Tax Credits: CTC elements
Both WTC and CTC comprise a number of elements. CTC can be claimed by people who are responsible for one or more children or qualifying young persons. It can be claimed by joint claimants (couples or polygamous units) where at least partner has responsibility for a child or young person, or by lone parents. It is immaterial whether the claimant is in work. This section of the site explains the qualifying criteria for CTC elements.
- Being responsible for a child or young person
- What is a child or qualifying young person?
- Death of a child or young person
- Family element
- Child element of CTC
- Disabled child element
- Severely disabled child element
- Baby element
In order to claim CTC a person must be responsible for a child or qualifying young person. There are two tests that are relevant in determining responsibility – the ‘normally living with’ test and the ‘main responsibility’ test.
The basic test is that a person is responsible for a child or qualifying young person (QYP) if that child or QYP is normally living with them.
The legislation gives no further guidance on what this means. The HMRC guidance manual states that it should be given its ordinary meaning which is ‘regularly, usually, typically lives with them which allows for temporary or occasional absences’. (TCTM02202)
The ‘normally living with’ test is supplemented with the ‘main responsibility test’ where a child or QYP usually lives with two or more people in different households or where they live in the same household where those persons are not limited to the members of a couple.
If two or more people make separate claims for CTC for a child or QYP, only one claimant can be treated as responsible for the child or QYP, for tax credit purposes. In such cases, the CTC will be awarded to the person who has main responsibility. Normally both (or all) claimants will decide between them who has main responsibility and make a joint ‘election’ as to who should receive the CTC. However, if agreement cannot be reached, HMRC will make the decision.
Similarly, ‘main responsibility’ is also not defined in legislation. HMRC guidance states that it should also be given its ordinary everyday meaning of ‘someone who is normally answerable for, or called to account for, the child or qualifying young person’.
This can be quite a difficult test to apply in practice and HMRC have developed a list of factors that can be considered in determining who has main responsibility. The list is not exhaustive but includes the following factors:
- who the child or QYP normally lives with and where they keep the majority of their belongings such as clothes, toys
- who is responsible for the day to day spending for the child or QYP such as buying clothes, food and providing pocket money
- who is the main contact for school/college/nursery/childcare
- who is responsible for the health care and hygiene of the child or QYP such as making appointments with the doctor/dentist, doing their laundry
- what is the registered address for contact for the school/college/nursery/child care, healthcare
- who has legal custody of the child or QYP.
There are exceptions to the normally living with and main responsibility test. A claimant cannot be responsible for a child or QYP in the following circumstances:
The child or QYP is provided with, or placed in, accommodation under Part III of the Children Act 1989, Parts 4 or 6 of the Social Services and Well-being (Wales) Act 2014, Part II of the Children (Scotland) Act 1995 or Part IV of the Children (Northern Ireland) Order 1995, and the cost of that child's accommodation or maintenance is borne wholly or partly –
- Out of local authority funds under section 22C(10) (for England) of the Children Act 1989, or section 81(13) of the Social Services and Well-being (Wales) Act 2014, or section 26 of the Children (Scotland) Act 1995 which gives rise to regulation 33 of The Looked After Children (Scotland) Regulations 2009).
- In Northern Ireland, by an authority, within the meaning in Article 2 and under Article 27 of that Order or
- Out of other public funds.
Case B: The child or QYP is being looked after by the local authority and has been placed for adoption in the home of a person proposing to adopt them. This applies if the local authority (or authority in Northern Ireland) is making a payment in respect of the child or QYP’s accommodation or maintenance under section 22C(10) (for England) of the Children Act 1989, or section 81(13) of the Social Services and Well-being (Wales) Act 2014, or section 26 of the Children (Scotland) Act 1995 which gives rise to regulation 33 of the Looked After Children (Scotland) Regulations 2009 or in Northern Ireland, Article 27 of the Children (NI) Order 1995.
Case C: The child or QYP is serving a custodial life sentence (without limit of time), is detained at Her Majesty’s pleasure (or in Northern Ireland at the pleasure of the Secretary of State), or is detained for a term of more than four months.
