Tax Credits: Public consultations
The Tax Credit Act 2002 introduced the current tax credit system, however discussion about the new system started long before that date. We have set out a full history of the consultations, reports and discussions:
- Social Security Advisory Committee consultation on managed migration regulations (June 2018)
- Consultation on exceptions to 2 child limit for universal credit and child tax credit (November 2016)
- Direct recovery of debts – summary of responses
- HMRC consultation on proposals to recover tax and tax credit debts directly from those who are able but have refused to pay (May 2014)
- HMRC consultation on supporting customers who need extra help (March 2013)
- Consultation on mandatory revision before appeal in tax credit cases (July 2012)
- Passported Benefits under Universal Credit – review and advice (June 2011)
- National review of tax credit statistics (May 2011)
- IDAS – Identity Authentication Service (Feb 2011)
- Improving the operation of PAYE: Collecting Real Time Information (Dec 2010)
- 21st century welfare (July 2010)
- Tax Credits: improving delivery and choice (May 2008)
- New Tax Credits: Supporting families, making work pay and tackling poverty (July 2001)
The Social Security Advisory Committee (SSAC) launched a public consultation on proposals for moving all existing claimants of a working age income-related benefit to Universal Credit.
Under the managed migration process, DWP will begin the process of moving claimants in receipt of one or more of the following benefits to Universal Credit:
- Working Tax Credit
- Child Tax Credit
- Income-based Jobseeker's Allowance
- Income-related Employment and Support Allowance
- Income Support
- Housing Benefit
The wide-ranging draft legislation, which was presented to the committee for scrutiny at its meeting on 20 June 2018, sets out the government's proposals on:
1. Requirements for claimants on existing benefits to make a claim for Universal Credit (including the deadlines for doing so) and arrangements for ending their existing benefit
2. The calculation, award and ongoing treatment of transitional protection.
The task of safely moving around 3 million claimants (in around 2 million households) from legacy benefits to Universal Credit raises important questions about the delivery challenge facing the department and the potential impact on claimants.
The Committee’s report and Government’s response can be found on GOV.UK.
The Welfare Reform and Work Act 2016 restricts the number of children/young people in respect of whom the child element in UC and CTC is payable to a maximum of two. The Government announced that there would be exceptions to this rule and this consultation sought evidence and views to inform the detailed design of those exceptions. The exceptions consulted on were:
- Where a child is born as part of a multiple birth where there were previously fewer than two children in the household
- Living long term with family or friends because they were unable to live with their parents and could be at risk of entering the care system
- Born as a result of rape
- Adopted children
In Budget 2014, the Chancellor announced a new power (Direct Recovery of Debts) to allow HMRC to recover tax and tax credit debts directly from debtors’ bank and building society accounts, including Individual Savings Accounts (ISAs). The consultation document outlines how this measure will work in practice. The government would like to gather views from anyone who could be affected by these changes, including institutions which take deposits, such as banks, building societies and others, and from those representing vulnerable debtors and those on low incomes on how best to implement the policy, including which safeguards would be proportionate and balanced to ensure that debtors do not suffer undue hardship.
In March 2013, HMRC announced that they would be piloting a new system of support for taxpayers and tax credits claimants who need extra help. This new service will replace the existing enquiry centre network which currently serves as HMRC’s face to face service channel. The new service was piloted for June 2013 in the North East of England. Several North East enquiry centres were closed as a result (the full list can be found in the official HMRC announcement). The consultation document set out HMRC’s proposals for the new service and asked for responses on how the extra help will work in practice, the impact of the changes, the impact of the new service on the voluntary and community sector as a whole and how help could be given to those who use enquiry centres who don’t need extra support. In February 2014 HMRC announced that following a successful pilot they would be closing remaining enquiry centres by the end of June 2014 and that a new service will be in place for claimants who need extra help. More information can be found on the HMRC website.
