Notional Entitlement (Info)
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This guidance tells you the
- Changes affecting notional entitlement
- How to calculate notional entitlement
And
- How to identify if a genuine error has been made by the claimant
Examples of when you might apply notional entitlement are at the end of this information page
From 17 May 2007 there has been a change in policy on notional
entitlement. Claimants will now benefit from notional entitlement
where they have made an incorrect claim for tax credits because of
a genuine error.
Where it has been established the
partner was living with the
claimant when the single claim was made, the claim should be
terminated from the day
before it was made because it was never a valid claim.
Although the claim must be terminated in this way, not all
of the resulting overpayment may be recovered.
Incorrect claims
Where the claimant has or had been living with a previously
undisclosed partner you need to decide if the claimant made an
incorrect claim because of a genuine error. Genuine error means the
claimant must have reasonably thought they had made a correct
claim.
Notional entitlement
will be available if you have established that an
incorrect claim was made by the claimant as a result of a genuine
error.
Where a claimant who has made a genuine error when they
first made their tax credits claim
- Subsequently realises their claim was incorrect
Or
- Their circumstances change so that they could no longer reasonably believe their claim was correct, will no longer qualify for notional entitlement unless they take prompt steps to tell you about their change of circumstances
Notional entitlement will not be available
- Where the claimant is late telling you about a change of
circumstances
- For claimants who knew they were making a false claim
Or
- They could not reasonably have thought their claim was correct
In these circumstance the award will be terminated from the day before the partner joined or left the household and all tax credits paid from that date will be classed as an overpayment
The claimant may be eligible to make a new claim based on their
new circumstances.
Calculating notional entitlement
Where you have determined the claimant made a genuine error
you will need to calculate the notional entitlement
The amount of the notional entitlement will depend on the
following circumstances
- If there has been a claim by a couple when they should have
claimed as two single claimants
- If both the claimant and the partner have made a claim as single claimants
A claim may be made by a couple when, in fact they should have
made two separate claims. For these cases the total overpayment
will be the amount of tax credits paid from the date of the claim.
The notional entitlement will then be the amount they would each
have been entitled to claim had they claimed as single claimants
To arrive at the amount of recoverable overpayment you must
deduct the amounts of notional entitlement from the total
overpayment
If the notional entitlement exceeds the total amount of the
overpayment you must restrict the recovered amount to the amount of
the overpayment
For example: The amount of tax credits paid to the
couple is £1376, but they should not have claimed as a couple.
Had they correctly claimed as single claimants they would have been
entitled to £2478 in total. The notional entitlement should be
restricted to £1376 so the balance of the overpayment is
£0.00.
Recovery of overpayment – Previous claims made by
both partners
Where both partners have previously made claims as single
claimants, you will be looking at two incorrect claims. They will
each be responsible for the total overpayment on their incorrect
single claims but from each figure you can deduct their share of
the notional entitlement.
You must calculate the amount they could have claimed as a
couple and then allocate this between both claimants. How you
allocate the balance between the parties will depend on their
wishes. If they
- Specifically ask for it to be split in a particular way you
must proceed with their proposal so long as they are both in
agreement with this
- Do not say how this should be split or cannot agree the split, you must divide the notional entitlement equally between them. However, you can change the split if there is notional entitlement remaining
In a case where a couple has made two single claims and there is
a balance of notional entitlement remaining after applying a 50-50
split. Mr Brown’s overpayment on his single claim was
£600 and Miss Green’s was £300. Their notional
entitlement as a couple should be £700. If you do a 50-50
split you would remit £350 against Mr Brown’s
overpayment and only £300 on Miss Green’s, leaving a
balance of £50. In this case you would remit £400 against
Mr Brown’s overpayment.
The recoverable overpayment on each case will be the
difference between their respective total overpayments and their
amount of notional entitlement.
Objections from claimants or agents
Where you have decided that notional entitlement is not
appropriate, a claimant or agent may object to the recovery of all
the overpayment. This would be on the grounds that the claimant
would have received tax credits had they made a correct claim or
told you about their change of circumstances. However the various
representative groups were advised of this change of policy on 16
May 2007.
Examples of where notional entitlement may be
appropriate
Below is a list of examples where notional entitlement may
be appropriate. Bear in mind this list is not exhaustive
Example 1
Billy is in low paid work and lives with his mother. He
telephones the Contact Centre to ask if he is able to claim WTC and
they say he can claim even though he is living with his mother.
