Tax Credits: Who can claim?
The UK left the European Union (EU) on the 31 January 2020 and entered a transitional period, currently due to end on 31 December 2020, during which EU law continues to apply in the UK. The UK's relationship with the EU beyond the end of the transitional period has not yet been finalised. Please note that the guidance below reflects the law as it applied before the UK's departure from the EU, and as it will continue to apply throughout the transitional period.
To be entitled to tax credits, a claim must be made. Without a claim, there can be no entitlement.
Tax credits are gradually being replaced by Universal Credit and HMRC state it is no longer possible for most people to make brand new tax credit claims.
- Universal Credit roll-out
- Being in the UK
- Subject to immigration control
The general rules are that you cannot claim tax credits (working tax credit and/or child tax credit) at the same time as UC and you cannot make a brand new claim for tax credits if you are entitled to make a claim for UC.
UC is now available in all parts of the UK. As a result, HMRC state it is no longer possible to make brand new claims for tax credits unless you fall into an exception group. Broadly speaking, only those:
- Who are entitled to the severe disability premium in certain benefits (or have been in the past month but although the benefit has ended, they continue to meet the eligibility conditions for the severe disability premium)
- Who are 'frontier workers'. Frontier workers are people who are 'in Great Britain' (under Section 4(1)(c) Welfare Reform Act 2012) or 'in Northern Ireland' (under Article 9(1)(c) of Welfare Reform (Northern Ireland) Order 2015) but do not reside in either GB or NI. Crown servants or members of HM Forces who are posted overseas (as defined under the UC Regulations 2013) are not frontier workers.
can make brand new tax credit claims.
Existing tax credit claimants can continue to renew their claims and can add working tax credit to a child tax credit claim and vice versa as these are not counted as brand new claims.
For people who have reached qualifying state pension credit age (or where both members of a couple have reached this age), please see our Pensioners page in the UC section. Mixed age couples, where one person is above and one person is below state pension credit age, must claim UC.
You can find the detailed rules for the exception groups in our UC section.
You can find the detailed rules for the exception groups in our UC section. NOTE: HMRC’s position is that no brand new tax credit claims are possible unless the person falls into one of the exception groups above, is already claiming either WTC or CTC and wants to claim the other tax credits or they are renewing their claim. However, the legislation is not clear on this point and one interpretation of the current legislation is that other people may be able to make new claims for tax credits. We have written some guidance for advisers which provides further information about this – however, it is extremely complex and should not be followed without speaking to a welfare rights specialist.
Under the tax credit system, it is possible to claim tax credits from an earlier date in some cases - for example, where the claimant is waiting for a decision on a qualifying disability benefit that is needed to establish entitlement to tax credits or for asylum seekers who are given refugee status. Our understanding is that these rules will still apply in such cases where a person is still entitled to make a brand new claim for tax credits, but for anyone who is not able to make a new claim for tax credits such backdated claims are prohibited even if UC was not available in that postcode area throughout the whole backdating period.
Richard makes a claim for personal independent payment in July 2019. He works 20 hours a week and is single with no children. PIP is awarded in July 2020.
Previously, Richard could claim working tax credit and his claim would be treated as made from July2019 (the start date of his PIP award). This is because Richard needs the PIP award in order to qualify for the disability element and establish entitlement for working tax credit by working at least 16 hours. Otherwise he would need to work 30 hours to qualify.
However, Richard is not able to make a claim for working tax credit because he doesn't fall into any of the exceptions listed above. He can claim UC but will not receive backdating like he would have done under tax credits.
Members of a couple must make a joint claim with their partner. Although this may appear a straightforward and sensible requirement, it is one of the more complicated and problematic parts of the tax credits system. You can read more about the detailed requirements in our Understanding Couples section of the site.
Tax credits may be claimed by persons who are in the United Kingdom. The United Kingdom is England, Scotland, Wales, Northern Ireland, and adjacent islands, but does not include the Isle of Man or the Channel Islands. If a person ceases to be in the UK, their entitlement to WTC and CTC ends at that point under TCA 2002, section 3(4), unless any of the exceptions outlined below apply.
