Minutes of the Tax Credits Consultation Group (TCCG) meeting 16 October 2008

Attendees

Stephen Timms (Financial Secretary to the Treasury)
Cerys Morgan (HM Treasury)
Kara Humphreys (HM Treasury)

HM Revenue & Customs

Tracy Gale (Chair)
David Skinner
Des Dolan
Helen Smith
Helen Cook
Martin Friar
Joe Houghton
Sue Smith
Andrew Burland
Anita Rakhra
Nick Chaplin

Representatives

Brigid Campbell (Social Security Advisory Committee)
Lindsay Isaacs (Citizens Advice Scotland)
David Brodie (Taxaid)
Katie Laine (Citizens Advice)
Robin Williamson (Chartered Institute of Taxation)
John Andrews (Low Incomes Tax Reform Group)
Victoria Todd (Low Incomes Tax Reform Group)
Beth Lakhani (Child Poverty Action Group)
Fran Robinson (Local Government Association)
Sylvia Gilbert (Local Government Association)
Bernie O'Gorman (Local Government Association)
Jane Hayball (Local Government Association)

Apologies

Frances Corrie (Taxaid)
Fran Bennett (University of Oxford)
Paul Treloar (Disability Alliance)
Siobhan Harding (Citizens Advice Northern Ireland)
Lucy Cochrane (Citizens Advice Northern Ireland)
Kevin Higgins (Citizens Advice Northern Ireland)
Jane Moore (Institute of Chartered Accountants of England and Wales)
Kate Bell (One Parent Families)

Welcome and Introductions

Tracy Gale welcomed everyone to the meeting and introduced the Rt Hon Stephen Timms, MP, the new Financial Secretary to the Treasury (FST).

FST attending

The FST said he was pleased to be attending the meeting in his fourth period as a Treasury Minister. Previously Minister for Employment, he said he was familiar with the huge gains in incentives to work provided by tax credits, but as a constituency MP was also aware of some of the problems that had been seen by individuals.

FST explained that he was grateful for the opportunity to work with the group to look at those issues. He also mentioned his attendance earlier that morning at the launch of the new 'In and Out of Work' pilot in Clapham, South London, where people were benefiting from the much faster procedures put in place between HMRC, Local Authorities and the Department for Work and Pensions (DWP), and said he was keen to be involved in these discussions with representatives.

Representatives then presented some of the issues around the operation of tax credits they see as outstanding presently, including:

• A request for some reform of the process dealing with recovery of tax credit overpayments after couples separate.
• The capacity of HMRC still to recover overpayments even where a customer has met all their obligations.
• A request for resolution of the position on 'notional entitlement'.
• Various difficulties with direct collection of tax credits debt.
• Examples of people not claiming tax credits because of a fear of incurring an overpayment, especially amongst self-employed and others with fluctuating earnings, and those who had previously incurred overpayments following the introduction of tax credits.
• Delays in dealing with disputes and appeals by HMRC.
• The complexity of the system for the most vulnerable in society, despite the improvements to date.
• The operation of the £25k income increase disregard when a customer informs HMRC that their current year income is less than the previous year.
• That it is/may be more appropriate for certain customers to deal with their affairs face to face rather than by telephone. The Social Security Advisory Committee has had a lot of discussion with DWP on this issue.

HMRC noted the points raised and explained that work was still ongoing in the Tax Credits Transformation Programme to further build on the improvements representatives had recognised and that the general issue of tax credits debt was on the agenda for discussion later in the meeting.

Representatives mentioned the good work being undertaken in Children's Centres as part of the Tax Credits Transformation Programme, and asked whether there were any plans to put HMRC staff in JobCentre Plus offices to help deal with tax credit queries.

FST mentioned his hope that the 'In and Out of Work' pilot exercise being run together with JobCentre Plus offices will help to address some of the problems seen, and that that would mean tax credits claims would be dealt with much faster. FST thanked representatives again for their constructive input, and said he looked forward to working with the group going forward.

Operational issues

Tracy Gale said that representatives from the Low Incomes Tax Reform Group had written asking for an 'operational issues' subgroup to be set up, as had been mentioned at previous meetings.

David Skinner said that Richard Summersgill now had a joint management role for both operational and policy issues for tax credits and Child Benefit and that Richard was looking to speak to representatives on these issues, possibly at the next Consultation Group meeting.

