Working Together : New Tax Credits - Questions & Answers edition 1
- What will the Revenue need in order to work with professional tax advisers?
- What support is available for professional tax advisers?
- Why will the Revenue accept claim forms signed by 'appointees' but not professional tax advisers?
THE CLAIM FORM
- What is the simplest way for professional tax advisers to obtain bulk supplies of claim forms?
- Is an amended form TC600 claim form being prepared to address any improvements (albeit minor) that have been identified?
THE CLAIM
- Is a claim necessary if a customer already claims Child Benefit or Working Families' Tax Credit/Children's Tax Credit?
- If my client does not get a claim form in by 6th April will they lose money?
- What constitutes a claim?
- Can a claim be withdrawn?
- Do claimants need to make a fresh claim at the end of the first year of their award?
INCOME
- What income will a tax credits claimant have to report in their claim?
- How will claimants know which social security benefits to include in their income?
- What about people not receiving Children's Tax Credit but who may be entitled to the new Child Tax Credit from April 2003?
- What about other people who think they may be eligible for Child Tax Credit or Working Tax Credit?
- What happens when a claimant knows that their 2001-02 income will be significantly different to their income in 2003-04?
- What happens if income figures are adjusted following an enquiry?
- Do changes in income have to be notified within 3 months in the same way as some changes in circumstances?
- Are Gift Aid payments deducted from the income figure in a claim?
- Are mileage allowances treated as income?
- Are pension contributions deducted from the income figure in a claim for tax credits purposes?
- Are contributions to a Share Incentive Plan deductible from income?
- What is 'other income'?
- Are maintenance payments (for instance, child support, payments under a divorce settlement) taken into account when calculating tax credit entitlement?
- Are student loans/grants taken into account for Child Tax Credit?
CHANGE OF CIRCUMSTANCES
- Must claimants notify all changes in circumstances?
- How long do claimants have, where there is a requirement to notify a change in circumstances?
- What about changes in circumstances which are not subject to this requirement?
- If a claimant makes a claim resulting in a 'nil' award, and then fails to notify a change in circumstances, which MUST be reported within three months, will they be liable to a penalty?
PAYMENTS
- Is it true that awards will be paid into a bank account ?
- How will the Post Office™ card account work ?
LOSSES
- How are losses set off in a tax credit claim?
- Why is this different to general tax treatment of couples?
APPEALS
- What does a claimant do if they think a tax credit decision is wrong?
- What if a claimant would prefer to write rather than telephone?
- How can a claimant appeal against a Tax Credit decision ?
- Who will hear appeals if we cannot settle by agreement ?
1. What will the Revenue need in order to work with professional tax advisers?
We will require the client's written authority (perhaps most conveniently reflected in a completed form 64-8) for us to deal with professional tax advisers. If a form 64-8 has been submitted since January 2000 we will not require another one to be submitted for tax credits purposes. Forms 64-8 submitted to the Revenue before the re-printing of the form in January 2000 will not be suitable for this purpose. This is because the old- style form only gave the Revenue our customers' authority to deal with their agents on taxation and Class 4 NICs matters. It is important to bear in mind that the professional tax adviser's authority only covers the named client, not his or her partner/spouse. We will require a 64-8 signed by both partners/spouses in the event of a joint claim.
2. What support is available for professional tax advisers?
- The Inland Revenue website includes a wide range of material, for
example copies of presentations, bulletins etc.
- The tax credits helpline on 0845 300 3900 (or 0845 603 2000 in Northern
Ireland), for answers to any questions about claims.
- The guidance notes that accompany claim packs are very comprehensive
and a useful source of information.
- Revenue Business Support Teams run courses on tax credits for employers,
which can also be attended by professional tax advisers. This will mostly
help them to understand payroll obligations.
- We are preparing a series of leaflets and booklets including, for example, Codes of Practice on overpayments examinations and enquiries and a detailed guide to be published soon. We will tell you when these are available.
