Low-income families lose nearly £20,000 tax credits due to data error

The UK government failed to pay the correct level of tax credits to thousands of families with disabled children for years, it emerged on Friday (25 November). The underpayment, which was buried in the policy costings of Wednesday's Autumn Statement, has cost families as much as £4,400 a year.

Families whose children qualified for Disability Living Allowance and who also received tax credits missed out on the extra £3,100-£4,400 per annum, which is calculated on the basis of the severity of disability. The error occurred due to a "gap in the data-feed between DWP and HMRC during 2011-14", according to the UK government's document, which meant that 28,000 families did not receive the higher level of tax credits.

Though the Autumn Statement set out plans to backdate the payment, it would only go back as far as April this year at a cost of £95 million to the government. However, between 2011 and now, those families could have missed out on almost £20,000.

The rationale for backdating the payment only as far as April this year was that it was the responsibility of individual claimants to claim the correct amount of benefits. However, the error was caused by government failing to inform families of their eligibility.

Disability Living Allowance is paid by the Department of Work and Pensions, while tax credits are paid by Her Majesty's Revenue and Customs. Ordinarily, when a family applies for disability benefit on behalf of a child, they would be asked at the same time if they were in receipt of tax credits, and that information would be shared with HMRC, which is intended to ensure families receive the correct level of benefits. In this case, that appears not to have happened.

Despite public perception to the contrary, benefits are generally under-claimed by those who are eligible to receive them, it is thought often because of a lack of access to understanding or awareness of eligibility rules as well as the stigma surrounding benefits. Earlier this year, charity Turn2Us published a study conducted by Research Now which estimated as much as £15 billion worth of benefits went unclaimed every year.