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Forum Home  →  Discussion  →  Income support, JSA and tax credits  →  Thread

WTC & HB

davidsmithp1000
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Brighton Unemployed Centre Families Project

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Total Posts: 195

Joined: 22 May 2016

Hi. Can I please quiz, on TC for a client;

Client, single mother, child aged 6, self employed - 16hrs per week WTC

Client is asking how HB & WTC are treated, that being;

when filing tax returns and creating accounts - travel expenses, (and other expenses) can be disregarded. Do HMRC and HB treat these in the same way?

Also; school holidays; tax credits are awarded and calculated annually and so school holidays, when client not working can be negated - does this impact on HB though?

Any comments welcome. Thanks

HB Anorak
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Benefits consultant/trainer - hbanorak.co.uk, East London

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Total Posts: 2895

Joined: 12 March 2013

HMRC uses the same income figure for both tax ad WTC (“taxable income”).  Some expenses that are allowable for tax purposes are not allowable for HB, so the taxable income used by HMRC might not exactly match the HB self-employed earnings assessment.  Losses carried forward, depreciation and capital investment are not allowed for HB.  Travel though is allowed.

HB will assess self-employed earnings over an “assessment period” of up to one year: this is a period in the past selected as being most likely to provide an accurate basis for estimating income going forward.  If there are seasonal fluctuations, such as school holidays, the Council will normally look to use a whole year assessment period so that everything is smoothed out.

If the self-employment has only started recently most local authorities will take it three months at a time: use the claimant’s projections for the first three months, then use income received in months 1-3 as the basis for the HB assessment in months 4-6 and so on until a whole year is complete.  During that initial year the three months including the summer vacation will probably be dealt with as an isolated period so the earnings used to assess HB in the next three months will dip.

Unlike Tax Credits, HB does not feature a retrospective end of year reconciliation: self-employed earnings are always assessed prospectively and councils don’t go back unless:

- there was something wrong with the estimate based on the facts at that time, or
- there has been a clear change of circumstance from an identifiable date, such as the claimant securing a new contract that significantly increases his/her earnings.

But HB isn’t reassessed retrospectively simply because the claimant did a bit better (or a bit worse) than predicted.