28 March 2012

Couples with Children must contact HMRC – or their tax credits might stop

From 6 April 2012, HMRC will stop working tax credit for most couples with children who do not work at least 24 hours a week between them. This includes some who will still be entitled from 6 April because they are covered by one of the exceptions to this rule. HMRC have failed to tell these claimants that they must contact them by 6 April if one of those exceptions applies to them.

Below, I have reproduced a very informative article from the Low Incomes Tax Reform Group (LITRG) website.

Rule change

Under current rules, a couple with children qualify for WTC if one person works at least 16 hours a week. From 6 April, couples with children will be required to work at least 24 hours between them, with one person working at least 16 hours a week in order to continue to qualify for WTC.

There are a number of exceptions to this new requirement. Anyone who qualifies for WTC in another way should continue to receive WTC by working at least 16 hours a week from April 2012. This applies to people who:

There are four other situations where the new 24 hour rule will not apply. One person only needs to work at least 16 hours if the other person is:

The last exception was announced only recently after a coalition of charities, led by LITRG, wrote to the Minister asking for an extension of the exceptions to cover carers (see our article).

HMRC letter

In November 2011, HMRC wrote to some 280,000 claimants telling them about changes to working tax credit from April 2012.

The letter (TC 1139) fully explained the change for couples, and listed all the exceptions to the new requirement that were known at that time. The most important piece of information, that for tax credits to continue from 6 April, claimants covered by one of the exceptions must contact HMRC, was missing from the letter. If they do not, HMRC will stop their WTC payments from 6 April. This is because HMRC do not hold information about who qualifies for these exceptions, although we understand they may try to identify those who qualify under the carers exception.

We are concerned that many claimants will have forgotten the contents of a mailshot they received some six months ago. HMRC are relying on people contacting them when their payments decrease, but the cuts to tax credits have been well publicised, therefore most people are expecting their awards to fall and may not contact HMRC.

HMRC Charter

HMRC have a duty under their Charter to ‘help and support you get things right’. This includes providing information that helps claimants understand what they have to do and when they have to do it. HMRC have failed to do that in this instance and as a result some of the lowest paid most vulnerable claimants may miss out on payments.

At the very least, HMRC must write to those affected (including carers) before the 6 April to ensure they understand that they must contact HMRC if one of the exceptions may apply to them, otherwise their WTC will stop.

You can find the full article Contact HMRC - or your tax credits might stop on the LITRG website.

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