14 October 2005
Revenue & Customs is unlikely to agree to the parliamentary ombudsman's view that only fraudulent tax credit overpayments should be reclaimed, R&C chair David Varney has told the Commons' treasury committee.
The R&C estimates that £4.4bn in tax credits were overpaid between 2003 and 2005.
Ann Abraham's June report on the troubled tax credit system stated that a statutory test, akin to that used in social security benefit overpayments, should be applied.
'In general, an overpayment of a social security benefit must be repaid if the claimant has misrepresented or failed to disclose a material fact,' wrote Abrahams.
'This test seems to strike the right balance between the obligations on the part of the administrators and those… of the recipients. It is therefore difficult to understand why this model… should not be applied in tax credits cases.'
But Varney told the committee on October 12 that Abraham's actual recommendation was only to 'consider' adopting the test.
The department was in the process of doing that, but had no plans to do so.
Varney also confirmed that R&C had rejected Abraham's recommendation that all overpayments caused by official error should be written off.
His appearance before MPs followed the National Audit Office's refusal to sign off the department's accounts, suggesting that £961m in overpayments would not be recovered.
Varney told the committee, however, that he did not plan to write off the £961m and that it had only been presented as such in the accounts as a worst-case scenario. 'This is the best and most accurate way of presenting it,' he said.
PFoct2005
