Example Of A Revised Award Calculation
Contents
Case details
Initial change of
circumstances
Second change of
circumstances
The capture process produced the following claim details and the effective date is 02-05-2009
Claimant 1 details
- Date of birth is 30-04-1970 aged 39 at 02-05-2009
- Works 16 hours per week
Claimant 2 details
- Date of birth is 01-08-1967 aged 41 at 02-05-2009
- Works 10 hours per week
Children
- Took responsibility for two children, dates of birth – 20-09-1992 and 08-07-1995, Aged 16 and 13 respectively, at 02-05-2009
Income
- For 2008-2009 tax year - £18,600
The claim satisfied both the Working Tax Credit (WTC) and Child Tax Credit (CTC) eligibility rules.
The results of the initial award calculation were as follows
Entitlement Period 1
- 02-05-2009 to 31-08-2009
- 122 days long
| Entitlement | Amount due |
| WTC work elements | Nil |
| CTC individual elements | £1,162.14 |
| CTC family element | £183.00 |
Entitlement Period 2
- 01-09-2009 to 05-04-2010
- 217 days long
| Entitlement | Amount due |
| WTC work elements | Nil |
| CTC individual elements | £736.88 |
| CTC family element | £325.50 |
To illustrate the working of the revised award calculation
rules, two separate changes of circumstances will be
considered.
Initial change of
circumstances
On 21-07-2009, claimant 1 notifies that they lost their job on 18-07-2009 and has applied for Income based JSA. They decide to submit CY income figures – they total £7,400
First revised award calculation: Stage 1 – Establishing award and entitlement periods
The award period is unchanged from the last calculation, that is 02-05-2009 to 05-04-2010.
Entitlement periods
The Eligibility rules identify that from 02-05-2009 the following elements were due based on the claimant’s circumstances at that date
- WTC – basic element
- WTC – second adult element
- CTC - child element for two children
- CTC - family element
From 19-07-2009 as neither claimant is working 16 hours, only the following elements were due
- CTC – Child element (x2)
- Family element
From 01-09-2009 as eligibility to the CTC Child Element is assumed to end on the 31 August on / following the child’s 16th birthday, a change in eligibility also needs to be taken into account for the child with DOB of 20-09-1992.
Although income must only be taken into account for part of the award period, the start and end dates for these periods coincide with changes in eligibility. No more entitlement periods are needed as a result.
Three entitlement periods will therefore need to be considered in the award calculation
- 02-05-2009 to 18-07-2009
- 19-07-2009 to 31-08-2009
And
- 01-09-2009 to 05-04-2010
Stage 2 – Calculate the maximum amount for each entitlement
Entitlement period 1
- 02-05-2009 to 18-07-2009
- Number of days in the period – 78
Element maximum amounts
| Element | Calculation | Maximum amount |
| WTC – basic element | £1,890
÷ 365 = £5.18
78 days x £5.18 per day | £404.04 |
| WTC – second adult element | £1,860
÷ 365 = £5.10
78 days x £5.10 per day | £397.80 |
| CTC – child element | £2,235
÷ 365 = £6.13
78 days x £6.13 per day | £478.14 x 2
= £956.28 |
| CTC – family element | £545
÷ 365 = £1.50
78 days x £1.50 per day | £117.00 |
Entitlement maximum amounts
| Entitlement | Element | Maximum amount |
| WTC work elements entitlement | Basic element and second adult elements | £404.04
+ £397.80 = £801.84 |
| CTC individual elements entitlements | Child element | £956.28 |
| CTC family element entitlement | Family element | £117.00 |
Entitlement period 2
- 19-07-2009 to 31-08-2009
- Number of days in the period – 44
Element maximum amounts
| Element | Calculation | Maximum amount |
| CTC – child element | £2,235
÷ 365 = £6.13
44 days x £6.13 per day | £269.72 x
2
= £539.44 |
| CTC – family element | £545
÷ 365 = £1.50
44 days x £1.50 per day | £66.00 |
Entitlement maximum amounts
| Entitlement | Element | Maximum amount |
| CTC individual elements entitlements | Child element | £539.44 |
| CTC family element entitlement | Family element | £66.00 |
Entitlement period 3
- 01-09-2009 to 05-04-2010
- Number of days in the period – 217
Element maximum amounts
| Element | Calculation | Maximum amount |
| CTC – child element | £2,235
÷ 365 = £6.13
217 days x £6.13 per day | £1,330.21 |
| CTC – family element | £545
÷ 365 = £1.50
217 days x £1.50 per day | £325.50 |
Entitlement maximum amounts
| Entitlement | Element | Maximum amount |
| CTC individual elements entitlements | Child element | £1,330.21 |
| CTC family element entitlement | Family element | £325.50 |
Stage 3 – Determining whether income needs to be
taken into account and if so, applying the income taper
rules
The claimant was only entitled to IS / JSA (IB) / PC (formerly known as MIG) for part of the award period, therefore income needs to be taken into account.
