Universal credit: Making a universal credit claim

This page looks at what happens if an existing tax credits claimant makes a voluntaryclaim for Universal Credit (UC). This is often referred to as 'natural' or 'voluntary' migration.

What is natural migration?

For existing tax credit claimants, awards of tax credits will continue at present unless they claim UC for themselves (eg by choice, due to a change of circumstances or need to claim support now provided by UC) or until DWP select them to move across to UC under the 'managed migration' process and issue a migration notice to them or, for some who have reached their state pension age, issue them with a tax credits closure notice.

The time table for completion of the managed migration exercise has changed several times and information about the latest position is available on the GOV.UK website. It is expected that most tax credit claimants will have moved, or received a migration notice inviting them to move, to UC by the end of 2024. Migration notices generally allow a deadline of 3 months so for migration notices issued at the end of 2024, the migration to UC may not be complete until March 2025. Some existing tax credit claimants who have reached their state pension credit age and who claim child tax credit but are not entitled to working tax credits and those who are claiming tax credits and pension credit at the same time, will be issued with a tax credits closure notice and invited to claim pension credit for support. Those who are already claiming pension credit and tax credits, will remain on pension credit. Transitional protection will be available for people who move to UC or pension credit (or who are already claiming pension credit alongside tax credits) in line with the instructions on their migration or tax credit closure notices. See our pensioners section for more information.

Apart from the managed migration exercise,  existing tax credit claimants who have not yet been issued with a migration notice or tax credits closure notice will still be affected by UC if they choose to claim UC, if they have a change of circumstances that ends their tax credits claim and they still need to claim some support or if they need to make a claim for another legacy benefit (one of the other benefits that UC is replacing). The general rule is that you cannot claim tax credits and UC at the same time. Tax credit claimants who move to UC in any of these situations are said to be 'naturally' or ‘voluntary’ migrating.


Choosing to claim universal credit

Existing tax credit claimants can choose to claim UC voluntarily. Some people will be better off under UC rules than under tax credits and some people will be worse off under UC than tax credits. If a tax credit claimant is likely to be worse off under UC, then it is probably in their interests to try and remain in the tax credit system for as long as possible until they receive their migration notice. If they are likely to be better off under UC, then they may wish to move across now.

It is important that claimants seek advice from a welfare rights specialist before leaving tax credits as there are many issues to consider aside from which one is better financially, as the UC rules are very different to tax credits. For example, under UC people may be required to look for work as a condition of receiving the benefit, which is not required for tax credits.

What happens if a tax credit claimant makes a UC claim, is issued with a migration notice or a closure notice?

The mechanism for terminating the tax credits claim

Broadly, under Regulation 8(1) Universal Credit (Transitional Provision) Regulations 2014, where a claim for UC is made (whether or not it is subsequently withdrawn), the tax credit award will terminate the day before the first day of UC entitlement under Regulation 8(2). If the person is not entitled to UC or does not claim UC by the deadline, then it will terminate on the day before the first date they would have been entitled if they had met all of the UC conditions (both basic and financial conditions).

From 6 June 2024, for tax credit claimants who are issued with a tax credits closure notice, the rules mean the tax credit award will terminate from the deadline date in the closure notice, or the day on which they claim state pension credit if that is after the closure notice is issued and on or before the deadline.

It should be noted that no decision notice or indeed any written notification will be issued by HMRC at the point the tax credit claim is terminated. Therefore, it is seemingly not possible to appeal the termination of the tax credit claim at that point. The claimant will, at some later point, receive an in-year finalisation pack which will seek to finalise the tax credit claim between 6 April and the date of termination. A final award notice (Section 18) will then be issued which carries the usual appeal rights.

As with other parts of UC legislation, the legislation refers to awards of tax credits ending where there is 'entitlement'. In some cases, tax credit payments may be made before entitlement is established - for example, between 6 April and the date a person renews their claim for the current tax year. The legislation includes a provision to treat people as entitled to tax credits in certain cases. We explain where this is the case in our tax credits and UC section.

How does the process work in practice where a UC claim is made?

In practice, our understanding is that as soon as a UC claim is validly completed online and the submit button pressed, an electronic notification (called a 'stop notice') is sent from DWP to HMRC to end the tax credits claim. There is an interesting discussion of the various stages of a UC claim leading up to pressing the submit button in GDC v SSWP (UC) 2020 UKUT 108 (AC). [VT1] Broadly, it was held that partially completing the online process does not amount to a defective claim for UC and that submission of the claim occurs when the claimant presses the submit button.

