Closed period supersession for CTC?

Tenant is receiving CTC for two children. Children’s Services told HB in June that both children have been in the care of their father since April, so they are not on the HB claim any more. We are now hearing that one child is back with the tenant. The tenant has continued to receive CTC for two children throughout.

I’ve realised that although I know exactly how HB would deal with this, I have no idea how HMRC will. So how should HMRC deal with this when they catch up with the facts? Should they end the CTC from when she ceased to be responsible for the children, or should they deal with it as an ongoing claim with a period of non-entitlement?

She’s getting SDP so I’m not keen to advise her to move onto UC now if she doesn’t need to, but if she’s no longer entitled to CTC then I’d like to at least prepare her for what’s going to happen next.

I can’t say I have had such a case in practice, but I think the legislative structure of tax credits is sufficiently different for the case law re. closed period supersessions not to apply to tax credits. In particular, the existence of s.3(2) of the Tax Credits Act 2002 is very relevant.

The analysis in JL v HMRC (TC) [2013] UKUT 0325 (AAC) also seems to back this up.

However, if HMRC were only to find out about this after the end of the tax year, then this could be different, as they would no longer be able to make a s.16 decision to terminate the award, and s.3(2) TCA 2002 would no longer apply (see R(TC) 2/06, para.6).

Thank you Charles.

I think that all makes sense now. During the TC year (the “period”), HMRC can decide (s16) to terminate the CTC because there was a point during the period when the claimant couldn’t have made a claim (s3(4)) - in this case because she wasn’t working and wasn’t responsible for any children. But once you get into the next period, it’s too late for HMRC to terminate under s16.

So really does this mean that the closed period rule DOES apply to tax credits - it’s just that the period in question is the whole CT year (rather than the benefit week for HB, for example)?