Applying income taper rules
Determining the income to be used in the revised award calculation
- Previous year (PY) income - £18,600
- CY income - £7,400
CY income is less than PY income and must be used
Entitlement period 1
- 02-05-2009 to 18-07-2009
Establish the income and Initial taper start point amounts for the period
WTC is included in the award for the period, therefore the initial taper start point is £6,420 ÷ 365 x 78 = £1,371.95
Income for the period is £7,400 ÷ 365 x 78 = £1,581.37
Is a taper calculation required?
- Income (£1,581.37) is greater than the initial taper start point (£1,371.95), so a taper calculation is required
Taper the first entitlement
- The entitlement, in the award for the period, which appears highest in the required taper order is the WTC Work Elements entitlement
- The taper amount to be applied to this entitlement is £1,581.37 (income) – £1,371.95 (taper start point) = £209.42. Then multiplied by 0.39 (taper rate) = £81.67
- The taper amount (£81.67) is less than the entitlement maximum amount (£801.84) so the taper amount is deducted to find the net amount due. The amount of the other entitlements, CTC Individual elements (£956.28) and CTC Family Element (£117.00), will be due in full
Summary of calculation for Entitlement Period 1 so far
- Award period 02-05-2009 to 05-04-2010
- Entitlement period 1 – 02-05-2009 to 18-07-2009 – 78 days
| Entitlement | Maximum amount | Taper amount | Amount due |
| WTC Work Elements | £801.84 | £81.67 | £720.17 |
| CTC Individual Elements | £956.28 | Nil | £956.28 |
| CTC Family Elements | £117.00 | Nil | £117.00 |
Entitlement periods 2 and 3
- As the claimant is in receipt of JSA (IB) throughout both of the other two entitlement periods, a taper calculation is not required and the maximum amount of the entitlements in this period will be due in full.
Stage 4 – Calculating the amount due for each entitlement and total award for each tax credit
Entitlement Period 1 (02-05-2009 to 18-07-2009)
| Entitlement | Amount due |
| WTC work elements | £720.17 |
| CTC individual elements | £956.28 |
| CTC family element | £117.00 |
- WTC amount due = £720.17
- CTC amount due = (£956.28 + £117.00) = £1,073.28
Entitlement Period 2 (19-07-2009 to 31-08-2009)
| Entitlement | Amount due |
| CTC individual elements | £539.44 |
| CTC family element | £66.00 |
- WTC amount due = Nil
- CTC amount due = (£539.44 + £66.00) = £605.44
Entitlement Period 3 (01-09-2009 to 05-04-2010)
| Entitlement | Amount due |
| CTC individual elements | £1,330.21 |
| CTC family element | £325.50 |
- WTC amount due = Nil
- CTC amount due = (£1,330.21 + £325.50) = £1,655.71
The award calculation is complete
Notes
- The use of the lower CY income figure has not just increased the award rates from 19 July but right back to the start of the award. Some WTC is now due
- The daily rate of CTC Individual Elements entitlement is lower in Entitlement Period 3 in response to the loss of the Child element for the 16 year old child
Second change of
circumstances
- On 20-08-2009 claimant 1 notifies that they restarted work on 19-08-2009. He works 20 hours a week and no longer receives Income-based Job Seekers Allowance (JSA). They decide to submit updated Current Year (CY) income figures – they total £11,400
Second revised award calculation: Stage 1 – Establishing the award period and entitlement periods
Award period is unchanged from the last calculation, that is – 02-05-2009 to 05-04-2010.
