Treasury Committee Press Notice No. 5

Session 2005-06 26 October 2005

New inquiry into the administration of tax credits

Statement by the Chairman of the Treasury Sub-Committee

The Treasury Sub-Committee has agreed to undertake an inquiry into the administration of tax credits in the United Kingdom. The inquiry will examine HM Revenue and Customs' handling of the payment of child and working tax credits.

The 2002 Budget introduced two new tax credits for families and those on low incomes: the Child Tax Credit and the Working Tax Credit. The new tax credits system has been in place since April 2003.

Over 6 million families receive tax credits. As a result of in-year adjustments to payments resulting from changes in individual family's circumstances, around 1.9 million families received overpayments totalling £1.931 billion in 2003-04. Overpayments are automatically recovered by HM Revenue and Customs' IT system. Recovery of overpayments appears to have caused significant hardship in a number of individual cases.

The Sub-Committee's new inquiry will look specifically at the way in which HM Revenue and Customs has administered the tax credits system. We will focus on identifying future solutions to the difficulties which have plagued the system, rather than simply 'raking over' past administrative decisions and practices.

The Sub-Committee plans to take oral evidence on the inquiry early in 2006. A formal call for written evidence, together with formal terms of reference, will be issued in a few weeks.

The Treasury Committee is a Select Committee of the House of Commons, appointed to examine the expenditure, administration and policy of the Treasury, HM Revenue and Customs and associated public bodies. All Members of the Committee are Members of the Sub-Committee.

Rt Hon John McFall (Chairman), L, West Dunbartonshire
Lorely Burt, Lib Dem, Solihull
Jim Cousins, L, Newcastle upon Tyne Central
Angela Eagle, L, Wallasey
Mr Michael Fallon, C, Sevenoaks (Sub-Committee Chairman)
Damian Green, C, Ashford
Ms Sally Keeble, L, Northampton North Susan Kramer, Lib Dem, Richmond Park
Mr Andrew Love, L, Edmonton
Kerry McCarthy, L, Bristol East
Mr George Mudie, L, Leeds East
Mr David Ruffley, C, Bury St Edmunds
Mr Mark Todd, L, South Derbyshire
Peter Viggers, C, Gosport