TaxPersonal TaxTax credit overhauled

Tax credit overhauled

The government has scrapped employers' duty of paying for the child tax credit through the pay packet, but will still expect companies to administer the working tax credit.

Link: Brown launches new family tax credit scheme

As the Treasury launched a £9m advertising campaign encouraging people to claim the tax credits, chancellor Gordon Brown announced the child tax credit would be paid direct to carers either in cash or through a bank account.

The chancellor first announced his intention to overhaul the existing tax and benefits system in his 2000 Budget, though the new child and working tax credits will not be introduced until April 2003. The tax credits will replace the existing working families’ tax credit, disabled person’s tax credit and the children’s tax credit.

The moves were criticised by the Institute of Directors, which has calculated the tax credit system is currently costing British business #89m to administer.

‘We’ve gnashed our teeth about tax credits, as they can create huge misunderstandings between employers and employees (over private information),’ said Ruth Lea, the IoD’s head of policy.

Lea also complained the credits were adding extra complexity to companies’ payrolls.

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