Entitlement periods
The Eligibility rules identify that
From 02-05-2009 the following elements were due based on the claimant’s circumstances at that date
- WTC - Basic element and second adult element
- CTC - Child element (x 2) and family element
From 19-07-2009 as neither claimant is working 16 hours only the following elements were due
- CTC - Child element (x 2) and family element
From 19-08-2009 Claimant 1 returns to work for increased hours meant that the following elements were due
- WTC - Basic element, second adult element and 30 hour element
- CTC - Child element (x 2) and family element
From 01-09-2009 as eligibility to the CTC Child Element is assumed to end on the 31 August on / following the child’s 16th birthday, a change in eligibility also needs to be taken into account for the child with DOB of 20-09-1992.
Although income must only be taken into account for part of the award period, the start and end dates for these periods coincide with changes in eligibility. No more entitlement periods are needed as a result.
Four entitlement periods will therefore need to be considered in the award calculation
- 02-05-2009 to 18-07-2009
- 19-07-2009 to 18-08-2009
- 19-08-2009 to 31-08-2009
And
- 01-09-2009 to 05-04-2010
Stage 2 – Calculate the maximum amount for each entitlement
Entitlement period 1
- 02-05-2009 to 18-07-2009
- Number of days in the period – 78
This is unchanged from the first revised award calculation. The results were
| Entitlement | Element | Maximum amount |
| WTC work elements entitlement | Basic element and second adult elements | £801.84 |
| CTC individual elements entitlements | Child element | £956.28 |
| CTC family element entitlement | Basic family element | £117.00 |
Entitlement period 2
- 19-07-2009 to 18-08-2009
- Number of days in the period – 31
Element maximum amounts
| Element | Calculation | Maximum amount |
| CTC – child element | £2,235
÷ 365 = £6.13
31 days x £6.13 per day | £190.03 x
2
= £380.06 |
| CTC – family element | £545
÷ 365 = £1.50
31 days x £1.50 per day | £46.50 |
Entitlement maximum amounts
| Entitlement | Element | Maximum amount |
| CTC individual elements entitlements | Child element | £380.06 |
| CTC family element entitlement | Family element | £46.50 |
Entitlement period 3
- 19-08-2009 to 31-08-2009
- Number of days in the period – 13
Element maximum amounts
| Element | Calculation | Maximum amount |
| WTC – basic element | £1,890
÷ 365 = £5.18
13 days x £5.18 per day | £67.34 |
| WTC – second adult element | £1,860
÷ 365 = £5.10
13 days x £5.10 per day | £66.30 |
| WTC – 30 hour element | £775
÷ 365 = £2.13
13 days x £2.13 per day | £27.69 |
| CTC – child element | £2,235
÷ 365 = £6.13
13 days x £6.13 per day | £79.69 x 2
= £159.38 |
| CTC – family element | £545
÷ 365 = £1.50
13 days x £1.50 per day | £19.50 |
Entitlement maximum amounts
| Entitlement | Element | Maximum amount |
| WTC work elements entitlements | Basic, second adult and 30 hour elements | £67.34
+ £66.30 + £27.69 = £161.33 |
| CTC individual elements entitlements | Child element | £159.38 |
| CTC family element entitlement | Family element | £19.50 |
Entitlement period 4
- 01-09-2009 to 05-04-2010
- Number of days in the period – 217
Element maximum amounts
