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

Tax Credit Review on UC claim

Timothy Seaside
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Housing services - Arun District Council

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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
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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
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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
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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
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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
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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
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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.