× Search rightsnet
Search options

Where

Benefit

Jurisdiction

Jurisdiction

From

to

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

Tax Credit Review on UC claim

Timothy Seaside
forum member

Housing services - Arun District Council

Send message

Total Posts: 539

Joined: 20 September 2018

I’ll start by saying I don’t have much experience of tax credits.

One of my clients has just sent me a copy of the review form they got after claiming UC. I had a look through it and saw that the review has the partner down as only working 20 hours when he usually works over 30 in reality. So I thought I’d have a look at how much more money they would get with all the correct information, and WTC elements.

I was quite surprised to find that on the exact same income they got about £100 less tax credit (over the first three months of this tax year). I think I’ve done the sums right, and it’s clearly to do with the massive difference in threshold between WTC&CTC; and CTC alone. So this means that a person earning £20 per hour for 15 hours per week will get a lot more tax credit than somebody earning £10 per hour for 30 hours? I appreciate I’m a little late to the party on this, but is this correct, or am I missing something?

 

Gareth Morgan
forum member

CEO, Ferret, Cardiff

Send message

Total Posts: 1995

Joined: 16 June 2010

Timothy Seaside - 17 July 2020 02:44 PM

I’So this means that a person earning £20 per hour for 15 hours per week will get a lot more tax credit than somebody earning £10 per hour for 30 hours? I appreciate I’m a little late to the party on this, but is this correct, or am I missing something?

If that’s the only person working, they won’t get any Working Tax Credit if working 15 hours.

Charles
forum member

Accountant, Haffner Hoff Ltd, Manchester

Send message

Total Posts: 1411

Joined: 27 February 2019

Nope, something wrong there. The threshold for CTC for claimants also entitled to WTC is never lower than it is in CTC-only cases, and often substantially higher, particularly this year.

Timothy Seaside
forum member

Housing services - Arun District Council

Send message

Total Posts: 539

Joined: 20 September 2018

Thanks for the responses - they made me look a bit harder at it and I spotted my mistake - I somehow managed to miss out the couple element.

I had a think about the difference in threshold between claims which are CTC only and ones that include WTC. The WTC basic element and the couple/single parent element were previously set at almost exactly 41% of the difference in threshold - matching the taper. So whether you were earning £16,105 in 15 hours or 29 hours last year, you’d still get all your CTC amount.

With the increased WTC basic element this year, the aggregate of WTC elements (for somebody with children) is about 52% of the difference in thresholds and the taper has stayed the same, so you should always be better off with WTC.

Gareth, the reason I mentioned 15 hours was to make it clear that there would be no WTC, but I didn’t make it clear I was talking about somebody who was already getting CTC. My point (which turned out to be mistaken) was about the difference in the thresholds.

 

[ Edited: 20 Jul 2020 at 10:26 am by Timothy Seaside ]
Charles
forum member

Accountant, Haffner Hoff Ltd, Manchester

Send message

Total Posts: 1411

Joined: 27 February 2019

Timothy Seaside - 20 July 2020 10:23 AM

I had a think about the difference in threshold between claims which are CTC only and ones that include WTC. The WTC basic element and the couple/single parent element were previously set at almost exactly 41% of the difference in threshold - matching the taper. So whether you were earning £16,105 in 15 hours or 29 hours last year, you’d still get all your CTC amount.

As you explain, it doesn’t make a difference, but there is anyway a rule that the threshold for CTC cannot be lower than the £16,105 figure, whether you are also entitled to WTC or not.

Timothy Seaside
forum member

Housing services - Arun District Council

Send message

Total Posts: 539

Joined: 20 September 2018

Charles - 20 July 2020 01:01 PM

As you explain, it doesn’t make a difference, but there is anyway a rule that the threshold for CTC cannot be lower than the £16,105 figure, whether you are also entitled to WTC or not.

CPAG handbook seems to be convinced you can only have the higher threshold if you are CTC only. See, for example, pp 291 &1435; (last year’s edition). They reference Reg 3 of the CT(ITDR) Regs. Sadly legislation.gov.uk only seems to have the original version as made and I’m not keen to go through all the amendments to see if anything material has changed (other than the amounts).

