Tax Credits and moving abroad

I have a client on WTC/CTC. They are moving abroad in a few weeks, starting a new job there almost immediately, and will be earning significantly more than what they currently earn.

Before the UC era, I believe I am correct in saying that their income abroad earned during the 2023/24 tax year would count for TC purposes, and would have meant they would have had a large overpayment for the part of the year in which they did have entitlement to TCs.

I am thinking of advising them to claim UC just before leaving, and withdraw the claim immediately (or even just put down that they have assets of over £16k). That would have the effect of cutting off the remainder of the year for income purposes (due to the in-year finalisation process for new UC claimants), and would mean no overpayment will arise.

I’ll have to work out the exact dates and figures, but it could even be worthwhile making the claim for UC a day before they receive their last set of wages here in the UK, even if that is a week or two before they leave the country…

Any comments?

Hi Charles

Seems like a good plan. Only thing I can think of, as I’m sure you have considered, is there is a power in UC(TP) Reg 12A(3) not to apply in-year finalisation, but it seems unlikely they would use it in this sort of case.

Mark

Thanks Mark.

Yes, I did consider 12A(3) - but also think they would be unlikely to use it in this case. Particularly as they won’t even be aware of the reason for the UC claim! The EM for the Regs also backs this up, as it suggests Reg 12A(3) is intended for cases where there are operational or IT issues:

“... provision has been made under regulation 12A(3) to allow the Her Majesty’s Revenue and Customs Commissioners to continue to finalise tax credits awards after the end of the tax year, if they think that it is not practicable to apply the modified legislation to a particular case or class of case or as a contingency to guard against unforeseen operational or IT difficulties.”

The EM for the 2013 Regs goes into further detail:

“7.75 The intention is that in-year finalisation of tax credits awards will be the default approach in every case. However, the Regulations allow the Commissioners of Her Majesty’s Revenue and Customs to continue to finalise tax credits awards after the end of the tax year, if they are of the opinion that it is not reasonably practicable to apply the modified legislation to any particular case or category of case. This flexibility has been built in as a sensible contingency to guard against unforeseen operational difficulties with the inyear finalisation process.

7.76 Whilst it is inevitably difficult to predict the types of problem that might arise, it is envisaged that the Commissioners’ discretion might, for example, be exercised where there is an unforeseen system or process failure. Similarly, it could be exercised in the event that it proved difficult to verify income in a case or class of case where income is particularly complex, such as, for example, those including particular combinations of self-employed and other income.”