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  • FIRST POST
    • Former MSE Wendy
    • By Former MSE Wendy 28th Jul 09, 3:30 PM
    • 868Posts
    • 1,782Thanks
    Former MSE Wendy
    Tax Credits: Why So Complex? discussion
    • #1
    • 28th Jul 09, 3:30 PM
    Tax Credits: Why So Complex? discussion 28th Jul 09 at 3:30 PM
    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.
    Something should be done to change this flawed, iniquitous structure. While the help is welcome, the system causes much misery and confusion.

    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

    This Forum Tip was included in MoneySavingExpert's weekly email

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    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.
    Last edited by Former MSE Andrea; 07-09-2009 at 8:43 AM.
Page 1
    • Mr. H
    • By Mr. H 28th Jul 09, 11:03 PM
    • 360 Posts
    • 242 Thanks
    Mr. H
    • #2
    • 28th Jul 09, 11:03 PM
    • #2
    • 28th Jul 09, 11:03 PM
    I've got to agree that tax credits are an horrendous mess. I shudder to think of all the money spent administering it. Why on earth the principles can't be incorporated into the tax code is beyond me.

    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.

    Job done.
    • Coupon-mad
    • By Coupon-mad 28th Jul 09, 11:14 PM
    • 76,449 Posts
    • 89,794 Thanks
    Coupon-mad
    • #3
    • 28th Jul 09, 11:14 PM
    • #3
    • 28th Jul 09, 11:14 PM
    I totally agree.

    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. :confused:
    PRIVATE 'PCN'? DON'T PAY BUT DON'T IGNORE IT UNLESS IN SCOTLAND OR NI
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  • indipop
    • #4
    • 28th Jul 09, 11:37 PM
    • #4
    • 28th Jul 09, 11:37 PM
    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.
  • tanyamason
    • #5
    • 28th Jul 09, 11:44 PM
    Tax Credits - argh!!!!!
    • #5
    • 28th Jul 09, 11:44 PM
    Tax Credits - brilliant idea! ... but in reality... what a nightmare! My friend gave up on them as the hastle of getting things right wasn't really worth £25 or so a month. I nearly gave up myself but then decided to carry on as things got into some sort of order after the initial mess. On a couple of occasions I did my own calculations and proved their calculations wrong and got a 'refund' of what they thought was an overpayment on their part which they later admitted to be an 'underpayment'. Once we got too much tax credit which I suspected from the very start and rang them up at least 6 times to double check whether we should really be receiving all that money and each time they reassured me that the money was mine to spend except that six months later they said that I claimed the money I wasn't entitled to and that I should now be paying it back a sum of around £1500. Thankfully but not painlessly after two years of dispute I won the case and they admitted to making a mistake and said I didn't have to pay the money back after all. However, it took many phonecalls, letters and a lot of headache. I think I can defienetly do a better job at calculating Tax Credits than their 'trained' staff and their 'super smart' computer sytem. All I would say, always double check their calculations and ring them if in any doubt and if they still insist on the fact that the money is yours to keep and later turn around and ask for it back - you've got the case! Do record the dates, times and customer service advisers' names each time you ring them - it really did the trick for me! Makes my hair stand up just thinking about it now.
  • indipop
    • #6
    • 28th Jul 09, 11:44 PM
    • #6
    • 28th Jul 09, 11:44 PM
    And, after posting - and lamenting the lack of a support group - I found whitvanwoman's post (on another thread), regarding this site:

    taxcc.org
    (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.
  • tanyamason
    • #7
    • 28th Jul 09, 11:47 PM
    • #7
    • 28th Jul 09, 11:47 PM
    About the double letters... we are married and they still send us a letter each. I totally agree - what a waste of paper and resources!!!
  • whitevanwoman
    • #8
    • 29th Jul 09, 12:02 AM
    • #8
    • 29th Jul 09, 12:02 AM
    Here's a link www.taxcc.org

