New tax credit scheme slated

The government’s new working family tax credit has come under fire from experts over the practical difficulties of offering tax credits to employees on unpaid time off.

The WFTC, due to take over from the government-paid family credit in April 2000, will require low-paid employees to be paid tax credits, plus their basic salary, over a 26-week period. The employer can then off-set the credit against PAYE and NI liabilities.

After questioning the Inland Revenue and employers, the Commons social security committee highlighted unresolved issues such as how the government could force reluctant employers to pay the tax credit and what happens when people change jobs. ‘The inability of officials to give answers on such key questions gives ground for concern about the delivery of the timetable,’ the committee said.

Anne Redston, a tax partner at Ernst & Young, called for the government to release more information on how it will administer the proposal for offering tax credits to compensate workers forced to take unpaid time off work over family crises.

‘You invariably don’t get warning of family crises and the time off varies. It is another difficult dimension for the small employer,’ she said.