Families lose out in tax farce

MILLIONS of families face losing money as the Government's new tax credit system descends into a shambles. Worried parents say cash needed to raise children and meet bills has not been paid into their bank accounts as promised.

Fewer than half the 5.75m families entitled to the tax credit payments are guaranteed to receive them on time this month. The result is that families could be missing £200 to £300 a month. The problems coincide with an increase in National Insurance payments, which has already substantially cut the take-home pay of millions of workers.

There are also concerns that at least 500,000 families entitled to tax credits have simply gone 'missing' from the system. A telephone helpline set up to deal with inquiries about the new regime has collapsed under the weight of calls. Last night, the Inland Revenue said it has appointed 700 extra staff to help the 2,000 workers originally designated to handle calls.

So serious is the situation that officials have drawn up contingency plans to hand out Giro cheques to families at local tax offices.

But the new payment regime - drawn up on the orders of Chancellor Gordon Brown in an attempt to merge the tax and benefits system - risks being totally discredited.

The Government claims nine out of ten families with children, including all households with an income up to £58,000, will benefit from the new Working Tax Credit and Child Tax Credit.

However, problems have dogged the decision to put an end to the tax allowances which were previously used to help families, particularly those with children. Instead, this money is being collected by the taxman and then paid directly to carers - mainly mothers - through their bank accounts. This is separate to child benefit.

The first part of this equation has happened, effectively cutting the take-home pay of fathers. But the second element, making sure money goes to mothers, appears to have broken down.

The Inland Revenue has so far received 3.9m applications for the tax credits. However, it said payments could be guaranteed on time only to the 2.6m who applied before 31 January.

Some 1.3m will automatically be awarded money under the new regime without having to make a formal application. However, there are approximately 525,000 families who are missing from the system. This group is entitled to claim the tax credits, but has not done so.

The problems arose because the Inland Revenue failed to give families sufficient warning of the changes and time to make their applications.

Application packs went out only last August and families were expected to get to grips with the forms - criticised as being confusing - and return them by January Just 2.6m of the 5.75m potential applicants met the deadline, while the Government helpline was unable to cope with the flood of calls from families who could not understand the forms or how to claim.

Conservative work and pensions secretary David Willetts said: 'This is just a shambles. The Inland Revenue has been changed from a taxation department to a benefits department and it clearly cannot cope.

'My own research demonstrates that the so-called helpline has effectively collapsed. People either cannot get through at all, or they are faced with a 20 to 30-minute wait on hold.

'Millions of middle and low income families who are legally to these tax credit paymentsare not getting the money they have been promised.

Liberal Democrat work and pensions spokesman Steve Webb said: 'The scheme probably looked good on a blackboard at the Treasury, but it did not take into account the complexities of individual families. The Inland Revenue plainly cannot cope, but this is just the beginning of the saga.

'Every time someone's circumstances change, they will have to inform the Inland Revenue and be reassessed. This is a recipe for confusion and chaos.'

An Inland Revenue spokesman said: 'We are aware that people were not getting through to the helpline as easily as they would like. We do regret that and we are sorry for that.' He said the helpline, which operates seven days a week, will be in action over Easter, other than on Easter Sunday.

He added: 'We did say that provided applications were made by 31 January, there would be a smooth transition to the new system of tax credits. With applications after that date, we will do everything we possibly can to make sure payments get out as soon as possible.'

I've been forced to borrow money
SINGLE mother Kate Rolling, 30, from Winchester, Hampshire, earns £11,000 a year as a graphic designer, She has a nine-year-old son, Jake.

Under the old tax credit scheme, she received £115 a week, but the payments stopped on 7 April. She said: 'I absolutely depend on this money. It pays for my child care. I sent in my application in December and have been checking by phone since January that it had been recorded, which it had.

'But I have had no notification when I would get it. I spent two and a half hours yesterday trying to get through to the helpline. When I did get through, I was kept on hold for 20 minutes.

'The woman told me she didn't know when I would get the money and she couldn't check my details because they were giving priority to people who hadn't filled in the form properly. It's just madness. I have been left high and dry. I have had to borrow money off my mother.'

Sue Evan-Jones and her husband David, 54, a computer engineer for Avon and Somerset police, live in Yate, Gloucestershire, with their sons Luc, 15, and Marc, 12. Mrs Evan-Jones, who is disabled and does not work, filled in the forms in November and is due to receive credits of about £190 a week.

But despite numerous calls to the helpline, the application has still not been processed. She said: 'This is causing us huge problems. My husband is now paying more in National Insurance, so we need help even more.

'Each time I talk to somebody, they say it is being processed and that we'll have it in two weeks. This has been going on since January. It's typical of the Government. They bring in this new scheme but don't think it out.'