This was posted on Reddit yesterday:
I work on the Undeclared Partner remit for HMRC Benefits and Credits. Basically, I check single tax credit claims when we suspect that the claimant is hiding thier partner (and partner's income) in order to claim money they aren't entitled to. Usually we check tax systems and credit reports to find evidence that the claimant is living with someone else. However, in November (running up to Christmas) we have been assigned 'DWP work'. Which means we are going after single tax credit claimants who are in joint DWP benefit claims (ESA, JSA, DLA/Carer's).
This also includes retirees aged 65+ who are claiming state pension, when another adult at the address is also claiming stars pension and sometimes pension credit. These claimants have probably never claimed tax credits thier entire lives and almost all of them are retired. They have low and stable incomes - usually small pensions and state pension. Its completely unreasonable to suggest that any are committing fraud. Yet we treat them as of they are.
In this scenario lets say that a 74 year old is claiming CTC for her resident grandchild. Her income is only £8000 a year, and this is unlikely to change (she's unlikely to start employment and pensions tend to be stable year after year). She has neglected to include her 78 year old husband on the claim. His income is £9000 a year, bringing the total household income upto £17000. We can see this information.
The single claim is worth £3800 (family and child element). If she was in a joint claim with her husband, the joint claim would still be worth £3800 as the household income remains below £20,000 and the elements remain the same (family and child). The claim began in 2015. However, HMRC didn't check the claim until November 2016. The claimant phones and confirms that she and her husband live together. The single claim is terminated using the household breakdown date of 06/04/2016. Any money recoeved between 06/04/2016 and the date the claim was terminated has to be paid back as part of an overpayment. Lets say this is £2000. The claimant can then make a joint claim, and would recirve approximately £1800 for the remainder of the tax year.
A) HMRC records the 'losses prevented' as 3800 (its actually 2000, but this isn't taken into account).
B) the claimant has to pay back 2000.
C) the claimant is only entitled to £1800 for a joint claim that is no dofferent than the single claim other than the inclusion of her partner.
D) because the check was only performed in November(using information abailable at the start of the year), the overpayment has been allowed to build up for 8 months. If it was checked earlier, the overpayment would be less and the claimant would be entitled to claim more as part of the new joint claim. So, the later HMRC checks the information the more money reclaimed through repayment, and the less money paid out to the claimants.
E) the customer has effectively been given a £2000 penalty. (To get a penalty that high, the tax credit award usually has to be around £7000 pound).
This work, I suspect, has only now been assigned to HMRC staff because people with very low income who are claiming benefits and pensions are seen as "easy pickings". The work should have been completed as close to 06/04/2016 as possible to reduce the impact on claimants. However, its been left to late into the tax year so that repayments are larger and subsequent payments to claimants as part of any new joint claims are minimised. Throughout the year the 'hit' rate is around 20 percent. That is, every 10 cases checked 2 will end up being terminated as "error or fraud". But with the benefit work, the hit rate is expected to rise. The yield claimed from each case is let, but the number of cases due to be terminated in the next few weeks means that the actual yield recorded will be higher than any point in the tax year. This coincides with criticism directed at B&C that not enough risked cases are being opened as examinations, and not enough yield is being recorded from terminated claims.So, in the weeks before Christmas a lot of 65+ claimants are going to find thier award terminated and a letter demanding repayments of around £2000. These people aren't committing fraud. They are old, retired. Probably never claimed in thier lives. Many will be computor illiterate. Some will have next go no understanding of the system. Some will be in poor physical and psychological health.
A lot of auffering is going to be caused by this. But who cares, so long as the Director of Benefits and Credits can report the 'successes' of the work performed in termed of greater yield and money reclaimed?
And people like 'Mary', who was fraudulently claiming 6000 a year in tax credits by hiding her husband 'Tom' and his £70,000 a year wages, and putting her tax credit payment into a savings account? We dealt with her back in June. She had a couple months overpayment to pay back (she would have just taken it out of the savings account) and a small penalty. She'll probably have a great christmas, whereas 80 year old Ethel who has dementia and can't work a mouse is going to find herself without heating and unable to buy a present for her dead son's child who she and her husband care for.
This feels genuine and informed.
Has anyone any further information on this use of HMRC time?
Has a minister been asked to comment on the objective of pursuing what are, at most, technical errors?
Has anyone a copy of instructions to staff on this issue?
If this interpretation is true HMRC would appear to be engaged in a policy that might best be called victimisation in pursuit of meaningless performance targets. And unsurpsringly, that worries me, greatly especially when one of HMRC's greatest priorities should be ensuring that appropriate sums are paid irrespective of minor technical issues.