The basic rule is that in order to be ‘in the UK’ you need to be present in the UK and ordinarily resident here throughout the period of an award. Additionally from 1 May 2004 for Child Tax Credit you must also have a right to reside and, for claims made after 1 July 2014, you must have been ‘living in the UK’ for the 3-months preceding your claim. This basic rule is subject to some exceptions which are explained below.
The residence rules for child tax credit changed from 1 July 2014, when the 3-month rule was introduced. The rule, introduced by The Child Benefit (General) and the Tax Credits (Residence) (Amendment) Regulations 2014 (SI.No.2014/1511) does not apply to claims made (or treated as made) prior to that date.
To meet the basic condition of ‘being in the UK’, a claimant must have been living in the UK for a consecutive period of 3 months in the period immediately prior to the claim and where the claim is treated as made earlier (backdating), the rule applies to the 3 months leading up to the date the claim is treated as made, ie the earlier date. HMRC's technical manual (TCTM02035) gives some insight and examples as to how they treat occasional days outside of the UK in that period and whether it will disrupt someone being classed as living here if they returned to their home country for a weekend. HMRC say they will make a judgement on whether the claimant ceased to be living in the UK during their absence and apply a common sense approach, including looking at the reason for the departure and the length of absence.
The rule applies to all claims for child tax credit, but there are specific exceptions set out below.
The 3-month rule does not apply where the claimant:
- most recently entered the UK before 1 July 2014
- is a worker or self-employed person in the UK for the purposes of Council Directive 2004/38/EC
- retains the status of a worker or self-employed person in the UK (under the above Directive)
- is a national of Croatia and has a right to reside in the UK as a worker
- is not a national of an EEA State and would be a worker or self-employed person in the United Kingdom for the purposes of Council Directive 2004/38/EC if that person were a national of an EEA State
- is a family member of any of the above
- has been temporarily absent from the UK for a period not exceeding 8 or 12 weeks
- has been temporarily absent for less than 52 weeks and had been ordinarily resident in the UK for a period of at least 3 months prior to that absence
- returns to the UK after being abroad and has continued to pay Class 1 or 2 national insurance contributions during their absence (allowing for a break of up to 3 months prior to the absence)
- has UK refugee status
- has been granted leave, or is deemed to have been granted leave, outside the rules made under section 3(2) of the Immigration Act 1971 where that leave is granted by the Secretary of State with recourse to public funds, or *deemed to have been granted by virtue of regulation 3 of the Displaced Persons (Temporary Protection) Regulations 2005
- has been granted leave to remain in the UK with recourse to public funds, (including restricted leave to remain pending an application under the domestic violence concession) or humanitarian protection
- has been granted section 67 leave (section 67 leave means leave to remain in the United Kingdom granted by the Secretary of State to a person who has been relocated to the United Kingdom pursuant to arrangements made by the Secretary of State under section 67 of the Immigration Act 2016.
HMRC interpret presence as requiring a physical presence in the UK throughout the award period. This general requirement is subject to three important exceptions.
The first involves those who are temporarily absent from the UK. Providing a claimant is ordinarily resident and remains so throughout the absence, they will be treated as present and thus in the UK during the first 8 weeks of any absence. This is extended to 12 weeks where the absence is in connection with:
- the treatment of their illness, or physical or mental disability
- the treatment of their partner’s illness, or physical or mental disability
- the death of their partner
- the death or illness of a child or qualifying young person for which they or their partner are responsible
- the death, or illness, of a relative (or a partner’s relative).
Any absence must be temporary from the start. It must also be unlikely to last more than 52 weeks. If the absence is expected to last for longer, the person ceases to be treated as in the UK from the date they leave. TCTM 02040 states that the question of whether the absence is unlikely to exceed 52 weeks need only be considered once, at the beginning of the absence.
The second exception is for Crown Servants who are posted overseas. For the purposes of the tax credit legislation, a Crown Servant posted overseas is a person performing the duties of any office or employment under the Crown in Right of the United Kingdom.
The Crown Servant must be ordinarily resident in the UK or must have been immediately before the posting or the first of consecutive postings. Alternatively, immediately before the posting, or the first of consecutive postings, they were in the UK in connection with that posting. This alternative requirement is of particular help to members of the armed forces who may be posted abroad too quickly to enable them to establish ordinary residence before they leave.
