Tax credit clawback hits low paid

A flagship scheme to tackle poverty is pushing single parents into hardship after demands that overpayments should be clawed back, the charity Single Parents said .

Some families were already living on incomes below the government's poverty line after cuts in their tax credit payments, while others faced demands for repayments of more than £2,500 following administrative errors last year.

The report for the charity found that a quarter of single parents were overpaid tax credits last year and more than nine in 10 have been forced to make repayments from their current benefit allocation or are waiting to hear how much they must pay back the money.

The tax credit scheme was designed to reward parents and couples who wanted to work but could not afford to move off benefits. Working Tax Credit and Child Tax Credit provide income top-up pay ments, including childcare subsidies. As at December 2004, 5.9m families were receiving tax credits. However, it has been dogged by errors. In the first few months computer errors meant millions of payments were delayed.

Single Parents said there was a growing problem from overpayments which in 80% of cases were due to administrative error. The Inland Revenue annual report shows that at least 455,000 households were overpaid due to a software error last April and May.

By December around 78,000 claimants had asked for overpayments to be written off as they were due to error. Only 1,600 have been written off. The charity is urging government to reduce and cap the rates at which overpayments can be recovered.

A spokesman for the Inland Revenue said:"If the overpayment is the result of our error and the claimant had no reason to think it might not be correct we can and do write off the debt."