I've had a query regarding payments in kind and how HMRC view them for Tax Credits. Would be grateful for pointers to where I can find an answer.

Client already has work over 16 hours but doing extra work for a self employed hairdresser who as yet can't afford to pay in cash, only in services and kind.

I've looked at guidance on Tax Credits and can't distinguish any condition that would apply.

There are references to payment in kind being used to establish "paid work" for purposes of tax and I' ll nedd to tell her to inform the employer as there is obligation to NIC.

From a personal bog standard common sense approach and the conviction HMRC would rather choke than be merciful I'd expect tax Credits to take account of her payments in kind and give them a cash value or ask for cash value to be supplied. Any assistance gratefully jumped on

Tony

The basic rule for treatment of income in Tax Credits claims, is that they take all taxable income into account. In other words they apply the same rules as for income tax. Don't know if that's of any help Tony.

Thanks. That reinforces my feeling that the payments in kind will be assigned an income value for Tax Credits purposes. Starting to get interesting cos client now saying compliance are holding up the claim and the letter telling her this had an extra missive about how she could be fined 3 grand if they think she's pulling their chain.

As has been said, the tax credit benefit rules follow tax rules. these vary whether someone earns less or more than £8,500 per annum. The rules are more relaxed for those under £8,500.

Assume that if you have a tax liability you have income for tax credits purposes. A major exception is childcare vouchers which are not income for tax credits purposes.

If you want help, feel free to post your query to our website.