Tax refund due on earnings and underlying entitlement

Complicated one here - well OK not very by Rightsnet standards.

Client’s HB stopped because council found out she’d got a temporary job when IBJSA stopped. It wasn’t just suspended though she has no memory of being asked to provide evidence of income, though that doesn’t surprise us with this client as she is not very good at that sort of thing.

She worked part-time for about 5 months, earning below the NI and tax thresholds, but as she had provided no P45 (surprise surprise) she had basic rate tax deducted from her earnings on the “week 1” basis. The job ended and she has successfully reclaimed both IBJSA and HB, but without any backdating.

She now of course has rent arrears and we are trying to help her to keep her home. The council is happy to look at underlying entitlement for the period since it stopped, and she can produce all her payslips. Will they calcualate it on the basis of her actual net pay or will on the basis that she shouldn’t have been paying tax all along?

I do not think they have any option other than to take the earnings as paid, net of tax -

HB Regulation 36 is clear that net earnings are the gross earnings less “any amount deducted from those earnings by way of income tax….”

so, if tax was deducted, it is the net figure that should be used

Reg 36(6) allows a notional deduction for tax, NI and half pension from estimated earnings, but as you have actual earnings here, it can’t apply

I agree. Then she will later have the bonus of a tax refund that she can pay to her rent arrears as well (ahem)

Thanks both