it happened, all this caused was yrs of grief and my credit going up then down then back up. Having eventually managed to sorted these 'overpayments' a couple of yrs ago I now wait till I have my P60 call them up and tell them how much it says was my income for the previous yr. This has stopped all yoyo-ing of my payment and the apparent 'overpayments'

Tax credit is based on your previous yrs income, not the current yr, therefore any monitory change that occurs in the current year does not need to be notified to them, they always tell you it does, if you do notify, this causes all kinds of problems and you will no doubt be told you were over paid. If you dont tell, and they dont need to know because it does not effect the previous yr, the change will be detailed on your P60 at the end of the current year which will then be your previous yr for next yrs credits. Hope that makes sense.

So , call them once a yr when your renewall arrives tell them the earning as detailed on your P60 and thats it. Do the same yr on yr and you will have no problems with overpayments.:T

[Deleted User]

I am not trying to defend the Tax Credits System but I need to point out few facts -

The renewal:
If you dont provide your income details for last year they don't know how much they should be paying you this year. If you are asked to provide the income and don't, your claim is ended. If you do it, you are 'renewing' your claim.
Maybe not the best wording but the government don't always use the right words.

Tax allowance:
If someone is self employed how can they get their allowance paid to them? And if WTC was paid through the tax coding this would have exactly the same issues other than that you will receive your payments via your pay instead of straight in to the bank. It wouldnt solve any of the issues that exists with the current system. Actually, I suppose the issue surrounding bank details may be sorted. Personally I think it would probably cause more problems as it would be messing with your tax code. WTC was previously paid via the employer but this was a total balls up so the current system was used as an improvement - although by no means perfect.

Overpayments ARE avoidable:
Overpayments are avoidable if you follow each and every bit of guidance to the letter - however most people dont actually read all of the guidance and award notices due to the amount there is to read. Most overpayments are currently caused by late notification of a change of circumstance or under-estimating income. TCO in previous years did cause a lot of overpayments which I do appreciate.
A number of claimants think they only need to report changes of circumstance when they receive their renewal forms - obviously not the case and all changes should be reported ASAP.
With regards to under-estimating income, if a claimant updates their current year estimated income and the figure used is lower than what they earned in the previous year they do not have the ability to use the £25,000 income disregard. When you provide the lower figure your award is re-calculated using this lower income and the award increased. But when you declare the income on the following year's renewal and this income is higher than the estimate it means you have been overpaid. TCO could probably avoid a high number of overpayments by giving this warning - written in clear English on a basic letter - when a customer provides a lower estimate. It could advise that the letter must be signed to confirm you understand what could happen if you under-estimate your income and if the letter is not confirmed in writing (or by telephone just like the renewal) the new estimate will be disregarded and the previous year figure wil continue to be used.



Until the system has been overhauled, my own advice would be to notify of any increase in income in the current year but if there is a decrease and you can cope with the same payments until the end of the year, wait until the renewal at the end of the year. If you have been underpaid you will normally receive a lump sum.

[Deleted User]

On another note, we are supposed to use this board to ask/give advice on benefits and tax credits so why is this discussion in here and not in DT of Money Saving Arms?

griffic

I agree that this system is completely useless.

My daughter (21) is caused anguish Year after Year, I swear it is affecting her health as each time they want more and more money back, irrespective of how accurate the information supplied is. She suffers needlessly each year.

I myself also have argued over years for them NOT to send me ANY money at all, I DO NOT WANT TO CLAIM, what part of that statement they don't understand I'm not sure.

I have to bail out My Daughter each year, I guess she is one of the lucky ones, that I can bail her out, even so, it IS affecting her health. I shudder to think how many people are in a much worse position and are close to suicide because of this Pathetic system, which frankly is just a 'jobs for the boys' system, they make work for themseleves to justify their own existence.

Another thing is that on at least 3 occasions THEY have LOST her information ???? PATHETIC excuse for laziness.

Any capaign against this appauling system would get my 100% backing and I would like to provide a voice based on experience.

I am desperate to find some legal advice which I don't mind paying for so that my daughter can be protected EACH year by making sure WE have the i's dotted and the T's crossed, does anyone know of such a service ?

I continue to feel sick to the stomach each time I hear the acronym HMRC, they are above the law, above reproach and basically do not live in this world and are out to make life as complex as possible so they can get away with whatever they want. "Tax doesn't have to be Taxing, we'll GET YOU in any case".

MSE, PLEASE start a campaing to highlight the plight of thousands and get this poorly administered systeem abolished NOW!!!!

indipop wrote: »

We gave up on this useless, obfustacting system three years ago. Two kids (now 9 and 5), in one year our income changed by 2k (from not very much in the first place), and after a year of no payments they were chasing us for money!