Case D: A QYP is awarded CTC in their own right for a child they are responsible for.
Case E: A QYP is awarded contributory employment and support allowance in their own right. This also applied to Incapacity Benefit. There is an exception to this rule for certain people whose period of incapacity for work began before 6 April 2004.
Case F: A QYP claims and receives WTC in their own right.
Case G: The QYP has a spouse, civil partner or partner with whom they are living and that person is not in full-time education or approved training. Both concepts are explained below. This case does not apply to people in receipt of CTC for a QYP who is living with a partner before 1September 2008.
Case H: The responsible person is the spouse, civil partner or partner of a QYP with whom they are living. This case does not apply to people in receipt of CTC for a QYP who is living with a partner before 1September 2008.
Where a child or QYP is in residential accommodation defined in regulation 9 of the Child Benefit (General) Regulations 2006 and in the circumstances prescribed in paragraphs (a) or (b) of that regulation, they are treated as being the responsibility of any person who was treated as being responsible for him immediately before they entered that accommodation.
Where a claimant is treated as responsible for a child or QYP based on the rules outlined above and that child or QYP has their child normally living with them, the claimant should also be treated as responsible for e.g. their grandchild. The HMRC manual gives the following example:
A seventeen year old girl and her baby live with her mum. The young mum attends full-time non-advanced education at the local college so she remains a qualifying young person for child tax credits. Grandma can claim for both her daughter and grandchild unless the young mum claims CTC for herself and baby in her own right. (TCTM02206)
For CTC purposes a child is under the age of 16. CTC can be claimed for a QYP from their 16th birthday until the following 31 August. During this period there is no requirement that the young person be in full time education or training.
From 1 September following the QYP’s 16th birthday CTC can continue if the QYP is under 20 and in full time, non-advanced education, approved training or registered with a qualifying body for work or training (where the education/training is not provided as part of their work).
The upper age limit was increased from 19 to 20 on 6 April 2006 to enable a young person who started a course before their 19th birthday to continue until they reach 20 without their parents or carers losing CTC. But young persons who were 19 before 6 April 2006 do not qualify.
However, the young person will no longer be a QYP during this time if they start remunerative work and cease full time, non-advanced education or approved training or they claim income-based job seeker’s allowance, income-related employment and support allowance, income support or Universal Credit in their own right. This means that the claimant can no longer claim CTC for that young person. In this context, remunerative work means work done in expectation of payment for not less than 24 hours a week.
From summer 2013, the Government started to raise the age of participation in England. This means that pupils who left year 11 in summer 2013 have to stay in education or training until the end of the academic year in which they turn 17. This increases to age 18 from 2015. The new rules allow 16-17 year olds to remain in full-time study or training, full-time work/volunteering with part-time study or training or undertake an apprenticeship. Many of the terms used in defining a child and QYP have very specific legal definitions. These are explained briefly below.
To be in full-time education, the young person must be receiving full-time, non-advanced education. They must be studying at a school or college, or elsewhere providing they were studying there prior to their 16th birthday and it is approved by HMRC or it is part of a Study Programme (England only). The course of study must also not be one that the young person is pursuing because of his or her employment
Full-time study means on average not less than 12 hours a week spent during term-time in tuition, supervised study, exams and practical work. The 12 hours includes gaps between courses, but not meal breaks or periods of unsupervised study or homework undertaken outside normal hours. The Child Tax Credit Regulations 2002 (SI 2002/2014) defines full time education as:
‘education received by a person attending a course of education where, in pursuit of that course, the time spent receiving instruction or tuition, undertaking supervised study, examination or practical work or taking part in any exercise, experiment or project for which provision is made in the curriculum of the course, exceeds or exceeds on average 12 hours a week in normal term-time, and shall include gaps between the ending of one course and the commencement of another, where the person is enrolled on and commences the latter course.’
