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. This is unlikely to happen now that HMRC state it is no longer possible to make brand new claims for tax credits.
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 TC603 or renewal notice. The circumstances of the claimant will dictate what combination of renewal forms are received.
- Auto-renewal cases – TC603R
- Reply required – TC603RR + TC603D (if HMRC require previous year information as well as the year just ended, PY-1, a TC603D2 will be used).
People who have claimed universal credit (UC) in the same tax year that they had a claim for tax credits will receive similar notices to finalise their tax credit awards under the in-year finalisation process. See Universal Credit - Finalising Tax Credits for more information.
If the claim is a joint one, the household should 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, before the award is finalised. If so, both claimants will receive a set of forms for completion. This is because once the claimants are no longer a couple, they cannot complete the form, nor renew, on behalf of each other.
More information about the process can be found in the renewals 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 compliance checks.
Decisions taken as a result of a compliance investigation may 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. You can find out more about compliance checks in our dealing with mistake and fraud section.
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, or, in relation to backdating of disability elements, varied under 21C Tax Credits Act 2002. It can also be changed if the claimant reports an error or further change or additional information before 31 July deadline.
The same principles apply to a Section 18 decision which is made by HMRC under the in-year finalisation process.
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, the claim changes from being single to joint and vice versa (for example, if they move in with a partner) or, in a CTC only claim, if they are no longer responsible for a child or qualifying young person.
In some cases, claims can continue for a period of time after the change. For working tax credit, this is called the ‘four week run-on’.
When a claim ends mid-year, payments will cease (subject to the four-week run-on) but the claimant will still go through the ‘renewals’ process. This will usually take place following the end of the tax year. In cases where a claim has already ended during the tax year, provided the claimant does not claim UC in the same tax year, there won’t be a renewal as such (although it is still referred to as the renewals process) but they will receive the same forms in order to finalise their claim for the period of the their claim in the tax year just ended. So if a claim ends in September 2023, the claimant will receive forms between April and June 2024 which ask them to confirm their income for the 2023/24 tax year so that HMRC can issue a final award notice for the period April – September 2023.
Universal Credit (UC), is gradually replacing working tax credit and child tax credit. Prior to the pandemic it was expected that existing tax credit claimants would be moved from tax credits to UC between November 2020 and September 2024, following a pilot exercise. Due to the coronavirus situation, the managed transfer of tax credit claimants to UC was put on hold but the managed move has re-started. Most tax credit claimants are expected to receive their migration notices at some point during 2023-2024 and the move for most tax credit claimants remains scheduled for completion by the end of 2024.
Outside the managed move tax credit claimants can also move to UC if:
- They choose to claim UC
- They need to claim another benefit which UC has replaced (For example help with housing costs)
- They have a change of circumstances that ends their tax credits award (for example a WTC only claimant who stops working or a joint/single household ends) and they need to continue to claim support through UC.
Where a tax credit claim ends and UC is claimed in the same tax year, the normal renewals/finalisation process will not apply and the claimant will instead follow an in-year finalisation process. This means that after they claim UC, DWP will notify HMRC to start the in-year finalisation process. The claimant will receive a notice asking them to confirm their income from April to the date the tax credit claim ended and that will be finalised. Under the normal process outlined above, this would not happen until after the tax year ends.
You can find out more information about this in our UC section.
Last reviewed/updated 2 May 2023