On 3 July 2012, HMRC published a consultation document called ‘Tax Credits: mandatory revision before appeal’. HMRC sought views on the impacts of changing the tax credits appeals process to mirror the Department for Work and Pensions planned changes to their appeals process which was announced in the Welfare Reform Act 2012 and subject to a consultation between February and May 2012. The aim of the consultation was to look at simplifying the tax credits appeals process by introducing a mandatory consideration of revision before appeal. HMRC anticipated that this would significantly reduce the number of appeals to be heard by the Courts and Tribunal Service and ensure continued alignment and consistency of treatment with the revised DWP appeals legislation and processes which DWP will be introducing. The consultation closed in October 2012. HMRC confirmed at the November 2012 Benefits and Credits Consultation Group meeting that although the proposals in the consultation document would go ahead to mirror DWP changes, given the current delays in the tax credits appeals system they would not be implemented until April 2014. Details about the new process can be found in our appeals section. More information about the DWP processes for Universal Credit can be found in our Transition to Universal Credit section.
In HMRC’s response to the consultation, 'Tax Credits: mandatory revision before appeal’ , published on 31 May 2013, they acknowledge the concerns raised in the responses they received and promise to take them into account. They confirm their intention to introduce the new step from April 2014. This also coincides with the introduction of mandatory consideration of review before appeal for Child Benefit and Guardian’s Allowance from the same date, which was considered as part of DWP’s consultation process.
Passported Benefits under Universal Credit – review and advice (June 2011)
On 15th June 2011, the Social Security Advisory Committee launched a consultation on passported benefits. SSAC were asked by the Minister for Welfare Reform to undertake an independent review of passported benefits and provide a report on possible approaches to those benefits in Universal Credit. The review was tasked to consider a number of key issues including complexity, cost and work incentives.
The Low Incomes Tax Reform group sent a written response to this consultation on 22 July 2011.
In March 2012, the Committee published their report which looks at the impact of Universal Credit on passported benefits.
On 27 May 2011, HMRC launched a formal review of its Tax Credits National and Official Statistics publications. The deadline for reply to the National Statistics Review of Tax Credit Statistics was 31 August 2011.
There were almost 140 responses to the consultation which are summarised in HMRC’s initial report. The report also provides an early response from HMRC. A more detailed report will follow later this year.
Under a process called the Identity Authentication Service (IDAS), introduced in 2009, any tax credit claimant who calls the helpline is required to prove their identity by answering security questions. If they cannot answer them correctly, they are required to make an appointment at an enquiry centre for an interview.
HMRC introduced IDAS in Tax Credits without producing an equality impact assessment (EQIA), but after much pressure from the Benefits and Credits Consultation Group (the consultative body of professional and volunteer organisations) HMRC agreed to carry out a belated EQIA and this was published in February 2011. The closing date for comments was 8 May 2011.
Eight responses were received from six external bodies, including a response from the Low Incomes Tax Reform Group.
Following these responses, HMRC published their Final Report and Action Plan for the Identity Authentication Service (IDAS) in July 2011. In this final report, HMRC acknowledged that the full EQIA consultation process should have been completed prior to the IDAS service going live. They also reiterated that it is not accepted HMRC practice to implement changes without showing that they have given due regard to the need to consider the impact on equality first.
The Low Incomes Tax Reform group published an article on 6 August 2011 “HMRC make some amends for breach of equality law”, which gives their reaction to HMRC’s Final Report and Action Plan.
Alongside this, HMRC issued a consultation document on real time earnings data on 3 December 2010. The closing date for comments was 28 February 2011.
The Low Incomes Tax Reform group sent a written response to this consultation on 28 February 2011
Following consultation, HMRC confirmed a “Real Time Information pilot to go ahead in 2012”.
Employers and pension providers must use the RTI service from April 2013. All employers will be using the RTI service by October 2013. You can find further details on HMRC’s Website.
In July 2010, DWP published a consultation called ‘21st century welfare’ which set out proposals for a new welfare system.
The Low Incomes Tax Reform group sent a written response to the consultation on 1 October 2010.
Following this consultation, the Government announced in the Comprehensive Spending Review (October 2010) that Universal Credit would replace some means-tested benefits, including working tax credit and child tax credit, over the coming years.
In May 2008, the Treasury and HMRC jointly published a discussion paper called ‘Tax Credits: improving delivery and choice’. This paper made several suggestions for reform of the system including consideration of fixed awards and changes to support for childcare.
Many organisations sent written responses, a selection are included below:
The first consultation document regarding New Tax Credits was published by HMRC (then the Inland Revenue) in July 2001. The consultation was called ‘New Tax Credits: Supporting families, making work pay and tackling poverty’ and set out how the Government envisaged the new tax credit system would work and asked for responses about the proposals. A regulatory impact assessment was also published in July 2002.
Last reviewed/updated 1 July 2022