After some discussion, it was decided that it would be more appropriate for HMRC to look to set-up an early separate meeting, again chaired by Tracy with Richard attending, for operational issues to be discussed.

Victoria Todd from the Low Incomes Tax Reform Group agreed to help co-ordinate a list of priorities to be covered at any such meeting.

Tax credits debt

Des Dolan handed out a document for discussion on tax credits debt, to complement the draft Debt Management procedures that had been circulated to representatives prior to the meeting.

He explained that an exercise was now being undertaken in HMRC to co-ordinate all aspects of tax credit debt issues across the department.

Des mentioned that the procedures allow for customers' individual circumstances to be taken into account when deciding whether an overpayment should be suspended or remitted.

In recovery cases, where a customer says they are unable to repay a debt immediately, HMRC will ask them for proposals on repayment. Customers are automatically given up to twelve months to repay a recoverable debt. Where a customer cannot pay within twelve months and makes an offer to repay within three years, they will have that offer accepted after a much shorter discussion than is currently the case.

If what they say about their disposable income sounds reasonable in connection with the overall debt HMRC is owed, then it will be accepted. If a customer says they can't repay within three years, then a full income and expenditure assessment will need to be completed.

He also said that HMRC would be looking at further work with DWP in instances where customers had debts with both departments, and that there is a possibility that HMRC would suspend recovery if DWP were already taking recovery action, and vice versa. Des said that HMRC will suspend direct recovery action where a customer is also repaying a debt through their current tax credits award. Suspension would apply where customers' awards were reduced by 10 per cent and 25 per cent.

HMRC hope to have automated processes for this by April 2009. A pilot exercise around recovering debts by altering a customer's PAYE coding has also taken place in HMRC for debts of up to £1,000, and the initial results of this are promising. He said that Debt Management staff now also had direct links into the Tax Credit Office to enable better co-ordination of recovery work.

Representatives raised some points for consideration:

• that they felt the attitude of some HMRC debt collection staff can sometimes appear inappropriate in tax credits cases
• letters received by tax credits customers in debt could contain more helpful wording
• that policies such as not taking someone who is on Income Support to court for repayment of debt should be made clearer, and that those on Income Support should not have to complete 'income and expenditure' forms for HMRC
• they saw a lack of local help for vulnerable people who may not be able to articulate their circumstances clearly and so might have further problems with the tax credits debt process
• HMRC do not suspend recovery of an overpayment where a customer requests an explanation of how an overpayment arose, therefore they effectively make people 'dispute' their overpayment in order to have the recovery suspended
• it is often so difficult to construct a sequence of events to find out how an overpayment may have occurred for the early years of tax credits (2003/2004/2005), and that there is a strong need for these overpayments to be 'written-off' now
• that the percentage threshold 'banding' for direct recovery of tax credits overpayments could be a fairer procedure, as customers would have protection 'built-in' to the system, and recovery amounts would therefore not be dependent on them having to 'argue their case'
• that a leaflet for customers explaining the debt process would be useful, as not everyone receives a COP26

Representatives agreed to comment on the draft guidance which had been circulated. Tracy thanked the group for their input and explained that the Debt team would be considering the points they had raised.

Tax credits Communications

Helen Cook explained that she would be giving an overview of what is being done to bring together work on customer communications products, and she would then hand over to Nick and Martin who were going to talk about two specific items which are part of that strategy.

Helen explained that HMRC felt there was a need to provide consistent themes and messages, and to give more clarity around the purpose of customer communications. A customer communications strategy and planning board has therefore been set up in order to:

1. facilitate escalation of issues raised
2. agree priorities
3. manage issues and risks

The group is working-up a two-year communications plan with agreed objectives, and has trialled a new governance process for communications products. Now that those foundations have been laid, the 'next steps' will be to launch the group to internal business partners (such as the Tax Credit Office), and to identify top issues and risks to take forward.

Helen mentioned to the group that HMRC wanted to give representatives (including the Social Security Advisory Committee) early notice of what was being done, and introduced Nick and Martin who were attending to talk about two strands of communications work; the 'In and out of work' pilot and improvements to the tax credits claim pack.

'In and Out of Work' Pilot

Nick Chaplin gave an overview of the pilot (run between the Department for Work and Pensions, HMRC and Local Authorities) and how it had come about, explaining that it was driven by customer research which had included 'sampling' customer circumstances and experiences over a two-year period.

