HM Treasury written question – answered at on 17 June 2015.
To ask Mr Chancellor of the Exchequer, pursuant to the Answer of 9 June 2015 to Question 578, for what reasons a temporary rise in tax credit related debt was forecast to take place before the replacement of tax credits by universal credit.
Although a number of measures have been introduced to prevent the occurrence of tax credits overpayments - and we will continue to consider further measures - we expect that tax credits related debt will continue to rise as we move towards it being replaced by Universal Credit due to the design of the tax credits system.
The tax credits system is an annual system – all awards and payments are “provisional” until finalised after the end of the year, once income and family circumstances are confirmed.
Tax credits are responsive to changes in claimants’ circumstances: overpayments – as well as underpayments – typically occur because people do not report changes promptly. However, due to the annual nature of the tax credits system, with tax credits awards being based on household income for a tax year, overpayments can occur even when the claimant and HM Revenue and Customs (HMRC) do everything right. Where error and fraud is identified, overpayments are generated.
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