| Element | Calculation | Maximum amount |
| WTC – basic element | £1,890
÷ 365 = £5.18
217 days x £5.18 per day | £ 1,124.06 |
| WTC – second adult element | £1,860
÷ 365 = £5.10
217 days x £5.10 per day | £ 1,106.70 |
| WTC – 30 hour element | £775
÷ 365 = £2.13
217 days x £2.13 per day | £ 462.21 |
| CTC – child element | £2,235
÷ 365 = £6.13
217 days x £6.13 per day | £ 1,330.21 |
| CTC – family element | £545
÷ 365 = £1.50
217 days x £1.50 per day | £ 325.50 |
Entitlement maximum amounts
| Entitlement | Element | Maximum amount |
| WTC work elements entitlements | Basic, second adult and 30 hour elements | £
1,124.06
+ £ 1,106.70 +£ 462.21 = £2,692.97 |
| CTC individual elements entitlements | Child element | £1,330.21 |
| CTC family element entitlement | Family element | £325.50 |
Stage 3 –Determining whether income needs to be taken
into account, and if so, applying the income taper rules
Applying income taper rules
Determining the income to be used in the revised award calculation
- PY income - £18,600
- CY income - £11,400
CY income is less than PY income and must be used
Entitlement period 1
- 02-05-2009 to 18-07-2009
- Number of days in the period – 78
Establish the income and Initial taper start point amounts for the period
- WTC is included in the award for the period, therefore the initial taper start point is £6,420 ÷ 365 x 78 =£1,371.95
Income for the period is £11,400 ÷ 365 x 78 =£2,436.17
Is a taper calculation required?
- Income (£2,436.17) is greater than the initial taper start point (£1,371.95), so a taper calculation is required
Taper the first entitlement
- The entitlement, in the award for the period, which appears highest in the required taper order is the WTC Work Elements entitlement
- The taper amount to be applied to this entitlement is £2,436.17 (income) – £1,371.95 (taper start point) = £1,064.22. Then multiplied by 0.39 (taper rate) =£415.04
- The taper amount (£415.04) is less than the entitlement maximum amount (£801.84) so the taper amount is deducted to find the net amount due. The amount of the other entitlements, CTC Individual elements (£956.28) and CTC Family Element (£117.00), will be due in full.
Summary of calculation for entitlement period 1 so far
Award period 02-05-2009 to 05-04-2010
Entitlement period 1 – 02-05-2009 to 18-07-2009 – 78 days
| Entitlement | Maximum amount | Taper amount | Amount due |
| WTC Work Elements | £801.84 | £415.04 | £386.80 |
| CTC Individual Elements | £956.28 | Nil | £956.28 |
| CTC Family Elements | £117.00 | Nil | £117.00 |
Entitlement period 2 – 19-07-2009 to 18-08-2009
- As the claimant is in receipt of JSA (IB) throughout this entitlement period a taper calculation is not required and the maximum amount of the entitlements in this period will be due in full.
Entitlement period 3 – 19-08-2009 to 31-08-2009
- Number of days in the period – 13
Establish the income and initial taper start point amounts for the period
- WTC is included in the award for the period, therefore the initial taper start point is £6,420 ÷ 365 x 13 = £228.66
Income for the period is £11,400 ÷ 365 x 13 = £406.03
Is a taper calculation required?
- Income (£406.03) is greater than the initial taper start point (£228.66), so a taper calculation is required.
