18 November 2011
Government amends Welfare Reform Bill to correct error in working tax credit taper legislation
Earlier this week, www.rightsnet.org.uk reported that the government has introduced amendments to the Welfare Reform Bill to correct an error in working tax credit taper legislation from April 2011. However, Lord Sasson (Commercial Secretary to the Treasury) says that there will be no adjustment to awards for underpayment under existing legislation.
Introducing the amendments in Monday’s House of Lords Committee Stage debate of the Bill, Lord Sassoon said that, following the June 2010 Budget announcement of an increase in the tax credits withdrawal rate from 39 per cent to 41 per cent, HMRC implemented the increase for both working tax credits and child tax credits from 6 April 2011 for 2011/2012 awards.
However, Lord Sassoon said that, although the secondary legislation was amended correctly for the child tax credit withdrawal rate, the working tax credit withdrawal rate was not, and that the new clause was therefore being introduced to correct the technical omission and ensure that the withdrawal rate for working tax credit from 6 April 2011 was 41 per cent and not 39 per cent.
Lord Sassoon went on to say that the implementation of the correction would not impact tax credit claimants as it simply aligned the legislation with 'the announced and currently effective practice', and, when asked if it was the government's intention to give back to people the money that they had been underpaid under exisiting legislation, replied –
'The technical position is that what is paid during the year is only an interim award. Of course, HMRC seeks to pay all entitlements on a correct basis. However, the final calculation is done at the end of the tax year. Therefore, at the moment HMRC is quite properly paying what it believes will be the position once we get the legislation lined up with the original policy intention.'
The debate on the working tax credit amendments to the Welfare Reform Bill is available from Hansard.
Source: Government amends Welfare Reform Bill to correct error in working tax credit taper legislation from April 2011(15 November 2011) - www.rightsnet.org.uk'
You can find up to date information about the Welfare Reform Bill and Universal Credit more generally in our welfare reform section.
The June 2010 emergency Budget announced several major changes to the tax credits system starting in April 2011. Further changes were announced in the October 2010 Comprehensive Spending Review. Information about these changes can be found in the future policy - tax credits section.