16 March 2018

HMRC delay transfer of tax credit debts to DWP

In February 2017, the Secretary of State for Work and Pensions stated that some HMRC tax credit debt would be transferred to DWP who would then seek to recover it using their wider powers (including Direct Earnings Attachment). This was due to commence in April 2018. 

However, this has now been delayed according to the latest OBR Economic and Fiscal outlook presented to Parliament in March 2018. On page 210 the document states:

Tax credits debt: enhanced collection: This was announced at Budget 2017 and was due to begin in April 2018. It transfers the ownership of certain debts owed by tax credits claimants from HMRC to DWP, which has greater legal powers to recover them. In the original costing the measure was expected to generate savings of £60 million in 2018-19 and £180 million in 2019-20. HMRC has told us that IT problems have generated a 6-month delay to implementation. It is not uncommon for IT to be a source of policy delay, 2 but whereas it often relates to the introduction of a new system, this delay relates to the transfer of debts between the existing HMRC and DWP systems. Expected savings have been revised down by 38 per cent across 2018-19 and 2019- 20. HMRC is confident that this shortfall will be recouped in future years as the amount of debt in scope is not expected to change. We have been assured that an IT solution will be in place no later than October, but will keep this under review.

The full OBR document can be found here