3. Why will the Revenue accept claim forms signed by 'appointees' but not professional tax advisers?
Appointees act for those unable (rather than unwilling) to control their own affairs, or claimants with a disability. Appointees must sign and date the Appointee Declaration on page 12 of the claim form. An appointee can only act following a decision by the Inland Revenue, the Department for Work and Pensions, the Department for Social Development or a court of law. If you are applying for the first time to be appointed, we may need to contact you for more information and we may want to visit you.
You are not someone's appointee if you are simply helping them to fill in the form and they can understand what you are doing; for example, you help a client to fill in the form. If the claimant understands the declaration and is able to sign it, they should do so. The degree of support that a professional adviser provides to a claimant in completing the claim form is a matter for the adviser and claimant. The final claim is the responsibility of the claimant.
THE CLAIM FORM
4. What is the simplest way for professional tax advisers to obtain bulk supplies of claim forms?
Ring the bulk orderline 01772 235623 or e-mail Tax Credits Claim Forms for a bulk supply up to a maximum of 300. Photocopies or facsimiles will not be acceptable because we want people to use the official form or claim online. This helps to reduce the numbers of incorrect claims and helps to avoid delay in making awards.
5. Is an amended form TC600 claim form being prepared
to address any improvements (albeit minor) that have been identified?
A new version of the claim form notes is being issued from April 2003 taking account of the recent changes to the rules relating to the childcare element of WTC.
THE CLAIM
6. Is a claim necessary if a customer already claims Child Benefit or Working Families' Tax Credit/Children's Tax Credit?
Yes. These people will not automatically move to the new Child Tax Credit
but will need to make a claim.
7. If my client does not get a claim form in by 6th April will they lose money?
A claimant will not lose entitlement as long as a claim form is submitted within three months, that is before 6 July 2003 for the year 2003-04. Claims can be backdated up to three months, so for every day after 5 July 2003 a claim is made for the year 2003-04, any award will run from a day later than 6 April.
8. What constitutes a claim?
A properly completed claim form.
No. It is not possible to withdraw a claim once it has been made. If a mistake has been made on the claim form or did not include relevant information, the claimant can tell us the correct information, or anything that has been missed, and we will amend the claim. If a claimant's circumstances have changed since making the claim, they should tell us what the changes are and we will amend the claim with the new details.
10. Do claimants need to make a fresh claim at the
end of the first year of their award?
A claim form is only completed for the first year of a claim. Renewal forms will go out around the end of the tax year. We will allow a period of time for them to be completed and, in the meantime, continue payments at the start of the new year - paying tax credits provisionally for a limited period until the information necessary to establish the new award is available.
INCOME
11. What income will a tax credits claimant have to report in their claim?
Broadly, income which is taken into account for income tax purposes. There are important exceptions to this general rule and some are outlined immediately below. Also, the Tax Credits Helpline on 0845 300 3900 will be able to give you more information. We take into account the gross amount of the income received - that is, income before the deduction of income tax and National Insurance Contributions.
12. How will claimants know which social security benefits to include in their income?
The Department for Work and Pensions (formerly the Department of Social Security) or, in Northern Ireland, the Department for Social Development should have sent claimants a record of the taxable amount of benefit they have received for the year.
13. What about people not receiving Children's Tax Credit but who may be entitled to the new Child Tax Credit from April 2003?
They should make a claim to new tax credits now based on their 2001-02 income.
14. What about other people who think they may be eligible for Child Tax Credit or Working Tax Credit?
They should also make a claim to new tax credits now based on their 2001-02 income. They will then have made a claim and established their entitlement. At the end of the year, when they can provide details of their 2003-04 income, we will finalise their entitlement. If their income in 2003/4 is lower than the income for 2001/2, we will pay any further tax credits that may be due. If their income in 2003/4 is more than £2,500 higher than that for 2001/2, their tax credits for the year will be based on their 2003/4 income, less the £2,500. If their income is higher in 2003/4 but by less than £2,500, tax credits are based on 2001/2 income.
The claimant can tell us during the year if they expect their 2003-04 income to be lower, or significantly higher, than their 2001-02 income. We will pay tax credits during the year based on their estimate, subject to reconciliation after the end of the year. Any overpayment of tax credits will, of course, have to be repaid so such estimates should be realistic.