A young person is only a QYP if they are in full time education that is not at an advanced level. The legislation does not define non-advanced education, but instead defines advanced education. If the education does not fall under the advanced heading, it is by definition non-advanced. Advanced education means full time education for the purposes of a course in preparation for a degree, a diploma of higher education, a higher national diploma, a higher national diploma or higher national certificate or Edexcel or the Scottish Qualifications Authority, or a teaching qualification. Alternatively it means any other course which is of a standard above ordinary national diploma, a national diploma or national certificate of Edexcel, a general certificate of education (advanced level) or a Scottish national qualifications at higher or advanced higher level.
Non-advanced education includes qualifications such as A-levels (As and A2 levels), Scottish Highers, NVQ at level 3; ordinary national diploma; a national diploma or national certificate of Edexcel; GCSEs; International Baccalaureate; Study Programme (England only); Scottish national qualifications at advanced or higher level. It does not include university courses.
This is defined by reference to various training programmes arranged by the Government. It has the same meaning given by regulation 1(3) Child Benefit (General) Regulations 2006. Generally, approved courses don’t pay wages and teach skills needed to do a particular job. Training must not be provided under a contact of employment.
HMRC guidance (TCTM 02230) defines approved training as:
- in relation to England arrangements made by the Secretary of State under section 2 of the Employment & Training Act 1973, known as ‘Foundation Learning’ programmes (this replaced ‘Entry To Employment’ in September 2010), 'Programme Led Apprenticeships' if started before 31 July 2011, Access to Apprenticeships or Apprenticeships in Olympic/Paralympics and Commonwealth Games, Deep Sea Fishing.
- in relation to Wales arrangements made by the Secretary of State under section 2 of the Employment & Training Act 1973, known as Foundation Apprenticeships or Traineeships.
Note: There should be no new starts on 'Skillbuild' or 'Skillbuild+' from 1 August 2011, only starts prior to 1 August 2011.
- in relation to Scotland made by the Scottish Ministers under section 2 of the Employment and Training Act 1973, or by Scottish Enterprise or Highlands and Islands Enterprise under section 2 of the Enterprise and New Towns (Scotland) Act 1990, known as ' 'Get ready for work' or Employability Fund
Note: The West Lothian Council Skills Training Programme should be treated as ‘Get ready for work’.
- in relation to Northern Ireland, made by the Department for Employment and Learning under section 1 of the Employment and Training Act (Northern Ireland) 1950, currently known as 'Training for Success: Professional and Technical Training or ‘Programme Led Apprenticeships (Apprenticeships NI)’, ‘Pathways to Success – Pathways for Young People’ and ‘Collaboration and Innovation Programme’.
Unlike non-advanced education, there is no requirement to attend approved training for a minimum number of hours.
If a young person is under 18 and has ceased full time education or approved training, , CTC can continue to be paid for up to 20 weeks. This only applies if the QYP has registered for work or training with a qualifying body and the CTC claimant has notified HMRC of the change within 3 months of the leaving date..
A qualifying body for this purpose is the Careers or Connexions Service, the Ministry of Defence, the Department of Employment and Learning or an Education and Library Board established under article 3 of the Education and Libraries (Northern Ireland) Order 1986 or any corresponding body in a member state where Council Regulation (EEC) No. 1408/71 and Regulation (EC) No 883/2004(h) of the European Parliament and of the Council applies. More information about what constitutes a Careers or Connexions Service can be found in TCTM02230.
The regulations allow for certain periods to be disregarded when determining whether a person is undertaking full time education or approved training. A period of up to 6 months can be disregarded if HMRC decide it is reasonable to do so. Any period due to illness or disability can also be disregarded, again if HMRC decide this is reasonable.
According to the HMRC manual, this provision allows for interruptions such as school holidays, moving location or illness as long as there is an intention to continue full time education or approved training.
In practice, the HMRC computer system is set up to stop the CTC child element from 1September following the child’s 16th birthday. The claimant is then required to inform HMRC, both TCO and CBO, that the child is either staying on in full time education or approved training in order for CTC to continue. However, it is not unknown for the computer system, to fail to stop CTC so this should not be relied upon and claimants should inform HMRC if their child is not staying on in full time non-advanced education or approved training so that they no longer qualify for CTC for that child.
