Clause 6 - Notifications of changes of circumstances

Part of Tax Credits Bill – in a Public Bill Committee at 6:30 pm on 15 January 2002.

Alert me about debates like this

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury 6:30, 15 January 2002

I do not think that the fears expressed in that regard on Second Reading bear too close an examination. We will come to clause 7 in due course, but the whole point of subsections (4) and (5) is to make it clear that awards will be based on income for a tax year. It is not a question of imposing on claimants a formal requirement to notify changes of income during the course of the year or to determine in advance what their income will be. The requirement is to notify the Revenue at the end of the year of any

changes that occurred during the year and that make the information supplied inaccurate.

A change could involve hours, employment or the household, but claimants are not required to estimate during the tax year what their income will be for the whole of that year. At the outset, awards will be based on the previous year's income and, depending on decisions still to be made on how to respond to changes in income, claimants may have their awards adjusted during the year based on an estimate of the current year's income. That will be determined in the light of decisions that have yet to be made.

The concerns that were expressed on Second Reading are not justified. Even if thresholds were set in regulations under clause 7(3)(a) to (d), there would still be no formal requirement to report changes in income to the Revenue during the year. In debates on previous amendments, I said that our aim was to develop a culture in which people asked for reassessment and reported changes if their income had risen. That is sensible because it will reduce the risk of overpayment. Similarly, when people believe that changed circumstances might justify an increase in the amount that they receive, we want them to be in a frame of mind in which they see that as something to help them. We shall actively discourage people from notifying small changes of income during the year to minimise the scope for overpayments.

We do not propose to introduce penalties for submitting an estimate of income during the year that turns out to be incorrect. I do not want to trespass on your patience, Mr. O'Hara, by going into clause 7 in detail, but the corollary is that clause 7(9) gives the Inland Revenue discretion to decide whether to adjust payments during the year to reflect a claimant's estimate of their income. That will provide protection against abuse by claimants who wilfully submit unreasonable estimates to obtain extra tax credit. The threat of penalties may deter claimants more generally from asking for reassessment during the year.

We want to encourage people to change their attitude. We are moving towards an integrated tax and benefits system and that will involve consumer education. It will require close working relationships with benefits advisers, NACAB and others to smooth the transition—the Revenue is geared towards this—but we believe that the gains at the end of the process justify the proposed actions.