Partners of Crown Servants are also covered by this exception. There is no requirement for such partners to be ordinarily resident in the UK. However, regulations require them to be either present in the UK or accompanying the Crown Servant on their posting. The rules on temporary absence also apply to partners of Crown Servants, allowing absence from the UK itself or from the place where the Crown Servant is posted. For members of the armed forces who are deployed on operations away from an overseas base, the TCTM02050 confirms that:
‘Where a member of the Armed Forces is posted or deployed from an overseas base to an operational area and is unaccompanied by their spouse or partner, then that spouse or partner in the country where the overseas base is situated shall continue to be treated as “in the UK”.’
The final exception to the general presence rule is for those who are entitled to WTC and CTC by virtue of European law. In such cases, entitlement is governed by EU law which overrides UK domestic law. An example of such a situation is someone living in Spain who continues to claim CTC under EU law.
The usual residency rules apply to seafarers and offshore workers. The UK includes its territorial waters and therefore someone working within those waters will continue to be in the UK for tax credit purposes. If they are outside of those waters, including the continental shelf, they will no longer be treated as in the UK.
The temporary absence rules apply to seafarers and offshore workers, and if the absence is less than 8 weeks, they continue to be in the UK for tax credit purposes.
As with any other incidence of temporary absence, if the period away is in excess of 8 weeks, they must notify HMRC who will end their claim. If they were claiming jointly, their partner can then claim as a single person (with only their income taken into account) until such time as the worker returns. At this point, another notification is needed to HMRC to end the single claim and start a new joint claim. In practice this leads to a complicated claim history, particular at renewal time when renewal papers will need to be completed for each separate claim.
The Tax Credits (Residence) Regulations 2003(SI 2003/654) state that ‘A person shall be treated as not being in the UK for the purposes of Part 1 of the Act if he is not ordinarily resident in the UK’.
There is no further definition of ordinary residence in the legislation. Despite the same term being used in the tax system, national insurance and child benefit, HMRC guidance asserts that the definition for tax credits is different. HMRC guidance states that:
'a person is ordinarily resident if they are normally residing in the United Kingdom (apart from temporary or occasional absences), and their residence here has been adopted voluntarily and for settled purposes as part of the regular order of their life for the time being.'
The guidance (TCTM02028- 02031) goes on to give a great deal of information on the factors that HMRC will consider when determining if someone is ordinarily resident. This can be invaluable for advisers who need to argue against any decisions on this ground. It is clear that decisions should be made based on the facts and evidence available at the time of the decision and that a decision should not be amended retrospectively if a person ended up spending more or less time in the UK than was reasonably expected at the time of the original decision. However, HMRC seemingly will amend an earlier decision where ‘it turns out that the facts at the time were different from the facts as they were understood to be when the decision was made.’
As with the requirement to be present in the UK, there are some exceptions. The regulations provide that people who are in the UK as a result of deportation, expulsion or other removal by compulsion of law from another country shall be treated as ordinarily resident in the UK.
Another notable exception is for the purposes of WTC where a person exercising their EU worker rights in the UK or a person with a right to reside in the UK pursuant to Council Directive No 2004/38/EC is treated as being ordinarily resident.
Finally, there are special transitional provisions which mean some claimants who transition from income support or income based jobseeker’s allowance are exempt from the ordinary residence requirement. Further details can be found in regulation 7 of the residence regulations.
When tax credits were introduced in April 2003, there was no requirement to have a right to reside for either WTC or CTC. However, from 1 May 2004, a person is not treated as being in the UK for CTC purposes if they do not have a right to reside in the UK.
Although the requirement applies only to CTC, a WTC claimant who is a national of an EEA country and who is not exercising their rights as a worker under EU law, will not be treated as being ordinarily resident unless there is right to reside.
As with ordinary residence, there is no definition of ‘right to reside’ in the legislation nor any definitive list of who may have a right to reside in the UK. HMRC’s manual TCTM02024 helpfully sets out a list of groups who HMRC consider have the right to reside in the UK for tax credit purposes. They are:
- all United Kingdom nationals and those with a right to reside in the Common Travel Area (which covers the United Kingdom, the Republic of Ireland, the Channel Islands and the Isle of Man);
- all EEA and Swiss workers legally working in the UK - there are special rules for nationals of certain EEA countries.