Nick explained that those customers sampled typically had around 30 contacts between the three departments over the two years, and that there could be areas of duplication across the departments which customers did not like. He added that delays in processing claims and changes could act as a disincentive for people to take up short-term work.

The aim of the pilot was therefore to gather all necessary information at the first point of contact (usually the JobCentre Plus contact centre) where possible. That information could then be shared as appropriate with other offices via an encrypted and Data Guardian-approved secure email link. In the pilot exercises, this had resulted in a great improvement in the amount of time between the information being given and any entitlement being received.

Customer reaction to the pilot has been very positive, with some customers saying they would be more likely to take-up short term employment as a result. Nick explained that the system had also been shown not to be more expensive than previous processes, and had even shown some potential savings. He said that, following these initial successes, the pilot processes were due to be introduced in 14 more local authority areas in December this year.

Representatives said that these improvements were very promising and welcome, and asked for details of the 'rollout' areas and for a flowchart detailing processes to be sent to them for information. They also asked how cases involved are/would be handled in the Tax Credit Office. Nick explained that pilot cases would be dealt with by the 'Fast-track' team in TCO. He said that new initiatives, including a handover of calls from JobCentre Plus to TCO were still being trialled, and that no firm conclusions would be drawn on final operation until the work had been evaluated. When asked about escalation routes, Nick clarified that tax credits claimants should contact the TCO for information about their claim after it had been made.

Representatives wanted to check whether Tax Credits Helpline staff would be able to see that such claims were 'urgent', and asked whether detailed notes would be kept by JobCentre Plus offices in case they were needed if there were any future disputed tax credits overpayments.

Tracy Gale mentioned that calls to the Tax Credits Helpline are recorded, and recordings could be recalled in such instances.

Tax credits claim pack changes

Martin Friar then handed out example copies of the prototype new claim pack for discussion.

Martin explained that work on the new packs was a component of the communications-based initiatives within the Tax Credits Transformation Programme. Paul Gerrard had given representatives an introduction to the programme at a previous meeting, and so this session was intended to build-on that. HMRC have built-up a wealth of customer understanding and insight, and have used the research carried out as a foundation for the new communications work within the programme. It has also been used to provide the framework for the new communications strategy that Helen Cook had referred to.

Building on work initially carried out by the Financial Services Authority, HMRC has determined that a relatively high proportion of tax credits customers could be classified as 'non-planners' or 'loose-planners', meaning that many struggle to organise and manage their financial affairs. HMRC also have a depth of understanding in relation to literacy and numeracy - and the work carried out within communications has shown that a number of key products are not written with this in mind.

The new pack and folder have been developed with customers involved at each step of the process, to ensure their needs are met. It includes key messages which have been extensively tested with customers, so that HMRC knows that customers understand and respond to the messages in it.

As the claim form guidance is a key working document, Martin explained that the new format had recently been tested with 800 customers, focusing on accuracy as well as customer benefits. Customers had shown an overwhelmingly positive reaction to the changes, and they had a positive effect, particularly in key areas where HMRC has identified customers can struggle. He advised that the new guidance was to be part of a suite of solutions, and has been designed to fit into ' Assisted Claims' that Paul Gerrard had covered previously, and new, more detailed web guidance which is currently being prepared. He said that HMRC's aim was to use the same tone and style of language in guidance for Contact Centre Advisers, in HMRC website content and for the claim pack and other customer communications.

Martin asked representatives to bear in mind that not all of the technical content of the example forms he had circulated had been approved yet, so this was still 'work in progress', but said he would be very interested to receive any feedback they may have via the TCCG secretariat by the end of October, if possible.

Representatives indicated that they felt the changes made were very much in the right direction, and gave some initial feedback around accessibility for disabled customers (around print size and formatting, etc) to be considered.

Any other business

Representatives mentioned the following issues that require HMRC attention:

• they are still seeing instances where Helpline operators were refusing to issue claim packs to enable customers to make 'protective claims', for example
• issues around the pre-population of tax credits forms by DWP
• problems around the treatment of Foster Carers for tax credits purposes
• they had heard of alleged delays in processing Child Benefit claims that were having a 'knock-on' effect on tax credits processing
• they would be writing shortly about alignment of the rules for Child Benefit and tax credit entitlement