Backdating of claims - another tax credits scandal?

Many tax credit claimants are missing out because of a failure by HM Revenue and Customs (HMRC) to operate the rules correctly, say low income campaigners.

The Low Incomes Tax Reform Group (LITRG) believe that many thousands of people who claim working tax credits are losing out on money they are legally entitled to because HMRC is excluding them from its automatic backdating regime and failing to inform them they have a right to claim backdated tax credits.

John Andrews, Chairman of LITRG, said: "One of the most welcome features of the tax credit system is the facility to backdate entitlement by up to three months before the claim has been received by HMRC.

"For most tax credit claimants, HMRC gives this backdating automatically on receipt of the claim. However, claimants who have no children and who have been in work prior to HMRC receiving their claim do not have their claims backdated automatically.

"Instead, HMRC are paying working tax credit only from the date the claim form is received at their office, meaning that these claimants may miss out on up to three months of tax credits (which typically might be worth £500).

"The way the backdating regime is operated by HMRC means that those people can only get their claim backdated if they ask for it once their claim has been processed. Yet HMRC are making no effort to inform them they can do this.

"Neither of HMRC's tax credit leaflets says anything about how to request backdating or who needs to do it. Nor do the HMRC or Directgov websites. The most natural place to inform a claimant is the claim form, but this is silent on the subject of backdating, as are the accompanying notes, and the checklist people get once they have their first award notice, which is supposed to enable them to make sure their award is correct.

"The law says that HMRC must give backdating whenever appropriate, yet HMRC are not taking action to ensure that claimants are receiving what they are due.

"It is clear to us that HMRC owe many tax credit claimants a lot of money for backdating payments not made. It is not acceptable to continue with this policy of not telling people of their entitlements."

LITRG believe this is in breach of the new HMRC Charter, which says:

We want to give you as much certainty as we can that you are paying or claiming the right amount.

We will:

provide information that helps you understand what you have to do and when you have to do it