Reg 3 says (or said in 2002)...
“(2) In the case of a person or persons entitled to working tax credit, the amount in relation to that tax credit is £5,060.

(3) In the case of a person or persons entitled to child tax credit, the amount in relation to that tax credit is £13,230.”

I can’t see any reason why this would mean that the lower threshold applies in the case of a person entitled to CTC and WTC. Is this what you are referring to, Charles? And if so, why does CPAG seem to be so clear that the lower rate applies if there is any WTC in the maximum amount?

Charles
forum member

Accountant, Haffner Hoff Ltd, Manchester

Send message

Total Posts: 1411

Joined: 27 February 2019

See Reg 8(3) Step 4 of those Regs. The lower threshold applies for the WTC elements, but the CTC elements will never be tapered before you reach the higher threshold.

As you explained earlier though, this is never relevant anyway, as the threshold for the CTC elements for someone entitled to both WTC and CTC will anyway be at least £16,105 if not higher. I haven’t looked at the CPAG book inside, but perhaps that’s why they don’t mention this.

By the way, you can get consolidated versions of tax credit legislation on the HMRC Technical Manual, and the Revenuebenefits website has even newer consolidated versions.

Timothy Seaside
forum member

Housing services - Arun District Council

Send message

Total Posts: 539

Joined: 20 September 2018

A continuation of this case…

The client has just sent me a letter from HMRC about their tax credits from 06/04/2019 to 05/04/2020. The letter is dated 16 August 2019 and she is adamant she has only just received it. It says HMRC are going to stop paying tax credits because either she hasn’t returned the declaration they sent her on 20/04/2019 or she hasn’t given them enough information to renew the award. It says the whole of the 2019/2020 payment (about £3K) was overpaid and she has until 17/11/2019 to dispute recovery.

They continued to get tax credits up until they claimed UC at the end of June/ start of July 2020. I advised them about what to do with their review form they got after they claimed UC. I believe they called HMRC to correct some errors, as the letter instructed them to do. They have heard nothing from HMRC since then, until now.

As I said at the start of this thread, I don’t have a lot of experience of tax credits, so I am a little bit flummoxed by this. Can anybody suggest anything, please?

Charles
forum member

Accountant, Haffner Hoff Ltd, Manchester

Send message

Total Posts: 1411

Joined: 27 February 2019

This is strange. I would call up tax credits and ask what is going on.

Letters issued in August as a result of the renewal not being carried out give you the chance to call up HMRC and get the renewal completed with no loss of tax credits. Also, HMRC wouldn’t have continued paying them from August 2019 (most claimants who don’t do the renewal see their payments being stopped even before they receive such a letter).

Was their total 19/20 award £3k, or does that correspond approximately to the amount they would have received up to the end of July 2019?

Timothy Seaside
forum member

Housing services - Arun District Council

Send message

Total Posts: 539

Joined: 20 September 2018

Thanks Charles. I’ve asked the client to complete a TC689 so that I can do the work for them (there is a bit of a language barrier so I don’t think a joint call will help).

On the review form when they claimed UC in July 2020, the amount paid for 2020-21 was £2865.60. They were getting about £700 every four weeks.
On the letter they’ve just received (dated 19/08/2019) the amount paid for 2019-20 is stated as £2898.29. Circumstances in the two years were very similar, so presumably that would have been close to the amount they would have received up to July 2019.

Is it normal (or Covid-normal) that they still haven’t had any response since they notified HMRC in July about inaccuracies in the review information at the start of the UC claim?

Charles
forum member

Accountant, Haffner Hoff Ltd, Manchester

Send message

Total Posts: 1411

Joined: 27 February 2019

Certainly speak to tax credits, but I think the most likely thing to have happened is that your client missed the deadline of 31/08/2019 for the 18-19 annual review so their payments were stopped. They presumably then called up and completed the renewal over the phone, and the claim was put back into payment. This letter was probably issued before they did the renewal on the phone - why it was only received now I have no idea.

I haven’t got any clients at the moment who have done a 20-21 review due to a UC claim, but many of our clients’ 19-20 renewals haven’t been processed yet. It certainly feels like it is taking longer than previous years.