Now taxman plans to raid banks of families it overpaid tax credits

STRUGGLING families deemed to owe the Government money because of errors by the taxman could have the funds snatched directly from their bank accounts.

HM Revenue and Customs is already under fire due to proposals that would give it the power to raid citizens’ accounts for unpaid income tax.

Now, it has emerged that the controversial measure could also be used to recover money from people paid too much in tax credits, which are designed to help lowincome families.

Recipients have to estimate how much they will earn, which is used to calculate how much they receive in tax credits. If they then get a pay rise, they may have to give some of the money back. Even those who owe the Government due to mistakes by HMRC could still have funds taken directly from their accounts.

According to the taxman’s own figures, the proposed new powers will be used against 3,000 people a year – who, by definition, are already on low incomes.

Campaigning group False Economy, which uncovered the plans through a Freedom of Information request, said the new powers could increase the burden on the low-paid. Spokesman Chamina Jayanetti added: ‘Tax credit overpayments are just a state-created debt that many families can never pay off.’ Citizens Advice chief executive Gillian Guy added: ‘Tax credits are there to make sure people get a decent standard of income, but the sharp rise in debts from overpaid tax credits suggests this policy is having the opposite effect.

‘Seeking to improve the accuracy of tax credit payments is sensible, but HMRC needs to tread carefully. It does not take much to push families into financial trouble and mistakes will be harmful.’

HMRC said it did not yet have the power to take money from debtors’ accounts. A spokesman added: ‘In all cases, £5,000 will be left across the debtor’s accounts after the debt has been recovered.’