Until the legislation was amended from July 2022, there was a condition that required the Secretary of State to be satisfied that the claimant meets the basic conditions of UC (except for the claimant commitment and any others the claimant is not required to meet). Our understanding is that the process has been automated all along and it does not involve a DWP official making a determination. This was confirmed by DWP in the SK case explained below and the UT confirmed in that case it is open to DWP to use a computer to make that decision.

The wording of Regulation 8 raised a number of questions about when a valid determination is made, what happens if a UC claim is withdrawn (either before or after the determination) and when is a claim made for the purposes of Regulation 8. Some of these issues have been considered in recent Upper Tribunal cases and may still be of interest for older cases but the condition that the Secretary of State be satisfied that the claimant meets basic conditions before the tax credit claim is terminated was removed from 25 July 2022 by SI 752/2022.

The new regulations also insert the words ‘whether or not subsequently withdrawn’ – which was the issue that was considered in the AB case below.

LH - 2018

In an Upper Tribunal case (LH - 2018 UKUT 306 AC) a tax credit claimant mistakenly made a claim for UC when trying to make a claim for personal independence payment. The UC claim was subsequently withdrawn/closed at the claimant's request. However, the tax credit claim had already been terminated and HMRC finalised the claim under the in-year finalisation process. The claimant appealed the final section 18 decision. The First-tier Tribunal found that the DWP had issued a stop notice in respect of the tax credit award, but found that there was no evidence (in the notice or elsewhere) that the Secretary of State was satisfied that the basic conditions had been met.

The Upper Tribunal rejected HMRC's submission that all that mattered was the existence of a stop notice, not its content. What was required was some evidence to link the stop notice itself to the Secretary of State being satisfied about the basic conditions. On this point, the Upper Tribunal said, 'All that was required was an explanation of the system that led to the notice being issued. Mr Eland has provided that'. Unfortunately, that explanation is not contained in the decision.

In this particular case, the Upper Tribunal decided that both conditions (a UC claim being made and the Secretary of State being satisfied that the basic conditions had been met) were met.

AB - 2021

In a further Upper Tribunal case HMRC v AB (2021) UKUT 209 (AAC), a tax credit claimant made a claim for UC and then subsequently withdrew the UC claim. The FTT found that the claimant withdrew her UC claim two days before the stop notice was received by HMRC and held that on the date on which the DWP issued their stop notice in respect of the claimant’s tax credit award, she had withdrawn her UC claim. As a result Regulation 8 Universal Credit (Transitional Provisions) Regulations 2014 did not apply because the claimant had withdrawn the UC claim before the Secretary of State had made a determination as to whether the regulation 8(1) conditions were satisfied.

HMRC appealed the FTT decision to the UT. The claimant argued that Regulation 31 of the Universal Credit (Claims and Payments) Regulations 2013 was authority for the proposition that, as soon as DWP received notice that her UC claim had been withdrawn, the claim was in law treated as if it had never been made. The claimant provided evidence she had withdrawn 2 previous UC claims without interruption of her tax credit award.

The UT dismissed HMRC’s appeal and found that the FTT decision was correct. The Judge said that two conditions must apply for Regulation 8 of the 2014 regulations to operate and thereby terminate entitlement to a tax credit. First, the person must make a claim for UC – which is a pure question of fact. Secondly, the Secretary of Stat must turn her mind to the question of whether the basic conditions of UC are met (Regulation 8(1)(b) and make a determination accordingly. Some duly authorised official must formally determine the matter.

The UT also found that:

It is not disputed that the Secretary of State’s issue of a stop notice involved a determination that the relevant UC basic conditions were met. No evidence suggests that the determination was made at some point before the stop notice was issued. It therefore followed that the determination was made on the same date as the stop notice was issued.
This meant that the Secretary of State determined that the UC basic conditions were met when the claimant had no subsisting UC claim (because it had been withdrawn)
The UT therefore had to decide whether Regulation 8(1) requires a subsisting UC claim at the date the determination is made. The UT found it did because it is a two stage process requiring a claim to be made then a determination to be made under Regulation 8.
The UT found that the wording in Regulation 8(2) also supported the claimant’s case as it refers to tax credits terminating ‘the day before the first date on which the claimant is entitled to universal credit in connection with the claim’  - since entitlement is only determined upon a claim being decided, therefore absent a subsisting claim a regulation 8(1) determination cannot be made.