Taper the first entitlement
- The entitlement, in the award for the period, which appears highest in the required taper order is the WTC Work Elements entitlement
- The taper amount to be applied to this entitlement is £406.03 (income) – £228.66 (taper start point) = £177.37. Then multiplied by 0.39 (taper rate) = £69.17
- The taper amount (£69.17) is less than the entitlement maximum amount (£161.33) so the taper amount is deducted to find the net amount due. The amount of the other entitlements, CTC Individual elements (£159.38) and CTC Family Element (£19.50), will be due in full
Summary of calculation for Entitlement Period 3 so far
Award period 02-05-2009 to 05-04-2010
Entitlement period 3 – 19-08-2009 to 31-08-2009 – 13 days
| Entitlement | Maximum amount | Taper amount | Amount due |
| WTC Work Elements | £161.33 | £69.17 | £92.16 |
| CTC Individual Elements | £159.38 | Nil | £159.38 |
| CTC Family Elements | £19.50 | Nil | £19.50 |
Entitlement period 4
- 01-09-2009 to 05-04-2010
- Number of days in the period – 217
Establish the income and Initial taper start point amounts for the period
- WTC is included in the award for the period, therefore the initial taper start point is £6,420 ÷ 365 x 217 = £3,816.83
Income for the period is £11,400 ÷ 365 x 217 = £6,777.54
Is a taper calculation required?
- Income (£6,777.54) is greater than the initial taper start point (£3,816.83), so a taper calculation is required.
Taper the first entitlement
- The entitlement, in the award for the period, which appears highest in the required taper order is the WTC Work Elements entitlement
- The taper amount to be applied to this entitlement is £6,777.54 (income) – £3,816.83 (taper start point) = £2,960.71. Then multiplied by 0.39 (taper rate) =£1,154.67
- The taper amount (£1,154.67) is less than the entitlement maximum amount (£2,690.80) so the taper amount is deducted to find the net amount due. The amount of the other entitlements, CTC Individual elements (£1,330.21) and CTC Family Element (£325.50), will be due in full.
Summary of calculation for Entitlement Period 4 so far
- Award period 02-05-2009 to 05-04-2010
Entitlement period 4 – 01-09-2009 to 05-04-2010 – 217 days
| Entitlement | Maximum amount | Taper amount | Amount due |
| WTC Work Elements | £ 2,692.97 | £ 1,154.67 | £ 1,538.30 |
| CTC Individual Elements | £ 1,330.21 | Nil | £1,330.21 |
| CTC Family Elements | £ 325.50 | Nil | £325.50 |
Stage 4 – Calculating The Amount Due For Each
Entitlement and total award for each tax credit
Entitlement Period 1 (02-05-2009 to 18-07-2009)
| Entitlement | Amount Due |
| WTC work elements | £ 386.80 |
| CTC individual elements | £ 956.28 |
| CTC family element | £ 117.00 |
- WTC amount due: £ 386.80
- CTC amount due: (£956.28 + £117.00) = £ 1,073.28
Entitlement Period 2 (19-07-2009 to 18-08-2009)
| Entitlement | Amount Due |
| CTC individual elements | £380.06 |
| CTC family element | £46.50 |
- WTC amount due: Nil
- CTC amount due: (£380.06 + £46.50) = £426.56
Entitlement Period 3 (19-08-2009 to 31-08-2009)
| Entitlement | Amount Due |
| WTC work elements | £92.16 |
| CTC individual elements | £159.38 |
| CTC family element | £19.50 |
- WTC amount due: £92.16
- CTC amount due: (£159.38 + £19.50) = £178.88
Entitlement Period 4 (01-09-2009 to 05-04-2010)
| Entitlement | Amount Due |
| WTC work elements | £1,538.30 |
| CTC individual elements | £1,330.21 |
| CTC family element | £325.50 |
- WTC amount due: £1,538.30
- CTC amount due: (£1,330.21 + £325.50) = £1,655.71
The award calculation is complete!
Notes
The use of the higher CY income figure has not just reduced the WTC award rates from 19 August but right back to the start of the award. WTC will have been overpaid
The daily rate of CTC Individual Elements entitlement is lower in Entitlement Period 4 in response to the loss of the Child element for the 16 year old child