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.

trouble00z

I spent ages being chased for an overpayment, court threats and a very stressful time.
HMRC were working in wrong tax year for my claim, it took a long time to show them the error of their ways, and I claimed compensation for the time it took (they even messed that up). I'm lucky I enjoy messing about with figures but it's a mine field that many cannot cope with.

pinkpig08

Kevin-E wrote: »

I am of the opinion that the tax credit system we now have is the most user friendly assistance for working people thus far. I cannot see the derogatory comments about the system as being fair as there is plenty of help and guidance given on the website, by post via the booklet (which seems to be kept up to date) and by telephone (use 01355 359007 to avoid the 0845 charges).

I used this number yesterday and the woman I spoke to asked if that next time I called could I use the number from the pack, as my call was being registered as coming from overseas! She said they record data as to where the calls come from. I was actually calling using free minutes from my mobile phone - not sure if that's why?

squirmy_2

cjfcampbell wrote: »

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!

:mad::mad: I did ring them for guidance on this as I have a group pension scheme through my work:

The first person shouted at me and told me I was wrong that it had already been deducted.... even though my gross pay was equal to taxable pay.

The second told me that my P60 was wrong!!!

kcthornton

On receiving a significant Christmas bonus two years ago I informed HMRC in January, again in April at the tax year end, and again in July with the renewals. I received notification of the credit allocation in September and then in October they decided that I had been overpaid and owed them £1,500, which they wanted immediately.

Because of the substantial overpayment the credits were then stopped. Despite chasing them here we are at the end of July and I still don't know what the situation now is, and haven't received a renewal form to complete!

I have been dealing with three separate tax offices concerning the tax credits & overpayment, as well as two other different ones for normal PAYE & child benefit.

The worrying thing is that I could soon be facing redundancy and tax credits should then form the largest part on my income, yet they don't seem to be able to sort it out!

eadieb

Kytkat wrote: »

For yrs I was hounded, and hounded is the appropriate word, for over paid tax credits. I called and told of any increase/decrease etc as soon as it happened, all this caused was yrs of grief and my credit going up then down then back up. Having eventually managed to sorted these 'overpayments' a couple of yrs ago I now wait till I have my P60 call them up and tell them how much it says was my income for the previous yr. This has stopped all yoyo-ing of my payment and the apparent 'overpayments'

Tax credit is based on your previous yrs income, not the current yr, therefore any monitory change that occurs in the current year does not need to be notified to them, they always tell you it does, if you do notify, this causes all kinds of problems and you will no doubt be told you were over paid. If you dont tell, and they dont need to know because it does not effect the previous yr, the change will be detailed on your P60 at the end of the current year which will then be your previous yr for next yrs credits. Hope that makes sense.

So , call them once a yr when your renewall arrives tell them the earning as detailed on your P60 and thats it. Do the same yr on yr and you will have no problems with overpayments.:T

Through years and years of appeals and trying to understand this system I have also taken this method. As long as tax credits set the payments for the current year themselves, based on an end of year P60 figure used for the last years renewal, then you can earn up to around £25,000 more than what they have set your payments at for the current year. The catch is, if at any time, you ring tax credits in the current financial year, and tell them your wages have gone up from the figure they set, then you are effectively giving an estimated income. As soon as you give an estimated income you lose the £25000 disregarded income increase.

as an example, last year tax credits set my annual income at 22,000 for the year, but I actually earnt 27,000. Due to past experience, I made sure that during 08/09, I did not ring up and change the income they set at all. Result after renewal, no overpayment for this year!

I would still ring up to report changes in circumstances e.g childcare costs and providers, employers etc. and family changes.

I dont think this would work for self employed and if you are frequently changing jobs then I think you would be giving new income estimates every time you phoned up to notify them of a change of employer.

On a general note, the system is incredibly complex. Tax credit seem to add and make up the rules as each year goes by, probably because when it was first introduced it was not thought out properly. People on a low income, with frequent changes in jobs have enormous difficulty with this system. the notifications letters are still not designed to spell out the calculations in a simple way. If I want to find an answer to a general question about tax credit then I will usually phone at least 4 or 5 times to get a variety of answers and try to work out which sounds the most plausable. The appeals system is still appalling. It has improved a bit over the years but is attrocious compared to the independent appeals structure in the rest of the benefits system.

On a plus note, the tax credit system enables my partner and myself to both work part time and have a reasonable quality of life with our 4 kids. without tax credit we would probably both have to go out to work full time.