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Interesting. The writer appears to be describing a situation where someone incorrectly making a single claim would actually have been entitled to the same amount of award in a joint claim. As it was incorrect to make a single claim, the whole amount of the award was/is an overpayment. However HMRC’s notional entitlement policy should mean that the amount of any ‘overpayment’ is offset against the amount that the claimant would have got if they had correctly claimed as a couple. In this example it might be that an overpayment will be recorded in a way that suggests the HMRC activity is worthwhile (when in such an example it isn’t really) but it should not result in any actual financial cost to the claimant. Any stress and strain is of course another matter entirely!
I can vouch for a small section of this article’s accuracy. I qualified for state pension and an occupational pension in October. My wife has both state and occupational pensions from three years ago but we don’t claim any benefits at all, (winter fuel aside). I suddenly found that I was paying an horrendous amount of tax despite having carefully planned ahead. Instead of paying 200 for the year I was on course to pay over 1,400.
After going backwards and forwards between HMRC and DWP I arrived at a very helpful man at HMRC who explained it was to avoid underpayment and that he spent most days explaining it to callers. I was the fifth person that day and it was only lunchtime. They had calculated tax as if I had received both pensions for the entire year, rather than for the remaining six months of the year. Three months later, despite several tax code amendments I have still overpaid for the entire tax year.
I admit I’m rather cynica, but it looks to me as if it’s a case of ‘squeeze and see how many squeal’.
Your cynicism is completely justified and HMRC’s justification for their disgraceful behaviour is reprehensible. Don’t take it out on the people you speak to; they don’t make the policy their jobs are probably under threat if they don’t do as they’re told.
As someone who prepares tax returns for others, my clients, I also get asked to sort out “ridiculous” tax codes” and I know only too well that it’s a case of squeeze and see how many squeal and how obstructive HMRC can be on this issue.
It would be helpful if the reddit poster could get some of her details right. The family and child elements of child tax credits total £3325 annually ( not £3800 as stated ). And as the excellent Michael O’Connor identifies, HMRC staff should send notional entitlement referrals when cases like this are identified so that what would have been claimed correctly anyway if is offset against the amount claimed incorrectly.
There’s a couple of other mistakes in there too. It looks like in this case some HMRC staff within Tax Credits are poorly informed on their own procedures.
If corporation tax and inheritance tax was set to the correct level, then this would release a lot of higher quality HMRC staff to do compliance work and catch errors made when claims are made, not months later.
I note you entirely ignored the issues of substance
You chose the pseudonym well: you are creating a sideshow
I presume you are confirming this is happening?
At the same time, MPs criticise HMRC for treating vulnerable customers as guilty until proven innocent over tax credits:
https://www.parliament.uk/business/committees/committees-a-z/commons-select/work-and-pensions-committee/news-parliament-2015/concentrix-report-published-16-17/
And I know I have probably mentioned this before: their attitude towards their own staff is equally disturbing. They persist with a performance management regime which has been proven to be discriminatory; they have implemented an attendance management policy which is also discriminatory and punishes people for a single 10 day instance of absence even if they’ve never had a day’s sick for the previous 35 years of service. And, perhaps, worst of all, HMRC treat as gross misconduct honest mistakes by staff in their own tax credits claims. Many staff have been dismissed as a result of genuine errors they made. The most recent case brought to my attention, was a member of staff who forgot to notify a change of circumstances until a few months after the event, so she overclaimed. When she did notify the change, she was investigated and sacked. She was 8 1/2 months pregnant at the time. I stress again: it was not deemed by the investigation to be fraud, just a mistake.
So if a member of staff discovers they have overclaimed due to a change of circumstances, do they come clean and risk the sack, or do they lie about it (committing fraud)and hope they don’t get caught. What a dilemma
When I worked there one of the most contentious targets was “future revenue benefit” – where if an intervention identified an underpayment due to error then the FRB was calculated as assuming that had that error not been found the customer would have continued to make the same error for the next 3 years and therefore the intervention was recorded as having a “yield” of 3 times the actual misdeclared figure !
The normal HMRC misstatement of benefit claim
If you’ll excuse the pun
If the HMRC must have performance indicators they should probably be re-prioritised toward the large-scale, big money targets.
I note that at times the police are embarrassed by activists and MP’s when the figures show that a disproportionate number of their drug arrests are small-time users. An absence of “big fish” is considered by some to be an indicator of corruption.
Maybe some MP could look into this aspect of this aspect of the HMRC’s activities. They would probably find the scope to be making useful comparisons and bring these to the attention of the public.