    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.
    Last edited by whitevanwoman; 29-07-2009 at 12:04 AM. Reason: pressed submit too soon!
    The independent woman's checklist for success :
    1. Look like a lady, 2. Act like a man, 3. Work like a dog
    Life instructions : 1. Breathe in, 2. Breathe out, 3. Repeat ad infinitum
    2008 - £4k challenge member 063 gave up halfway thru, not sure I even earned that much, so probably achieved it :confused:
  • cjfcampbell
    • #9
    • 29th Jul 09, 12:15 AM
    • #9
    • 29th Jul 09, 12:15 AM
    I also agree. Each year the 'renewal' process annoys me intensely, not so much because I have to take the best part of an evening to work through it, but because, like Coupon-mad above, I pity those who would struggle with such a detailed, accounting exercise, using terms that many of us are simply not as familiar with as the exercise demands.

    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!
  • whitevanwoman
    Go Martin – take on HMRC!
    Originally posted by cjfcampbell


    Yes, go on, Martin, we need your help here
    The independent woman's checklist for success :
    1. Look like a lady, 2. Act like a man, 3. Work like a dog
    Life instructions : 1. Breathe in, 2. Breathe out, 3. Repeat ad infinitum
    2008 - £4k challenge member 063 gave up halfway thru, not sure I even earned that much, so probably achieved it :confused:
    • nearlyrich
    • By nearlyrich 29th Jul 09, 12:24 AM
    • 13,335 Posts
    • 16,542 Thanks
    nearlyrich
    It's over five years since we were entitled to the basic tax credits, every year we still get two lots of everything, a small forest worth of waste paper. Every year they say they will stop sending them but we still get over 100 A4 sheets of paper and I wonder how many others do too?
    Free impartial debt advice from: National Debtline or Stepchange[/CENTER]
  • whitevanwoman
    HMRC have admitted that they have no effective exit strategy from the tax credit system. I think in the past they have terminated claims following customer request but only by putting an incorrect termination code into their computer system, to fool the computer into saying "no" ie by saying that your eligibility criteria has changed so therefore you don't qualify any more.

    Someone I know has been trying to exit the system for several years now - she was told to wait until tax year end before she could do so. She waited until she received the renewal pack for the following year and then informed them again as she had been told to do, that she wanted to leave the system and was then told that she was now too late to exit the system for the new tax year.

    So there is a Data Protection issue here - customer information being kept against customers wishes.

    There is a template letter instructing HMRC to terminate your claim on the website www.taxcc.org
    The independent woman's checklist for success :
    1. Look like a lady, 2. Act like a man, 3. Work like a dog
    Life instructions : 1. Breathe in, 2. Breathe out, 3. Repeat ad infinitum
    2008 - £4k challenge member 063 gave up halfway thru, not sure I even earned that much, so probably achieved it :confused:
  • viktory
    I can't understand why normal posters are not allowed to have discussion on here - as this board is for advice only and yet here we have a discussion thread :confused:

    This would be better in DT - even those that don't come to this board claim tax credits you know.
    • whitewing
    • By whitewing 29th Jul 09, 6:40 AM
    • 11,540 Posts
    • 48,331 Thanks
    whitewing
    I only claim Tax Credits now because I have an accountant. I get him to confirm all figures I give to them, and he tells me what effect this should have n my payments.

    I ring up and give figures. Then I get the Award back. Then I give it to the accountant again for checking. And he queries when they have it wrong.

    I shouldn't need an accountant's help with it. It makes me cross.
    When you find people who not only tolerate your quirks but celebrate them with glad cries of "Me too!" be sure to cherish them. Because these weirdos are your true family.
    • whitewing
    • By whitewing 29th Jul 09, 6:52 AM
    • 11,540 Posts
    • 48,331 Thanks
    whitewing
    Oh what a timely discussion. This is from an email from my accountant last week:

    your revised total annual reduction to your tax credits is expected to be around £35 (approximately £3 per month).
    _____________
    I then rang tax credits and gave them my renewal figures (which the comment above is based on). Last month my tax credits were £144.66. I've just checked online banking and today's credit is £177.07. The paperwork won't come thro for a few days, but I won't understand it anyway.