Billy fills in the claim form but does not understand what is meant
by a partner and completes the claim with his mother’s
details, but not her income. His mother also signs the form. Billy
has completed the claim with his mother’s details on in
error, therefore it was treated as a joint claim. As this should
never have been a joint claim, all of the tax credits have been
paid in the wrong capacity. Had Billy claimed as a single person he
would have received exactly the same amount. The incorrect claim
arose out of a genuine error and confusion. You would therefore
agree that Billy does not have to repay the overpayment as notional
entitlement will cover the full overpayment
Example 2
In April 2007 Ellie made a single claim when she began work.
In December 2007 she telephones the Contact Centre to notify a
change of circumstances as her boyfriend, Tom, has moved in with
her that week. During the conversation Ellie learns that she has
made an incorrect claim. Tom was previously a long distance lorry
driver who was only home on a Friday and Saturday. He is not the
father of her children, the house is in her name and she thought
she did not need to include him on the claim form. On 3 December he
had started a new job and will be home each night. Ellie thought
this meant the relationship had changed to a permanent one and so
she needed to tell HM Revenue & Customs (HMRC). Ellie and Tom
were always a couple, he was simply working away from home on a
long term basis, and they should have made a joint claim. Ellie
made a genuine error resulting in an overpayment of tax credits
because she claimed in the wrong capacity. Ellie can be given a
notional entitlement. You would calculate how much the couple would
have received had they claimed correctly and only recover the
difference
Example 3
Chloe is 19 and in May 2007 made a single claim when she
went back to work after having a baby. In October 2007 Chloe calls
at her local Enquiry Centre to say she made a mistake with her
claim. Chloe had married Joe in March 2007 but had not shown him on
her claim form because they have not been able to live together.
They cannot afford a house of their own and neither parent’s
will let the other one stay at their house so they have continued
to live with their respective parents whilst they try and save up
enough money for a rental deposit. Chloe only found out she had
made an incorrect claim when she was talking to a housing adviser
about their chance of getting housing together. Chloe made a
genuine mistake resulting in an overpayment of tax credits because
she claimed in the wrong capacity. You would calculate how much the
couple would have received had they claimed correctly and only
recover the difference
Example 4
Julia made a claim for tax credits on 18 November 2005. She
lives with Ed but she did not put his details on the claim form
because he is a student who has no earnings or income, it is a very
volatile relationship and so she never knows how long it will last.
She did not think this made her claim incorrect because Ed has no
income to take into account. Julia has made incorrect claims for
2005-2006, 2006-2007 and 2007-2008. Although she knew she had a
partner she reasonably believed her award was correct because Ed
did not have any income to take into account. Notional entitlement
will therefore be available for all the award years
Examples of where notional entitlement may not be
appropriate
Below is a list of examples where notional entitlement may
not be appropriate. Bear in mind this list is not exhaustive
Example 1
On 16 April 2007 Jan made a claim for tax credits as a
single parent. She knew she should have notified HMRC when her
partner John moved in with her on 10 June 2007, but she did not
notify this until 12 December 2007. Her single claim should be
terminated from 10 June 2007, notional entitlement will not be
available and any overpayment on her single claim will be
recoverable because Jan failed to tell HMRC about the change in her
circumstances
Example 2
Lisa has claimed tax credits since April 2003 as a single
claimant. Tony moved in with her on 21 March 2005. There will be a
small overpayment for 2004-2005 and all of the tax credits paid
since 6 April 2005 will be overpaid as Lisa was not entitled to
claim as a single person after 21 March 2005. Notional entitlement
will not be available for any of the years because Lisa failed to
tell HMRC about the change in her circumstances
Example 3
Susan has claimed tax credits as a single parent from April
2003. Stephen moved in with her on 1 February 2004 and they were
living together as husband and wife (LTAHAW). However, Stephen
moved out again on 16 June 2005. You accept that Susan and Stephen
were only LTAHAW between 1 February 2004 and 16 June 2005.
Susan’s award will be terminated from 1 February 2004 because
she was no longer entitled to claim as a single person from that
date. There will therefore be overpayments for 2003-2004,
2004-2005, 2005-2006, 2006- 2007 and 2007-2008. Notional
entitlement is not available because Susan failed to tell HMRC
about the change in her circumstances. It does not matter that
Stephen moved out again in 2005-2006 because the award should have
come to an end on 1 February 2004
Example 4
In May 2005 James made a single claim and renewed this in
2006 and 2007. On 22 October 2007 he telephones the Contact Centre
to say that on 11 June 2007 Emma moved in with him. Emma and James
can make a joint claim and this can be backdated to 22 July 2007.
James has been overpaid tax credits as a single claimant from 11
June to 22 October 2007 because he was late telling HMRC about the
change in his household. You will not be able to allow James
notional entitlement even though James and Emma could have made a
joint claim from 11 June 2007
