Effect on HB/CTB of Tax credit backdated payment

My clients working hours and earnings decreased from September. He advised the tax credit office of the change and received an amended award which removed the 30 hour bonus but did not take account of the reduced earnings. He was unsure of the amended total for the year and was told that he should give the amount in his annual declaration.

In fact he is no worse off on less tax credits and more housing beneift / council tax benefit than vice verse and it was always my understanding that a lump sum of backdated tax credits would always be treated as capital rather than income in which case he should be advised to amend his annual earnings figure for the purposes of his tax credit claim at point of annual declaration as instructed by the tax credit office in order to maximise his income in additon to ensuring that he will be underpaid rather than overpaid tax credits should his income change again before the end of the year.

i would welcome anyones views on this situaion especially taking into account the following judgement which would seem to indicate that the backdated payment would be regarded as income thus potentially generating a housing benefit / council tax beneift overpayment for the past year.

http://www.bailii.org/ew/cases/EWCA/Civ/2011/1155.html

edited to to fix link

Arrears of tax credits are disregarded under paragraph 9 of Schedule 6 to the HB Regulations so, no, an overpayment of HB would not be raised in these circumstances (similar provision for CTB)

Edits are due to repeatedly messing up my typing and not checking it!!

Tax credits is treated differently because there is express legislation relating to arrears of tax credits.  “Minter / Potter” doesn’t change that.

Regulation 46(9) of the HB Regs 2006 states that arrears of TCs “...shall be treated as capital.”

NB:  For clarity, “of arrears” is not the same as “in arrears”.

Many thanks to you both for the very helpful responses