Additionally, from September 2014, the HMRC computer system automatically stops the CTC child element on the 31st August following the respective 18th and 19th birthdays of any qualifying young person. This means that HMRC must be notified annually when a young person who turns 18 or 19, respectively, remains in full-time non-advanced education or approved training, otherwise the award will be reduced prematurely. There is a concern that claimants may not be fully aware of this change in approach and could therefore see their tax credit award reduced, or in some cases, end, early. To ensure entitlement continues correctly, claimants need to notify HMRC if the young person on their claim is continuing in full-time non-advanced/approved training. As mentioned above, HMRC’s computer may fail to stop CTC in some cases so this should not be relied upon and claimants should still inform HMRC if their young person leaves full-time non-advanced education or approved training so that they no longer qualify for CTC for them.
One particular area of difficulty for claimants is determining when CTC stops if a young person plans to continue to advanced level education e.g. by going to university. HMRC guidance states that in such cases, CTC can be paid to 31 August (the last day of the academic year) unless the young person changes their mind and decides not to remain in education before that date. For example:
A claimant telephones on 27 August to inform tax credits that her daughter has found work. The claimant states that although her daughter had originally intended to go to university, following her exam results she had decided to look for a job instead and has now found work. She is asked what date her daughter made the decision to look for work and not go to university. This date is given as the 21 August. CTC can therefore be paid to the 20 August. (TCTM02230)
Once the claimant can no longer include their only or last QYP in their CTC claim, entitlement to WTC can also be affected as they will need to work number of hours that apply to a person who is not responsible for a child/QYP.
If a child or QYP dies, CTC should continue for a period of 8 weeks following the death. In the case of a QYP, it will continue for 8 weeks or until they would have reached the age of 20, if earlier.
The family element is paid to each family entitled to CTC, irrespective of the number of children or QYPs in the family. Only one family element is payable on each claim.
For each child or QYP that the claimant is responsible for, a child element is included in the award. There are three rates of the child element and which one is payable depends on whether the child has a disability. The three levels of child element payable cover:
- where the child or QYP is disabled, or
- where the child or QYP is severely disabled, or
- any other case
Sometimes, the three rates are referred to as three different elements. However, when calculating daily rates and awards, the HMRC system follows the legislation which has only 1 child element payable at one of three rates.
The child element is paid at a higher rate for each disabled child or QYP that a claimant is responsible for. This is sometimes referred to as a ‘disabled child element’ but the true description, in line with the legislation, is that the value of the child element is higher in these circumstances.
A child or QYP is disabled for tax credit purposes if any rate of DLA or Personal Independence Payment (PIP) is payable for the child or QYP, or has ceased to be payable solely because they are a hospital in-patient.
A child or QYP will also qualify if they are certified as severely sight impaired or blind by a consultant ophthalmologist, or has ceased to be registered or certified as blind within the 28 weeks immediately preceding the date of claim.
The child element is paid at a higher rate for each severely disabled child or QYP that a claimant is responsible for. As suggested above, this is sometimes referred to as a ‘severely disabled child element’ but the true description, in line with the legislation, is that the value of the child element is higher in these circumstances and is, in fact, a higher amount than the value of child element for a disabled child or QYP.
A child or QYP is severely disabled for tax credit purposes if the highest rate care component of DLA, the enhanced rate daily living component of Personal Independence Payment (PIP) or any component of Armed Forces Independence Payment (AFIP) is payable for them, or would be payable but for a suspension or abatement due to hospitalisation.
Note: If a new claim for DLA/PIP or AFIP is made whilst a child is in hospital, it cannot be paid until the child is discharged. However, HMRC should be notified of any successful claim as soon as possible (especially if the highest rate care component or enhanced rate daily living component has been awarded). This is because the CTC severe disability element can be included whilst the child is in hospital, even though DLA has never been in payment. The same does not apply to the CTC disability element.
For historical purposes only, this paragraph discusses the baby element of child tax credit. This element was available to CTC claimants from 6 April 2003 to 5 April 2011. It ceased from 6 April 2011, even for families whose children had only received it for part of the 2010/11 tax year.
The baby element was paid in addition to the family element to families until a child’s first birthday. Only one element was payable no matter how many children under one were in the family.
Updated 28 July 2016