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Forum Home  →  Discussion  →  Universal credit migration  →  Thread

Tax Credits Entitlement

AlexJ
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Trafford Welfare Rights

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Total Posts: 178

Joined: 4 July 2016

Hello

I have a client on a very low income, who was in receipt of tax credits until recently.

Her tax credits were stopped as she has been told that she was overpaid the childcare costs element earlier this year. As a result, over the course of the 2019 - 2020 tax year she has now been already paid more tax credits than she was entitled to.

So is this the end of the tax credits award? Or will the award remain ‘dormant’, because the client is still sort of entitled, as she fits all the conditions of entitlement (she works the requisite number of hours for WTC, she is responsible for children , her income is low enough etc.). All that has happened is that her payments were simply weighted towards the earlier part of the tax year. Assuming no change in her circs before the end of the tax year, will she be able to resume tax credits entitlement at the beginning of the next tax year?

Obviously the background to this is the question of whether she claims UC. There are a couple of disadvantages to the client in claiming UC which I won’t bother expanding upon here; the main question is whether UC is the only option now, or if the tax credits can be picked back up, come April.

Any thoughts?

Alex

Charles
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Accountant, Haffner Hoff Ltd, Manchester

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Joined: 27 February 2019

The tax credit claim is most definitely still live.

AlexJ
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Trafford Welfare Rights

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Total Posts: 178

Joined: 4 July 2016

Hi Charles,

Thanks for the quick response. That was my feeling as well, what with tax credit entitlement being calculated on an annual basis, but I needed to be very confident about this because come April, if I’d been wrong then client would have missed out on significant UC in the meantime.

Could you or someone else expand on the reasoning behind this?

Thanks

Alex

Charles
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Accountant, Haffner Hoff Ltd, Manchester

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Your client’s tax credit award is for the whole tax year. How the payments are spread out are irrelevant.

To explain further, tax credits require a fresh claim each year. For this reason, there is special provision in the UC Commencement Orders allowing fresh claims by people who had an award the previous year. See for example para 6 here.
In fact, even someone who has a nil award for one tax year can make a renewal claim the following year.

AlexJ
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Trafford Welfare Rights

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Total Posts: 178

Joined: 4 July 2016

That’s great, thank you very much Charles.