- all EEA and Swiss nationals who are self-employed in the UK;
- work-seekers from the pre-July 2013 EEA Member States, who are genuinely looking for work and have a reasonable chance of finding work and nationals of Croatia who have been admitted under the Highly Skilled Migrants Programme or who hold a certificate confirming they have unconditional access to the UK labour market;
- non EEA nationals with permission to stay or remain in the UK;
- all EEA or Swiss nationals who have a permanent right to reside ;
- all EEA or Swiss nationals who are family members of a qualified person;
- all EEA or Swiss nationals who are extended family members of a qualified person with responsibility for the qualified person’s child who is in the UK or where access to the child must take place in the UK (up the age the dependent child is 21);
- EEA or Swiss nationals who have been working lawfully and are temporarily unable to work as the result of illness or accident.
This bullet point list is a very brief outline of people who may have a right to reside in the UK. Given that this is a highly specialist area, more aptly covered by residency and immigration experts, we recommend that advisers consult the relevant chapters in the HMRC manual TCTM02070 onwards for fuller detail of each of the bullet points.
From July 2014 onwards, closer scrutiny applies to the question of whether an EEA national can be defined as a worker or self-employed person for the purpose of establishing their right to reside. Both HMRC and DWP have introduced a minimum earnings threshold which is linked to the Primary Earnings Threshold set for National Insurance purposes. This approach draws on the argument that in order for the person to be a ‘qualified person’ as a worker or as a self-employed person, the work or self-employment must be genuine and effective, rather than marginal and ancillary (as required under EU law). To check whether this test is met the individual must earn a minimum amount from the work. In practice it means that, for tax year 2020-21, for a person to have a right to reside in the UK as a worker or self-employed person, they must earn (for self-employment, this is broadly simple ‘profit’) an average of £183 per week in each of the 3 months preceding their claim (this establishes that their work is genuine and effective). In cases where the person does not meet that income threshold, HMRC will consider their full circumstances including whether their right to reside may be established under other criteria (as in the above list). There is more detailed explanation in HMRC’s guide.
The following groups only have a right to reside in the UK if they have sufficient resources not to become a burden on the social assistance system of the UK, that is, they are self-sufficient:
- all EEA or Swiss nationals who are economically inactive and do not have retained worker status, a permanent right to reside, a right to reside as a family member or extended family member of a qualified person and are not a retired worker.
For these groups, HMRC take into account the claimant's personal circumstances are taken into account when deciding whether they are self-sufficient. Such factors could include whether or not they have claimed social assistance (i.e. Income Support or State Pension Credit) from the Department for Work and Pensions in Great Britain or the Department for Communities in Northern Ireland.
The importance of making a claim in the correct capacity, either jointly as part of a couple or as a single person, is highlighted earlier in our Understanding couples section. One area of particular difficulty in determining whether to make a single or joint claim is where one partner is in the UK and the other is not. The interaction with various EU law rules makes this a difficult area. HMRC have set out a list of circumstances where a person should make a single or joint claim. TCTM2010 states that a single claim should be made where a person is:
- in the UK and their partner lives outside of the UK and they have no children;
- in the UK and their partner and children live outside the European Economic Area (EEA) or Switzerland (unless they are a Crown Servant posted overseas, in which case it should be a joint claim);
- permanently separated from their partner and have children in the EEA or Switzerland who are financially dependent on them;
- in the UK, they have no children and their partner has been abroad for longer than eight weeks (12 weeks, if they’re abroad because either they or someone close to them is getting medical treatment or has died).
A joint claim should be made where:
- one partner is in the UK and the other partner and children are living or working in the EEA or Switzerland;
- both partners are in the UK and one partner goes abroad for eight weeks or less (up to 12 weeks if they or someone close to them is getting medical treatment or has died);
- one partner is a Crown Servant working anywhere overseas, for example in the armed forces.
The general rule is that those who are subject to immigration control are not entitled to WTC or CTC. As with most rules in tax credits, this is subject to a number of important exceptions.
The term ‘subject to immigration control’ has the same meaning as Immigration and Asylum Act 1999, section115(9).
