9 March 2012

Misleading HMRC letter sent to over a million tax credits claimants

A misleading statement in an HMRC letter sent to over a million tax credits claimants may persuade people to leave the tax credits system. This could mean they miss out on future payments. 

Advisers should be aware that HMRC have sent a letter (TC1015) to around 1.3 million tax credit claimants over the last couple of weeks. The purpose of this letter is to tell claimants that unless they contact HMRC by 31 March, their claim will not be renewed for 2012-2013. The letter has been sent to everyone who HMRC thinks will receive a Nil award from April 2012 (based on the information held on their system) and is a repeat of an exercise first carried out last year (see our renewals section for more information about last year's exercise). 

The problem with the letter is that it contains guidance that is not as clear as it could be. In particular, the letter quotes the income limit for CTC claims as £26,000 without explaining further that the limit may well be higher for people with more than 1 child, who qualify for the disability element or who have childcare costs. As a result people may allow their claims to lapse, because they believe the figure quoted is an absolute figure, without fully understanding the consequences. It may also deter people from claiming again in the future if their circumstances do change.

Claimants who know their circumstances or income have changed or who think they might change in the 2012-2013 tax year should contact HMRC before the 31 March 2012 and ask for their claim to be renewed from April 2012. Failure to do so may mean a loss of tax credits, as any new claim will only be backdated for up to 1 month from April 2012. 

HMRC have issued some more detailed advice for claimants who have received this letter on their website. 

You can find out more, and download a copy of the letter, from this Low Incomes Tax Reform Group press release.