Tax Credits: Claims changing
Once a claim has been processed and an initial award made it can be changed several times both during the tax year and after tax year ends.
There are many changes that must be notified to HMRC within 1 month. A full list of these changes can be found in the changes of circumstances section.
Any change made to a claim during a tax year has to be made using either Section 15 or 16 Tax Credit Act 2002.
More information about how these changes are made can be found in the Tax Credit Technical Manual on the HMRC website.
Once the tax year has ended, HMRC guidance to staff states that if a change is reported before the claimant has completed the renewals process and that change is one that does not increase the maximum rate, the change cannot be implemented until after the renewals process is complete. The change will therefore be implemented when the final decision for that year is issued following renewals. Further information can be found here.
Changes that affect the maximum rate, which are reported during the renewals period, will result in a ‘statement like an award notice’ (SLAN) being issued along with a provisional award notice including details of any up-rating.
Once a final, conclusive decision has been issued (under Section 18 Tax Credit Act 2002) it can only be amended in very limited circumstances even if it is incorrect.
The situations when a final decision can be revised include:
Section 18 Tax Credit Act 2002 – If a claimant gives new information before the 1st specified date (normally 31st July) then any previous final decision can be revised up until that date. The same applies if an estimated income was given by the 1st specified date, any final decision can be amended until the 2nd specified date (31st January). Once this date has passed, no further changes can be made unless one of exceptions below can be applied.
Section 19 Tax Credit Act 2002 – This section allows HMRC to open an enquiry into a claim and amend it should they find anything incorrect. There are very strict time limits for opening and closing enquiries. More information can be found in the tax credit technical manual and in our dealing with mistakes and fraud section.
Section 20 Tax Credit Act 2002 – This section is often referred to as ‘discovery’ as it allows HMRC to change awards following discovery of information in two situations. The first is where a person’s income tax liability is revised and as a consequence HMRC have reason to believe that the tax credits decision is not correct. The second is where HMRC have reasonable grounds for believing that a final tax credits decision is wrong by virtue of fraud or neglect. There are certain limitations on when this can be used and strict time limits. More information about discovery can be found in the HMRC compliance manual and in our dealing with mistakes and fraud section.
Section 21 Tax Credit Act 2002 – Often referred to as ‘official error’ (but not to be confused with official error in COP 26) this allows HMRC to revise a decision up five years after the date of the decision where the new decision is in the claimant’s favour and the claimant did not materially contribute to the error. This is an extremely useful provision and can often be used where the time limit for an appeal has run out. The actual detail of this provision is set out in the official error regulations. More information can be found in the tax credit technical manual and in our appeals section.
- Appeals – If an appeals is lodged against a final decision and that appeal is successful (either because HMRC settle the appeal or because a tribunal finds in favour of the claimant), the final decision can be changed. More information can be found in the tax credit manual and in our appeals section.
On 25th July 2007, the Financial Secretary to the Treasury announced that HMRC had identified an administrative problem with a number of older tax credits claims and that over 160,000 cases would have to be reviewed. The cause of this error was that HMRC had revised many final decisions without using any of the routes listed above. Although these new decisions may have accurately reflected the claimant’s circumstances, there was no legal basis for making the changes. As a result HMRC reviewed the cases. Any overpayments that arose as a result were remitted and going forward HMRC appear to have implemented operational procedures to ensure that final decisions cannot be revised unless one of the exceptions above can be applied.
Updated 9 June 2016