15. What happens when a claimant knows that their 2001-02 income will be significantly different to their income in 2003-04?
The claimant needs to make their claim, providing details of 2001-02 income in the usual way. We will then send them an award notice. The notice will tell them what changes in their income may affect their award and tell them to phone the helpline on 0845 300 3900 (or 0845 603 2000 in Northern Ireland) if their current year income falls outside a certain range (set out on the notice). Once the claimant has phoned the helpline, and told us what they expect their current year income to be, their award and payments will be adjusted as appropriate.
16. What happens if income figures are adjusted following an enquiry?
If a claimant has their taxable income adjusted, following a tax enquiry then that will be taken into account when assessing entitlement to tax credits.
17. Do changes in income have to be notified within 3 months in the same way as some changes in circumstances?
No. The standard position for income is that we settle at the end of the year by comparing (in the case of 2003-04 claims) the 2001-02 income with the final 2003-04 income. Any person having a fall in income (including those with a 'nil' award) can wait until the end of the year and get a lump sum in respect of any underpayment of tax credits. They also have the option at any point during the year to replace their 2001-02 figure with an estimate of what they expect their 2003-04 figure to be. If they do this then their entitlement for the whole year is recalculated on that basis. Even when an estimate of income for the year 2003-04 has been provided during the year, final settlement will be calculated at the end of the year by comparing actual income for 2003-04 with income for 2001-02.
18. Are Gift Aid payments deducted from the income figure in a claim?
Yes. The Tax Credits (Definition and Calculation of Income) Regulations 2002 allow a deduction from income of Gift Aid payments. The gross amount of Gift Aid should be deducted from total income.
19. Are mileage allowances treated as income?
Not if there is no taxable element. For many employees, where their mileage allowance covers qualifying business travel only, a dispensation is agreed between the Inland Revenue and there would be nothing to report for tax credit purposes in those cases. Other cases of qualifying travelling expenses would also not be included in the tax credit claim form. There should be no impact on box 5.4 as allowable mileage payments will not have been included in income.
20. Are pension contributions deducted from the income figure in a claim for tax credits purposes?
Contributions to a pension scheme approved by the Inland Revenue (such as an occupational pension scheme, a personal pension plan or retirement annuity) are excluded from the calculation of income in tax credit claims. The claimant should deduct the gross amount paid during the year from their income.
21. Are contributions to a Share Incentive Plan deductible from income?
No. If a claimant makes contributions from their earnings to buy shares in their employer's company under a Share Incentive Plan, then those contributions must be added back to calculate their gross pay for tax credit purposes.
Apart from taxable social security benefits and income from work (including employment and self-employment), student dependant's grant and miscellaneous income (that is, income taxable under Case VI of Schedule D), we also take into account of any other income in the year, but only to the extent that this other income exceeds £300. If there is a joint claim, that's one £300 limit between both partners.
23. Are maintenance payments (for instance, child support, payments under a divorce settlement) taken into account when calculating tax credit entitlement?
No.
24. Are student loans/grants taken into account for Child Tax Credit?
We will not take account of a student loan or of grants to meet the cost of tuition fees, child care, books, travel and equipment, etc although claimants should tell us if they receive a grant for a dependent child or adult. The Helpline will be able to advise which elements of the dependant's grant count as income for tax credit purposes. Student nurses or health profession trainees receiving a bursary under the NHS Bursary Scheme do not need to report such payments as income in their claim.
After finishing studies and taking up work, repayments of student loans are not deductible from income in tax credit claims.
CHANGE OF CIRCUMSTANCES
25. Must claimants notify all changes in circumstances?
There are just two changes subject to the requirement to notify . Firstly where a single claimant becomes a member of a couple or a couple in a joint claim split up, and secondly a decrease in average weekly child care costs by £10 a week or more (or a decrease to zero), which lasts for at least 4 weeks. However, we will be encouraging claimants to keep us informed about other changes that might affect their tax credits, to help them keep what they are being paid in step with their final entitlement.
