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Tax Credits — The Problem of Overpayments

Robin Williamson Technical Director of the Low Incomes Tax Reform Group considers how the operation of the tax credits system can give rise to overpayments and debt
It is a well-publicised feature of the new tax credits that they target resources on those who most need help when they need it and are responsive to changes in circumstances. But claiming tax credits when income is low could place the claimant in debt particularly where income increases substantially in-year or where claimants have already run up an overpayment and consequently face hardship.
To understand how this problem arises it is necessary first to consider how the renewals process works in outline.
Awards and entitlement — an outline of...

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