Original article from Kent Live
Half a million claimants of Universal Credit have been shocked with sudden tax debt deductions.
These deductions from Universal Credit as well as other benefits, have occurred from 17 years of tax credit overpayments.
The Government have been claiming back since January 18 this year, for people who had newly started claiming Universal Credit for the first time in the pandemic.
According to BirminghamLive, the DWP have been docking payments to recover tax credit overpayments, at a rate of 47,000 cases per week, this year.
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For those still receiving tax credits, the money is taken out of that with 10 per cent to 50 per cent of a person's payment cut to claw it back, depending on earnings.
For those only on the family element of Child Tax Credits, payments are slashed by 100 per cent, meaning income is stopped completely until the overpayments are cleared.
And for those no longer on tax credits but now on Universal Credit or other state benefits, the debt is taken from those payments.
The Department for Work and Pensions can impose deductions on Universal Credit and other benefits to recover third-party debts to HMRC and other organisations.
The Government website explains that you might be overpaid tax credits if:
- there’s a change in your circumstances – even if you report the change on time
- you or the Tax Credit Office make a mistake
- you do not renew your tax credits on time
"If you still get tax credits or are now getting Universal Credit, the money you owe will usually be taken from your future payments," the Government states.
Most people will not have been aware they had received too much in tax credits.
Between April and November 2020, a whopping £63 million was taken out of claimants’ payments because they had been overpaid tax credits in the past.
HMRC’s tax credit system has identified millions of claimants who were overpaid since 2003.
Those whose payments were targeted included carers and frontline workers, The Times reported.
Only 1 per cent of tax credit overpayments are a result of fraud or negligence by the recipient. In the majority of cases, it's said to be due to system errors by the HMRC.
HMRC said that between April and December 2020 it sent 137,059 letters to warn Universal Credit claimants they would have payments cut because of tax credit overpayments from as long as 17 years ago.
Alistair Cromwell, acting chief executive at Citizens Advice, told The Sun: “Deductions, particularly if they come out of the blue, can make it really hard for people on Universal Credit to manage their money.
“A more flexible approach is needed so that deductions don’t leave people unable to cover their essential bills.
‘If you’ve been affected by a benefits overpayment and are struggling, your local Citizens Advice can help with free financial advice.”
A DWP spokesperson said: “We carefully balance our duty to the taxpayer to recover overpayments with our support for claimants."
Peter Tutton, head of policy at debt charity StepChange said: “Nearly one in five of our clients with debts owed to Government has tax credit overpayment debt.
“Often, deductions are imposed to repay this debt without properly considering affordability, and in ways that take people by surprise due to poor communication.
"In a recent survey, nearly all (93 per cent) of StepChange clients who had experienced deductions had experienced some financial difficulty or hardship as a result.
“This is part of a wider problem in poor Government debt management practices, where standards need to quickly improve”.
Benefits advice website EntitledTo says claimants are able to challenge the decision.
A spokesperson said: "Tax credits sadly always came with the risk of over or underpayments but decisions can also be appealed or disputed if they’re wrong.
"Anyone can challenge HRMC’s decision if they’ve received a demand letter and they don’t think they need to pay anything back.
"There are time frames you need to follow though, so get in touch quickly to ask what the debt is for. Then ask how you can challenge the decision if you’re not happy with the reply."