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Forum Home  →  Discussion  →  Children and childcare  →  Thread

How do you close a tax-free childcare account?

 

Jeremy Barker
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Citizens Advice North Lincolnshire

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It’s not possible to claim UC and use the Tax-free Childcare (TFC) scheme. I know that if you set up a TFC account when you have a UC or tax credits claim that claim is terminated. However I’m trying to find how to go the other way - cancel the TFC account and claim UC. I cannot find any information about closing down a TFC account - the CPAG handbook says on p.864 “The government says that you will be able to leave the tax-free childcare scheme (and possibly get UC or tax credits again), but can only do so a limited number of times, unless there has been a relevant change of circumstances - e.g. a change in the make-up of your household or a change in your work.”

My client has been using TFC but their relationship has ended and she needs to claim UC. As she can’t have both TFC and UC she needs to close the TFC account but I can’t find anything anywhere about how to do that. Does anyone know whether simply making a claim for UC will close the account?

     
victoriatodd
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Welfare Rights Technical Officer, Low Incomes Tax Reform Group

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My understanding is that it is possible to close a TFC account - have you tried phoning the childcare helpline? They should be able to action it. https://www.gov.uk/government/organisations/hm-revenue-customs/contact/childcare-service-helpline

Victoria

     
Jeremy Barker
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Citizens Advice North Lincolnshire

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Thank you for that - I have informed my client

     
DebbieS
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Reading Citizens Advice

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Following on from the original post, does anyone know if it is in fact possible to get tax credits re-instated following opening a TFC account “by mistake”? Or would a person be forced to claim UC?
Many thanks

     
Mark Willis
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Welfare Rights Worker, CPAG in Scotland

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Hi DebbieS

I think it would be difficult to get tax credits reinstated in this scenario but may be arguable. Section 30 of the Childcare Payments Act 2014 ( http://www.legislation.gov.uk/ukpga/2014/28/contents ) indicates that tax credits would be automatically terminated:

30 Termination of tax credit awards
(2)This subsection applies where—
(a) a person (“P”) has made a valid declaration of eligibility for an entitlement period,
(b) an award of a tax credit is or has been made—
(i) to P or to a person who is P’s partner on the relevant day (whether on a single claim or a joint claim), or
(ii) to both of them on a joint claim, and
(c) the award is for a period that includes the relevant day.
(3) Where subsection (2) applies, the award of the tax credit terminates immediately before the relevant day, regardless of whether the decision on the claim was made before or after the relevant day.

Challenging this decision would be tricky, for one thing because it’s not clear there is a right of review/appeal under the Tax Credits Act s21A /s38 against a decision apparently made under the Childcare Payments Act, but also because the decision would appear at first glance to be correct. The similar rule on tax credits automatically terminating due to a UC claim was considered in HMRC v LH (TC): [2018] UKUT 306 (AAC) although this was an appeal against an in-year final decision on tax credits after the award was terminated, rather than the decision to terminate tax credits. It’s also different with tax-free childcare as there is no provision for ‘in-year finalisation’ of tax credits unless a UC claim is made, so the final decision would not be made until the end of the tax year.  Presumably a mandatory reconsideration would have to be based on an argument that the person had not made a valid declaration of eligibility under section 4 of the Childcare Payments Act and Reg 6 of the Childcare Payments Regulations 2015. Or perhaps a complaint/judicial review if mis-advised by HMRC.

A new claim would likely be rejected because although the TC Claims & Notifications Regs, Reg 7A(2A) was amended to allow backdating where a childcare account is closed and no payments made, a new claim for tax credits is no longer possible under Article 7 of the WRA Commencement No 23 Order (unless claimant is entitled to the SDP in existing benefit) which also says the backdating provisions are irrelevant.

Re-applying for tax credits after 6 April 2019 could be worth a try because Article 7(6) of the WRA Act Commencement No.23 order says the provision that prevents new claims “does not apply to a claim for a tax credit where a person is or was, or persons are or were, entitled to child tax credit or working tax credit in respect of a tax year and that person or those persons makes or make (or is or are treated as making) a claim for that tax credit for the next tax year.” In practice this is intended to cover renewals so likely to be a struggle to be accepted by HMRC.

So in most cases if people need help with childcare costs it seems they would have to claim UC, in which case there would be definitely be no way back to tax credits.

Mark

PS Does anyone else hear Al Green singing the title of this thread, or just me?

     
Charles
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Accountant, Haffner Hoff Ltd, Manchester

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Mark Willis - 14 March 2019 10:00 AM

Re-applying for tax credits after 6 April 2019 could be worth a try because Article 7(6) of the WRA Act Commencement No.23 order says the provision that prevents new claims “does not apply to a claim for a tax credit where a person is or was, or persons are or were, entitled to child tax credit or working tax credit in respect of a tax year and that person or those persons makes or make (or is or are treated as making) a claim for that tax credit for the next tax year.” In practice this is intended to cover renewals so likely to be a struggle to be accepted by HMRC.

Hi,

I would like to try this, as I have a client who was entitled to tax credits last year. They have nothing to lose (they have significant savings, so UC is out the question), so they’re happy to try this.

My question is, how do I get HMRC to make a decision on a claim for us to appeal?

     
DebbieS
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Reading Citizens Advice

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Thanks Mark for your very helpful reply. I was concerned that our client (who speaks little English) had been left with the unrealistic expectation that tax credits would simply be handed back to her.

     
Charles
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Accountant, Haffner Hoff Ltd, Manchester

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Has anyone had any luck with getting tax credits reinstated after a TFC childcare account was opened in error?