Six million say: it's no credit to the government

Sarah has received 11 different notices of what she is meant to receive in the form of working tax credit (WTC) in the past year - but still has no idea.

Meanwhile, Debbie and her family enlisted the help of a Citizens Advice Bureau to sort out their WTC problems. Over 10 weeks, the CAB contacted the Inland Revenue, which administers this benefit, 17 times. Twice the computers were down; two crucial letters affecting the family's entitlement were lost; letters received by the Revenue were not logged (as promised) on the system; unnecessary information was asked of the family and helped to delay the process; and it took one month to accept the CAB as representing the family when this procedure was supposed to take a day.

These are fairly typical problems dogging the administration of WTC and child tax credit (CTC), received by an estimated 6 million families. It is odd that claiming these benefits is so problematic - given that the government has adopted the slogan 'helping hard-working families' as the mantra on which to fight next year's General Election.

Chancellor Gordon Brown introduced these benefits to help people (mainly parents, but some non-parents as well) who work - but the administration is putting some people off, according to Citizens Advice.

'The administration needs to be improved,' says the CAB's Katie Lane. 'People need to be confident of what they are going to get, but some people have had bad experiences about going back to work again and not getting the benefits they expected.'

She cites the example of one woman with two children under the age of five who was overpaid WTC, then had the repayment docked over the next few months and ended up working 42 hours a week (far more than she wanted to work) to keep her family going on the reduced WTC income and her earnings.

The Child Poverty Action Group published a report on the system in August when Kate Green, its chief executive, said: 'The system remains riddled with problems that are not being addressed.'

There are many parallels with the Child Support Agency, whose chief executive, Doug Smith, announced his resignation last month.

In both schemes, there appear to be serious computer problems, major administrative failings, an absence of people who can take charge of a particular file, frustrated helpline staff who do not seem able to control the situation, forms that do not make sense and - of course - families suffering financial hardship as a consequence.

It could be argued that the problems are worse in the administration of WTC and CTC. About 1 million families have to deal with the Child Support Agency, while an estimated 6 million are in receipt of (or trying to get receipt of) WTC or CTC. Citizens Advice received 134,000 calls for help on WTC/CTC in 2003-04, nearly four times the 37,000 it received regarding the CSA. Lane, who deals with both areas at Citizens Advice, is still receiving more calls on WTC and CTC than on the CSA.

However, if you are claiming WTC or CTC there are some steps you can take to try to minimise the problems:

· Tell the Revenue quickly of any change in circumstance - a new job, increase in hours or new child, for instance. (Remember that a child staying on at school after the age of 16 is regarded as a change in circumstance and your money will fall if you do not notify the Revenue of this.)

· Ensure that all changes in circumstances are responded to by the Revenue. 'If you do not get an award notice, you should follow up,' says Lane.

· Ask for detailed backing information if you are puzzled by your awards notice. The Revenue is planning to make these more comprehensible (although probably not for at least a year). In the meantime, many families have lost out because they did not pick up strange errors (such as stating their earnings at work as £0.00) on the awards notices.

· Go to a Citizens Advice Bureau, ring the single parents' helpline at Gingerbread (0800 018 4318), ring the Revenue helpline (0845 300 3900), download the free leaflets and get as much help as you need to understand the system.

· Appeal if you believe you are missing out or are suffering hardship because of Revenue maladministration.

Do not expect the situation to improve rapidly. With the CSA, it has taken years for the government to accept that fundamental reform is needed. With WTC/CTC, the Inland Revenue does not accept there is a systemic problem. A spokesman said: 'The disparaging comments [in the media] relate to when WTC first came in [in April 2003]. There is nothing wrong with the process now. Citizens Advice Bureaux come across people who go to them with claims. We always put them down as isolated because the issues relate to that unique claim. It would not be an across-the- board problem.'

?1 million and counting

Compensation paid out by the Inland Revenue to families whose WTC and CTC claims have been badly handled has now reached £1 million. This averages £35 for each family awarded compensation, but there are other avenues open. The Adjudicator's Office (www.adjudicatorsoffice.gov.uk 020 7930 2292) runs an independent adjudication scheme, although it can only deal with complaints that have completed the course of the Revenue's complaints procedure. Since April this year, the Adjudicator has received 1,479 complaints relating to the Tax Credit Office, the part of the Revenue that handles WTC and CTC. Of these, most are settled - but of the 55 that have been investigated, the Adjudicator found in favour of the claimant in 69 per cent of cases. Compensation has been awarded in several cases.

Child tax credit

CTC goes to families - whether in work or not - with children under the age of 16 or, if 16-18, in full-time education. Families with a total income of £58,000 can qualify. The income threshold rises to £66,000 if they have a child aged less than one.The largest amount payable is £5,430 a year for families with incomes under £10,000 and three children. Families with earnings of £55,000 a year would get £210 a year.

Working tax credit

A couple with two children who qualify for both WTC and CTC and have a total income of under £5,000 a year could end up with another £6,920 in WTC/CTC, according to Inland Revenue. The highest rates of WTC are paid to parents, but you do not have to have children to claim. Childless people on low incomes can claim if they are over 25 and work more than 30 hours a week or if they are 16 or over, work 16 hours a week and have a disability. A single person could get as much as £1,285 a year - but the amount of benefit reduces as the person's earnings rise, and it withers to nothing for singletons earning £11,000 a year. Childless working couples, aged 25 or more, working 30 hours a week each, can get an extra £2,835 from WTC - but this goes to nothing in households where joint income exceeds £16,000. The childcare element of WTC is 'worth up to 70p in tax credit for every £1 a week spent on approved childcare', according to the Inland Revenue guidelines. The rules are, however, extremely complicated and there are several exceptions.