The tax credit was introduced by the government in October 1999 as a salary top-up to help low paid parents cope with childcare costs.
However 700 case reports compiled by the NACAB show that excessively ridged rules are making it difficult for parents to derive any benefit from it.
In many cases employers have cut their employees’ working hours to avoid the red tape required to administer the additional credit on top of monthly salaries, while employees have complained about tougher work conditions and are worried about their job security.
In the worst cases, employers have even gone so far as to fire workers entitled to the tax credit, according to the NACAB. In one example of a single mother of three was dismissed from her job after her employer said he could not cope with the hassle of paying WFTC.
And some parents have complained the additional income has not left them any better off, after they lost the benefits of free school meals, and financial assistance with rent and council tax.
NACAB chief executive David Harker said it made no sense that a scheme that was making it more difficult for some people to stay in their jobs.
He added: ‘The scheme should not put jobs at risk or trap people on income support.’
The NACAB report recommended parents be given the choice of being paid directly by the Inland Revenue, rather than by their employers. In addition they should be able to claim the childcare tax credit at any point during the six month WFTC award period (at present it can be claimed only from the start of an award).
The NACAB also recommended the WFTC at certain levels should provide children automatic entitlement to free school meals.
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