Tax Credits: Claims finishing
Once the tax year ends, the claim for the year just ended can be finalised. The process that does this is often called ‘renewals’. The function of renewals is two fold – to finalise the claim for the year just ended and to make a claim for the new tax year.
The first step in the process involves HMRC issuing a notice under Section 17 Tax Credits Act 2002. A claimant may receive more than one Section 17 notice as one is issued for each claim in the tax year. So, for example, if a claimant was single for six months and then ended that claim and made a joint claim with their new partner, they would receive two Section 17 notices, one for each claim. Similarly if a Working Tax Credit (WTC) only claimant stopped work part way through the year and then went back into work three months later and submitted a new claim, they too would receive two notices.
The Section 17 notices either:
- Ask the claimant to declare their income (actual or estimated) and confirm their circumstances for the year just ended (reply required cases) or;
- Tell the claimant that they only need to respond if their income is outside of the range listed on the notice or different from the figure given on the notice, otherwise they will automatically be treated as renewing (auto-renewal)
The Section 17 notice is more commonly known as the TC603R/D. The circumstances of the claimant will dictate what combination of renewal forms are received.
- Auto-renewal cases – TC603R (if a joint claim both claimants generally receive a form)
- Reply required – TC603RR + TC603D (if HMRC require previous year information as well as the year just ended, PY-1, a TC603D2 will be used).
If the claim is a joint one, the household should now only receive one set of forms (rather than one to each claimant as previously). The exception to this is if a joint claim ceased during the tax year. If so, both claimants will receive a set of forms for completion.
More information about the process can be found in the renewals section.
Universal Credit, when fully implemented, will replace working tax credit and child tax credit. Claimants will be transitioned from tax credits to UC over the next few years. Eventually claimants transitioning to UC will follow a new in-year finalisation process rather than the renewals process outlined above where they are moving to Universal Credit. You can find out more information about this in our dedicated transition to UC section.
Once the claimant completes the renewals process, HMRC will then be in a position to issue a Section 18 decision which is the final decision for the tax year just ended.
Between receiving the renewal documents and finalising the claim, HMRC may carry out additional checks. In 2009 and 2010, some claimants were asked to renew their claim using a special number which directed claimants to the high value renewals team. Since 2010, HMRC have taken the opportunity to check claims more closely during the renewals process through compliance checks and high value renewal exercises (where specific risks such as disability and childcare are carefully checked during the renewals phone call). For the 2012-13 renewals exercise HMRC cross-checked incomes reported by claimants with the PAYE tax system during the call. See our renewals section for more information. For the 2013-14 renewals cycle, HMRC will be using RTI data provided by employers and occupational pension providers to renew claims. See our RTI and tax credits section for more information.
Decisions under these exercises will affect both the initial award for the new tax year, and the final decision for the tax year just ended. If you think your client has received an incorrect decision, you can appeal it.
As a result of this finalisation the claimant should receive:
A final award notice for the tax year just ended and an initial award notice for the new (current) tax year. Both of these notices carry a right of appeal.
Once a Section 18 decision has been made, it can only be changed in very specific circumstances. We list these in full in the claims changing section. In brief they are where there is a successful appeal, as a result of an enquiry, as a result of discovery under Section 20 Tax Credits Act 2002 or where there has been official error under Section 21 Tax Credits Act 2002.
Claims can also end mid way through a tax year for a variety of reasons. Once a person’s entitlement ceases, their claim will end. For example, their claim will end if their working hours fall below the required number, if they move in with a partner or if they become no longer responsible for a child or qualifying young person.
Claims are also likely to finish mid-year where a tax credit claimant claims Universal Credit. You can read more about this in our Universal Credit - Stopping tax credits section.
In some cases, claims can continue for a period of time after the change. This is called the ‘four week run-on’. The four week run-on was introduced in its original form from 6 April 2007.
From that date, if the claimant has been working for not less than 16 or 30 hours a week, and they either drop their weekly working hours to below those thresholds or stop working altogether, they will be treated as continuing to work for the four weeks immediately afterwards. Thus their WTC entitlement will continue during those four weeks after they have finished work, or reduced their hours. The four week run-on applies in addition to HMRC’s guidance on temporary reduction in working hours.
The original regulations were unclear whether the childcare element was included in the four week run-on, but subsequent amendments made clear HMRC’s policy intention that it should be.
Originally, the four week run-on did not apply to WTC claimants who worked 30 or more hours a week and whose working hours fell to below 30 but remained above 16 hours a week. Then from July 2009, the four week run-on was extended to that group of WTC claimants.
Also with effect from July 2009, parents whose working hours fall to the extent that the childcare element of WTC is lost (but entitlement to the basic and other elements of WTC remains) receive a run-on of this element for four weeks.
Further changes from April 2010 mean that if a means tested benefit is claimed during the four week run-on (which under normal tax credits rules would entitle a person to maximum tax credits) maximum credits will not be payable and the income test will be applied (see understanding the disregards for more information about the income test).
From 6 April 2012, the four week run-on was amended further to take account of the new 24 hour requirement for couples with children. The four week run-on now applies where one, or both members of a couple who are subject to the 24 hour rule cease to work or reduce their hours to the extend that they cease to meet the condition that one member of the couple works not less than 16 hours a week with an aggregate of at least 24 hours between them.
Updated 23 May 2016