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.
- Changes during a tax year
- Changes which bring an award to an end
- Changes during the renewal period
- Changes after final decision
- Formal decisions
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. These decisions carry a right of appeal.
More information about how these changes are made can be found in the Tax Credit Technical Manual on the HMRC website.
Some changes of circumstance mean a tax credit award will end. In some cases the claimant will need to make a separate, new claim for tax credits (for example, where they were part of a couple on a joint claim and are now single).
The types of changes which can bring a tax credit award to an end mid-year include:
- Change in the household make-up from single to being part of a couple (requiring a joint claim) or being part of a couple to single. In such cases the claimant will need to make a separate claim based on their new status. See Understanding Couples.
- Leaving the UK. If the absence from the UK is intended to be temporary i.e. less than 52 weeks, then entitlement ends after the first 8 weeks (extended to 12 weeks in some cases). If the absence isn't intended to be temporary, then entitlement ends after the claimant leaves the UK. See Who Can Claim.
- For CTC only, losing the right to reside in the UK. Right to reside is not a condition of WTC entitlement, and so if WTC is also claimed, then the whole award will not end, only the CTC. See Who Can Claim.
- For CTC only, where the last or only child included in the claim no longer lives with the claimant or leaves full-time non-advanced education. If the award also includes WTC, then the minimum number of hours of work required to qualify for WTC may alter once there are no children included in the claim and this could bring both WTC and CTC to an end. See Entitlement.
- For WTC only, where the claimant stops normally working the minimum number of hours required to qualify. See WTC elements.
In addition, tax credit claims terminate when claims are made for:
- Universal credit (UC). See the Universal Credit section.
- Tax-free Childcare. See the Tax-free Childcare section.
This is not meant to be an exhaustive list but illustrates the types of changes which mean a tax credit award ends.
Now that universal credit (UC) is available across the UK, HMRC state that most people can no longer make a brand new claim for tax credits (there is an exception for frontier workers) . This means once the tax credit award ends, working-age claimants will find they need to claim UC for future support that was previously offered by tax credits and other benefits and claimants who have reached their qualifying state pension credit age (both claimants in a joint claim), will need to consider claiming pension credit for support. See our UC section for more information.
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. This includes final decisions made under the in-year finalisation process in relation to claiming UC.
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.
- Section 21C Tax Credits Act 2002 – this is a new provision which allows HMRC to vary (change) earlier tax credits award/entitlement decisions where HMRC are notified by the claimant that they have been awarded a qualifying disability benefit and meet the conditions to have a disability element included in their tax credit award in line with the longer backdating rules. This only applies where the claimant notifies HMRC about the qualifying benefit within 1 month of the benefit decision.
- 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.
Throughout the tax credits annual cycle there are a series of formal decisions made about tax credit awards.
Some decisions are provisional, some final and all formal decisions about awards are subject to the formal appeal process. This can throw up some issues about how the various decisions interact.
Tax credit decisions and universal credit
Where HMRC make a tax credit decision which brings a tax credit award to an end, if the claimant then claims universal credit, any subsequent change or revision to the tax credit decision can only take effect up to the date before the UC claim is made.
Last reviewed/updated 16 June 2021