SK – 2022

This case involved consideration of Regulation 8 in the context of the basic condition requiring a person to be ‘in Great Britain’. In this case, a tax credit claimant made a claim for UC on 17 March 2019. Her claim was accepted online and a stop notice was sent to HMRC. On 5 April 2019, DWP notified the claimant that she was not entitled to UC as she did not have a right to reside in Great Britain (and therefore could not be habitually resident). On the same day, the award of tax credits came to an end with effect from 16 March 2019.

The basic conditions for universal credit are set out in Section 4 Welfare Reform Act 2012 and state that a person meets the basic conditions…..if the are ‘in Great Britain’. Section 4 goes on to say that regulations may specify circumstances in which a person is to be treated as being or not being in Great Britain. The Universal Credit Regulations 2013 (Regulation 9) contain provisions made under Section 4(5) and say a person must be habitually resident in Great Britain in order to be treated as present here. A person must have a right to reside in Great Britain in order to be habitually resident.

The claimant argued that it was wrong to terminate her tax credit award because the Secretary of State could not be satisfied that she met the basic conditions of eligibility for UC. The claimant’s argument was therefore that the basic conditions had to be read as they apply to govern entitlement, including Regulation 9 of the 2013 Regulations.

HMRC representatives stated that they act on notification from DWP that regulation 8 is satisfied – the stop notice and terminate the award. The notification is electronic from the UC computer system  to the tax credit computer system. The position of HMRC Commissioners is that if the notice is received, the conditions must be satisfied and ultimate entitlement to UC has no bearing on how Regulation 8 applies.

DWP representatives argued that the decision making on an online claim is in two stages. The first stage involves checking the basic conditions – if they are met the award of tax credits is terminated. At the second stage, all the conditions of entitlement are checked. DWP argued that Regulation 9 of the 2013 regulations was irrelevant at the first stage and only relevant at the second stage.

The DWP gave a helpful explanation of the stop notice process:

DWP also argued that the appeal was against the termination of the tax credit award, not a challenge against the UC decision and therefore the only issue is whether the tax credit decision maker received the stop notice under Regulation 8.

The UT found:

The stop notice is a purely administrative step to ensure co-ordination between HMRC and DWP computer systems. It is the method by which HMRC are aware that Regulation 8 has been satisfied. It is not an adjudicative step.
It is regulation 8 that operates to terminate the tax credit award, not the stop notice. The tax credit award is only terminated if the conditions in regulation 8 have been satisfied.
That the basic conditions in Section 4(1) of the WRA 2012 only relate to those conditions listed – they exclude cases in which a person is treated as not being in Great Britain under Section 4(5). It therefore excludes cases in which 4(1) is qualified by deeming provisions.
The DWP are entitled to rely on a computer programme to identify cases in which the transitional condition is satisfied.
The claimant therefore lost their appeal – the UT found that the requirements of Regulation 8 were met.

The case is worth reading as it contains interesting analysis of Regulation 8 and that, in the UT’s view, it is unusual in that the transitional provision is qualified by requiring a determination by the Secretary of State as to whether the basic conditions are met. It also highlights that the determination requirement can be to both benefit and detriment of claimants.

The Judge specifically did not follow the AB case because that analysis was made on a different issue, on different arguments and a different explanation of how the universal credit system works.

JL case

In JL v Calderdale Metropolitan Borough Council (2022) UKUT 9 (AAC) This is a housing benefit case, not involving tax credits, but it explored Regulation 8 once again. The case explores withdrawals in the context of Regulation 8. The UT found in favour of the local authority and DWP.

Wrong advice

It is worth noting that there may be recourse to financial compensation if a tax credit claimant makes a UC claim based on incorrect advice from HMRC or DWP and the UC award is less than the tax credits award. For example, where a tax credit claimant who is off work with illness is advised to claim UC instead of New-Style Employment and Support Allowance.

In addition to taking any action outlined above to try and get the tax credits award reinstated, a complaint should be submitted to either HMRC or DWP (whoever gave the wrong advice) with a request for financial compensation to cover the amount lost by the claimant as a result.

NOTE: We recommend that any adviser supporting a tax credit claimant who has mistakenly or accidentally made a UC claim which has led to termination of the tax credit award seek specialist advice from Child Poverty Action Group or a welfare rights solicitor immediately and before any further steps are taken (for example, to withdraw the UC claim). This is a very complex area and taking the wrong steps can have serious financial implications for claimants.

Last reviewed/updated 20 June 2024