THE taxman should not force people to return money if they have been overpaid for tax credits, a North-East MP has said.

North Durham Labour MP Kevan Jones says those on low incomes - whom tax credits are designed to help - are suffering financial hardship through no fault of their own.

He spoke out at the launch of a report by the Citizens Advice Bureaux (CAB) across the North, which highlights the problems many of those receiving tax credits are facing.

The bureaux, which provide free advice and help in sorting benefit claims, say in some cases recipients who are overpaid point out mistakes only to be told their assessment is correct.

Mr Jones said he was proud of the tax credits, but "my sadness is that a flagship policy that should be helping people back into work and alleviating poverty is actually leading to problems".

He said that many could not afford to pay back overpayments, adding: "The worst case I saw was a woman who was going to have her house repossessed because she was behind in her mortgage repayments because she hadn't complained about the system.

"Where an overpayment is a mistake, it should be written off.''

The CAB report said that a third of families awarded tax credits in 2003-2004 were overpaid. Problems with the computer system and incorrect assessments were to blame.

"Families' actual incomes are being reduced below poverty levels because of poor quality administration," it added.

The report calls for adjustments in payments to be limited so families do not fall below minimum income levels and a right of appeal against the recovery of overpayments where it is an administrative error.

Paymaster General Dawn Primarolo has pledged to make improvements in the system.

A spokeswoman for HM Revenue and Customs said: "The vast majority of these overpayments were caused by rises in family income, the result of a growing economy and more people moving into work.

"Clearly, a key challenge now is to encourage the reporting of such rises to Revenue and Customs more quickly, in order to minimise people's overpayments in the future.

"The remainder of the overpayments were the result of the much-publicised IT and processing errors that occurred when the system was introduced two years ago.

"HMRC now has a new IT partner, the system is working well, and discussions are on-going with EDS (the computer firm) about compensation for past failures.''