TCTM02102 summarises those who are subject to immigration control as:
- Those who require permission to enter or remain in the UK and do not have it;
- Those whose permission to enter or remain in the UK is subject to the condition that they do not have recourse to public funds;
- Those whose leave to enter or remain in the UK is given as a result of a maintenance undertaking. (They are sometimes known as “sponsored immigrants”.) A maintenance undertaking means a written undertaking given by another person (or persons), under the Home Office’s immigration rules, to be responsible for the maintenance and accommodation of the person in question; or
- Those who qualify under Section 78 of the Nationality, Immigration and Asylum Act 2002 in that they may not be removed from the UK while there is an outstanding appeal against a decision to vary or not to vary his permission to remain in the UK. The person will remain subject to immigration control in this period.
Until 6 April 2014, there had been five exceptions to the general rule but the Tax Credit (Miscellaneous Regulations) 2014 (SI.No.658/2014) removed Case 3 - entitlement to tax credits for those subject to immigration control who have had a temporary breakdown in their supply of funds from abroad. A person can still claim tax credits in the following circumstances even if they are subject to immigration control:
- They were given leave to enter or remain in the UK on condition that someone else undertook to be responsible for their maintenance and accommodation, and they have been resident in the UK for at least five years commencing on the date of entry to the UK or the date on which the undertaking was given (whichever is the later).
- They were given leave to enter or remain in the UK on condition that someone else undertook to be responsible for their maintenance and accommodation, and that person (or persons) has died.
- They are claiming WTC, are a national of Turkey and they are lawfully present in the UK. This exception doesn’t apply to CTC, however there are some transitional rules that allow some former income support and income-based jobseeker’s allowance claimants to claim CTC using the exception.
- They are claiming CTC, and are a national of state with which the European Community has concluded an agreement for equal treatment for workers in the field of social security. This currently includes San Marino, Algeria, Morocco, Tunisia or Turkey. They must also be lawfully working in the UK. People can also be treated as lawfully working in the UK if they have retired on reaching pension age; have given up work to look after children or because of pregnancy, widowhood, sickness or invalidity, and accident at work or an industrial disease. This exception does not apply to WTC.
Note – from 1 April 2012, a new concession was introduced for people who are victims of domestic violence. It applies to people granted permission to enter or remain in the UK as the partner/spouse of someone who is either British or already has permission to settle in the UK and means that they are allowed to apply for leave to remain in the UK in their own right. Until they are granted their own permission, they are allowed access to public funds (and therefore can claim tax credits) if the UKBA accepts their claim under the Destitution Domestic Violence concession. People in this position should contact the UKBA to apply for the DDV concession.
Exception for couples
Where one member of a couple is subject to immigration control and the other is not, or comes within one of the exceptions above, a joint claim can be made and both claimants will be treated as though neither is subject to immigration control. However, the second adult element of WTC will generally not be awarded.
But if the person making the claim is within exception 3 above, they can only claim WTC (unless the transitional provisions apply); and similarly if they are within exception 4 they can only claim CTC.
Similarly, where one member of a polygamous unit is subject to immigration control and any other member is not, or is within one of the exceptions, a joint claim can still be made by the unit.
Asylum seekers, refugees and section 67 leave
The Tax Credits (Immigration) Regulations 2003(SI 2003/654) also deal with claims by asylum seekers. Such people are generally subject to immigration control and are not entitled to tax credits.
Asylum seekers are generally subject to immigration control and are not entitled to tax credits. However, if their claim for asylum is accepted and they are granted refugee status, Regulation 3(5) allows tax credits to be backdated to the date the claim for asylum was submitted. This applies only if the person claims tax credits within one month (three months prior to 6 April 2012) of receiving notification of their refugee status.. Any backdating will be reduced by support received from the Government under the Immigration and Asylum Act 1999 unless any DWP backdating has already been reduced to take these payments into account.
The same backdating rules apply to claims from people who are granted section 67 leave (this can cover cases associated with the 'Windrush' generation). Where a person is granted section 67 leave, their claim can be backdated to the date their application for leave to remain was submitted to the Home Office, providing they claim tax credits within 1 month of receiving notification of their section 67 leave. For further information about backdating in general see our claims section.
Note that with the introduction of Universal Credit, it is not possible for most people to make new tax credit claims and therefore there will be no access to the longer backdating rules.
Last reviewed/updated 9 November 2020