Tax Credits: Pilots being trialled
This section of the site gives information about pilots that HMRC are currently running. We have also included information about pilots that have now ended and will update the information once any decision is taken about whether to roll it out.
We are not aware of any current pilots.
Tax credits error and fraud childcare costs
During 2013, HMRC will be piloting a process asking tax credits claimants with high childcare costs to provide evidence to HMRC. This will involve HMRC asking for receipts over a number of weeks. The change was announced in the Autumn 2012 statement.
You can find out more about childcare costs during compliance investigations in our understanding childcare section. We will add further information as it is released by HMRC.
Collection of tax credits debt by debt collection agencies (DCA)
Following the 2011 pilot (set out below), HMRC announced in the Autumn 2012 Statement (Paragraph 2.67) that they would be piloting the recovery of tax credits debt using debt collection agencies on a payment by results basis. HMRC already uses DCA for collection of tax debt. Between January and July 2013, HMRC will use these DCA to collect tax credits debt. Tax credits claimants will receive a final demand letter that states if payment is not made then the debt will be passed to an agency. The DCA should follow all HMRC guidelines, including those implemented for Time to Pay and hardship. If claimants response to the final demand letter from DMB with a time to pay agreement, the case will not be referred to the DCA. Where debts are disputed, the DCA will send the case back to HMRC.
Collection of overlapping tax debts
HMRC announced in the Autumn 2012 Statement (Paragraph 2.68 that they would be running a pilot with DWP to test whether they could improve overall debt collection performance where the claimant has debts owing to both departments. This pilot will run in 2013.
Post offices and tax credits claims
During the early part of 2012, HMRC started a pilot looking at the use of post offices in checking tax credits claims. After concerns raised by representatives at the Benefits and Credits Consultation Group, HMRC confirmed that this was a checking service only looking at whether the boxes had been filled in, rather than whether the data entered was correct. HMRC stated that responsibility still remained with the claimant for the accuracy of any of the information entered. The pilot ended in July 2012 and is still being evaluated. More information about the future of the pilot will be posted as soon as it is received from HMRC.
Recovery of HMRC debts from DWP benefits
The Financial Secretary to the Treasury announced, via written ministerial statement in September 2009, that a pilot would take place in 2010 to trial the recovery of HMRC tax credits and self-assessment debts from certain DWP benefits.
In order to carry out this trial, amendments were made to the Social Security (Claims and Payments) Regulations 1987. The Social Security Advisory Committee (SSAC) selected these regulations for a formal referral and invited interested parties to submit comments on the proposals. SSAC published a final report and the Government then responded to the Committee’s concerns and recommendations.
Just before the trial began, DWP produced an impact assessment. The trial then began in July 2010.
HMRC announced that from 14th March 2011 they planned to target 4000 tax credits claimants and 4000 self-assessment customers with letters offering them the opportunity to join the scheme. The scheme was entirely voluntary.
Some points to note about the scheme:
- It is voluntary. HMRC will select claimants randomly and send them a letter explaining the pilot. Attached will be a form that the claimant can complete to say they would like to take part (and the amount they would like to repay) or to refuse to take part.
- Deductions can be made from income support, income-related employment and support allowance, income-based jobseeker’s allowance and pension credit.
- Claimants can decide on the deduction between £2.30 and £10.20
- The maximum arrangement can be two years, and if a balance remains at the end of that time the claimant will go back into the normal recovery process.
- The claimant can leave the scheme at any time.
- DWP will deduct the money from the benefit and pay it directly to HMRC.
- If the DWP benefit stops, recovery of the HMRC debt with stop and the claimant should contact HMRC directly.
- DWP will tell HMRC if the claimant is already paying out the maximum amount allowed from their benefits.
- DWP will decide which debts have higher priority than the HMRC debt.
Most claimants in the pilot came to the end of their two year period during 2012. HMRC confirmed in July 2012 that they will offer claimants already in the pilot the option to continue having their debt recovered from their DWP benefit. No announcement has been made as to whether this method of repayment will be offered to all claimants.
Building capacity in HMRC contact centres (Feb 2012-Feb 2013)
In response to the NAO recommendations in their report in January 2010, HMRC’s Personal Tax Directorate initiated the Building Capacity Project, which trialled the use of private sector providers in their contact centres, between 6 February 2012 and 5 February 2013. The aim of the pilots was to explore the operational capability of joint working within HMRC’s legal & administrative framework, evaluate the costs, benefits and customer impacts, inform HMRC’s thinking around how they handle peak work flows and whether using private sector companies is a viable option and learn and share best practice and skills from others in the contact centre industry.
Following the trial, the report has now been published which highlights that while HMRC is capable of outsourcing contact centre work, the work is more complex and variable than average contact centre work and therefore defining the right relationship with the right provider is essential.
Use of private debt collection agencies to collect tax credit debt (Starting February 2011)
HMRC piloted the use of private debt collection agencies for tax debt in 2009- 2010. An evaluation was published following that pilot which suggested the same approach could be used for tax credits debt. It was announced in the June 2010 emergency Budget that HMRC would roll this and use private debt collection agencies to collect additional tax debt.
HMRC then began piloting this approach for tax credits using 2 collection agencies – Fairfax Solicitors Ltd. and IQor Recovery Services LTD who are two of the companies used for tax debt recovery.
During the pilot HMRC used a two stage letter approach. The first letter encouraged claimants, who may not have heard from HMRC in some time, to contact them and agree a time to pay arrangement. If no response was received, a second letter was sent by HMRC informing the claimant that the debt may be passed to the debt collection agency if no response was received. HMRC then passed the debt to the collection agency.
The letters urged claimants to contact a specialist team in HMRC on 0845 915 5348.
These debt collection agencies should conform to the same standards as HMRC, particularly in relation to vulnerable customers and time to pay arrangements. More information about HMRC’s current position on time to pay can be found in our dealing with debt section.
Acknowledging intermediaries correspondence
From February to May 2012, HMRC trialled a new process for dealing with correspondence from intermediaries. The previous process involved sending intermediaries an acknowledgement on receipt of correspondence. Since this work had been decentralised HMRC state that turn-around times reduced and they expected further improvements. As a result they began testing the impact of not acknowledging correspondence from intermediaries. In July 2012, HMRC confirmed that they had not received any complaints about this new process and therefore they will no longer send out acknowledgements to intermediaries for disputes and complaints (it will continue for appeals which are dealt with separately. However, HMRC have stated that they will review this process in the future if necessary. Any feedback on how this is impacting on intermediaries can be sent to us through our contact form.
Undisclosed partners – data matching using credit reference agencies (January 2011)
HMRC have increased the amount of compliance work they do following publication of their joint error and fraud strategy with DWP in October 2010. A Counter Fraud Taskforce has been set up across Government which is overseeing a number of pilots by various departments. One such pilot by HMRC involved them using credit reference agencies to identify undisclosed partners. During the exercise, 20,000 claimants were identified using HMRC and credit reference agency data which was then narrowed down to 750 ‘high risk’ people who received letters. According to the cabinet office, over half of these people have now had their tax credits stopped or amended.
If advisers have claimants who have received these letters, the decision by HMRC to terminate the claim can be appealed. In particular, a credit report showing someone else using a claimant’s address does not necessarily mean that the claimant is part of a couple. More information can be found in our guidance section ‘Understanding Couples’.
Updated 27 May 2014