    I am very grateful for the tax credit help; I just wish that it was easy to know what you should be expecting, then you could check. I'm a reasonably intelligent person but I can't fathom this stuff at all.
    When you find people who not only tolerate your quirks but celebrate them with glad cries of "Me too!" be sure to cherish them. Because these weirdos are your true family.
    • trekker2002
    • By trekker2002 29th Jul 09, 6:55 AM
    • 17 Posts
    • 4 Thanks
    trekker2002
    Tax Credit Complexity
    The system is a bureaucratic nightmare that is not fit for purpose.

    When Tax Credits were introduced I was working as a Lone Parent Adviser for Jobcentreplus and had to help my clients to claim it as part of assisting them to return to work. When I attended the training session about 6 months before it started, I was appalled at how complicated it was, especially as it is aimed at the part of the population least able to cope with complexity. In the training I told the course leader that this system would collapse under the weight of its own bureaucracy and many of my colleagues said the same. We were, needless to say ignored as we were far to low in the system to have any effect on policy.

    The previous system was far simpler and much better suited for purpose. The whole thing is a vast sinkhole down which billions of pounds of public money has poured. It is unreformable and should be scrapped and then used as an object lesson in what not to do.

    Bring back Tax allowances for children and for those who are not working pay the equivalent via whichever benefit they are claiming. This Government will not do that because a Tax allowance lets us keep more of our own money whereas Tax Credits enable them to claim that THEY are GIVING us something.
    • Blackpool_Saver
    • By Blackpool_Saver 29th Jul 09, 6:59 AM
    • 6,074 Posts
    • 7,697 Thanks
    Blackpool_Saver
    This Government will not do that because a Tax allowance lets us keep more of our own money whereas Tax Credits enable them to claim that THEY are GIVING us something.
    Originally posted by trekker2002
    Boy, does that EVER sum it up.................
    Blackpool_Saver is female, and does not live in Blackpool


  • Mr Rhubarb
    Tax Credits are Brilliant!
    Yes Tax Credits have their problems, but they replaced a system of benefits that was infinitely worse. Before Tex Credits I was on disability Working Allowance and had to fill in a 28 page form every six months, and the calculations were always wrong, so I then had the stress of an appeal. Believe me, you don't want to be on the benefits system - TC is about the only good thing this government has done. It's not perfect, but the system it replaced was a million times worse!
  • ajadams
    Family/working tax credit has made me in debt for years
    They contacted me, I filled in the forms, they sent me money, the following year I told them again what our self employed income was a hey presto, we owe them money, so how the hell does that work! Every year they pay me and I owe them, I hate the stupid system, it's not meant to be understood by us mere mortals, I now owe them £1200 for which they have kindly offered me terms! My own govt has managed to get me into debt, my advice is if your are self employed don't get involved. Just this week they sent me 8 letters arriving on the same day 4 for my husband and 4 for me, 2 each the same! Ugh! Please Martin sort them out!
  • fruugal
    Government gobbledegook is embedded in all government activity, and this is misrepresentational use of language which wastes more time and money than anything else. The government should be taken to task for misrepresentation, on each occasion on each document.

    So, Renewal isn't renewal at all and so on, ad infinitum.

    Perhaps the best way to tackle it is to find out what they really mean and want, rewrite it in plain and understandable english, and get the relevant minister to impose it on the civil servants involved.

    Why do they do it?

    The same applies to all Department of Work and Pensions stuff. You should see the problems I've been having for years including all the contradictory advice from different departments, offices, officials, etc., all to the same question. And, they have lost my birth certificate and other documents having insisted on receiving originals.

    All of government speak needs to be sorted as it is unfit for purpose.
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