Would you credit it? The fiasco goes on

Six months after the government started tax credit payments, many claimants remain out of pocket and angry at their treatment.

Ministers have declared the system is running smoothly and the chaos of the summer is history, but a flurry of letters to Jobs & Money after we highlighted the case of victim Elizabeth Lewis, shows the fiasco is far from over.

Some people have yet to receive their money, others are receiving too little or too much. All of them are locked in a terrible dance with the Inland Revenue as they attempt to work out where it all went wrong.

Claire Tompkins has been denied child tax credit since April after the Revenue paid the money into a dead account. Promised payments to Ms Tompkins, who lives near Northampton with her partner and one year-old baby, have gone astray leaving her to pay mounting bank charges. All her attempts to clear up the mess have failed.

Bernadette Reddy-Oaten, a divorced mother of two who lives in Torquay, received an award for child tax credit which the Revenue later decided was too high.

Ms Reddy-Oaten had already spent the money on childcare when the Revenue realised its mistake. Officers demanded she return the cash. They even threatened to send round compliance officers to "interview" her and check her finances. Jobs & Money intervened, causing a change of heart in her local Revenue office.

Rebecca Taylor applied for child tax credit in June but has yet to receive an award notice, let alone any cash.

"My last conversation with them was on September 12 when I was told there was a computer problem with my form which would not be resolved until mid-October at the earliest. I was then promised an interim payment which has yet to arrive."

Mother of four Elizabeth Durkin received not one but two awards for £406.77 annual child tax credit payments. She says she is going mad phoning the helpline to get the second payment stopped. Before the pay ments arrived she received five award notices, one of them for a woman in Stockport who, it emerged, shared the same national insurance number as her husband.

Elizabeth Lewis, who complained to Jobs & Money in August after she lost out on tax credits worth almost £1,000, has received several emergency giro payments in the last couple of months. Attempts by the Revenue to calculate how much she should receive and pay the cash into her bank account have failed despite spending almost six months trying to sort out the problem. This week a £320 giro arrived in the post when her monthly payments so far have been £208.

Is it an overpayment? Or is the previous figure wrong? No one can tell her.

The common thread running through these cases is the sad state of the Inland Revenue's computer systems.

A change in circumstances - moving house, children starting school or a dramatic cut in income - send the computers into a spin, never to recover, at least not in these cases.

Despite spending almost £3bn over 10 years on brand new computer systems, Revenue staff find the system cannot trace files created weeks before about the same claim and even when they do find them, discover they are impossible to reconcile.

Liberal democrat spokesman Steve Webb, says: "I have every sympathy with these families trying to sort out their affairs. We have people who come to our constituency surgeries trying to sort out their problems and it is still like walking through treacle. The worry is that once the tax credit story has faded, the impetus to sort out complex problems has gone."

A spokesman for the Inland Revenue denies the tax agency had failed to tackle long-running cases. He also says claims that officers were zealous in clawing back overpayments were false. "We don't want anyone to be disadvantaged by our actions. We seek to recover funds in a fair and reasonable manner."

A spokeswoman for the National Association of Citizens Advice Bureaux says there have been many cases of overpayment and under payment and a failure to clear matters up quickly.

There might be nearly 6m people receiving tax credit payments, but they can't be confident, she says, their award is correct and the Revenue isn't going to come back and demand you pay them back large sums of money."

How they plan to put things right
The Inland Revenue publishes a code of practice called Putting Things Right When We Make Mistakes (COP1) which says it will pay back "reasonable" costs that are a direct result of their mistake or unreasonable delay.

The document also says when they will pay extra compensation for distress.

Claiming compensation: You don't need to obtain a copy of COP1 before making a claim. In COP1, the Revenue says reasonable costs include postage, phone calls, travelling expenses, professional fees, financial charges, and interest on overpaid tax and National Insurance.

Lost earnings: The Revenue also says, while it will not normally compensate complainants for the time they spend sorting things out, it will do so where it can "show lost earnings as a direct result". Lost holiday is the equivalent of earnings for those people who took time off work to visit local tax offices or phone the tax credit helpline.

Compensation for distress: COP1 says: "Payments,not intended to put a value on the distress you have suffered, will usually range from £25 to £500". Payments have been known to exceed these amounts.

Practical action: Write to The Director, Tax Credits Office, Cop Lane, Preston, PR1 0SB, (or at Dorchester House, 52-58 Great Victoria Street, Belfast BT2 7WF if you live in N Ireland), quoting your national insurance number and that of your partner if they have claimed tax credits jointly. Avoid a four-page rant. Just say when you first sent your claim form (an approximate date will do) and briefly what the delay in receiving the tax credit payment has meant to you and your family in terms of:

· financial hardship

· the need to borrow money

· lost earnings or income and costs in trying to get through to the helpline or to visit a tax office

· worry and distress over the whole episode and then ask for compensation.