26. How long do claimants have, where there is a requirement to notify a change in circumstances?
Claimants have three months in which to tell us about these changes. If a change is not notified within three months the claimant may be liable to a penalty of up to £300. In the case of joint claimants if both fail to notify the change within three months then their failures may result in a total penalty of up to £300.
27. What about changes in circumstances which are not subject to this requirement?
Claimants need to tell us within three months about changes that may increase their tax credit award, such as a new child in the family, or an increase in their working hours (or those of their partner) from under 16 to 16 hours or more a week or from under 30 to 30 hours or more a week, starting to use registered or approved child care or an increase in average weekly child care costs of £10 a week which will last for at least 4 weeks. This will enable us to increase the award from the date of the change. If a change increasing the award is notified to us later than 3 months from the date it took place, the increase in the award can only be backdated for 3 months.
We will also be encouraging people to tell us about changes that reduce their award, to help them avoid overpayments of tax credit. Changes that reduce the maximum entitlement to tax credit take effect from the date of the change.
28. If a claimant makes a claim resulting in a 'nil' award, and then fails to notify a change in circumstances, which MUST be reported within three months, will they be liable to a penalty?
We welcome claims from anyone who wishes to preserve her or his possible entitlement to tax credits, even where without a change in circumstance this will amount to a nil award. People in this position will have to fully complete a claim form. We will not seek penalties from people who make a claim resulting in a nil award and then fail to make any mandatory notification of a change in circumstances during the year. This approach will not, of course, apply where a claim resulting in a nil award has subsequently been amended so that tax credits are payable and there is then a failure to make a mandatory notification of a change in circumstances.
PAYMENTS
29. Is it true that awards will be paid into a bank account?
Payments of Child Tax Credit and the childcare element of Working Tax Credit will be made into a bank, building society or Post Office™ card account. Working Tax Credit for the self-employed will also be paid in this way. If a claimant is employed, Working Tax Credit will generally be paid by their employer.
30. How will the Post Office™ card account work?
Customers who have asked to open a Post Office™ card account, will initially be paid by giro, as will any other customers who have been unable to provide us with details of an account. We expect that tax credit customers will be able to open card accounts a few months after April 2003. At the appropriate time we will advise those customers who have asked for a Post Office™ card account how to open one.
LOSSES
31. How are losses set off in a tax credit claim?
If their business made a loss in that tax year, a claimant may be able to set that loss against other income they may have for that year and also against any income of their partner for that year.
32. Why is this different to general tax treatment of couples?
As the tax credit income assessment is based on joint income (of the couple), it is proper to allow trading losses to be set against the income of both claimants. That way, the household gets the full benefit of any loss relief and receives more help under the new tax credit system when it is most needed.
APPEALS
33. What does a claimant do if they think a tax
credit decision is wrong?
Claimants who disagree with the decision notice should contact the helpline
and tell the helpline adviser why they think the decision is wrong. The
helpline adviser will explain the decision and, if the operator agrees
it is wrong, they will arrange for the decision to be changed. Claimants
will then receive a new decision notice showing the change. Where the
helpline adviser cannot change the decision they will explain why and
if the claimant wants to appeal, they must do so in writing.
34. What if a claimant would prefer to write rather than telephone?
We will of course, be happy to respond to all correspondence, it just may take a little longer.
35. How can a claimant appeal against a Tax Credit decision?
Claimants can make an appeal if they disagree with our decision during the year to reduce the amount of tax credits we are paying them, or stop payment of tax credits. They can also appeal if they disagree with our decision about their tax credit entitlement at the end of the year. They have thirty days after the date on which notice of the decision was given in which to do that. An appeal against a tax credit notice must be made in writing. Any appeal should be made to the Tax Credit Office.
36. Who will hear appeals if we cannot settle by agreement?
Initially, for a transitional period, appeals against decisions on tax
credits will be administered and heard by appeals tribunals within the
Appeals Service. Employers appeals however, still go to the General and
Special Commissioners of Income Tax. In due course, responsibility for
hearing all tax credit appeals is expected to be transferred to the General
and Special Commissioners of Income Tax.
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