Terms & Conditions

[Anonymous]

Sorry if this has been addressed before but……
We have a brand new claimant in receipt of child and working tax credit. She has had her reviewed award letter which says she has already had approx £5000.
We have put this as arrears of tax credit. It’s not a brand new claim so we can not disregard it for 52 weeks, but have to count it as capital. But, can this be correct? She doesnt have any other capital ( she is overdrawn). It is money she has already had and spent, how can it be capital?
As this is a reviewed amount of tax credit, should it not be a change of circumstances and be disregarded as capital for 52 weeks? It would be a change of circs if the amount of tax credit had changed since last year, but as she has never claimed with us before, we don’t know if it is a change of circs.
Should we presume it is a change of circs and disregard the “arrears”?
It really doesnt seem fair to take it as capital.
Help please!

[Anonymous]

The significance of treating something as a payment of capital is that you don’t treat it as income first.

Normally, if a claimant receives a regular payment of income, they will use it to live on until they get the next payment and you would only regard them as having any saved capital if there is still some left at the end of the income cycle.

But items that count as capital as soon as they are received (like your TC arrears) do not go through that holding phase: it’s capital the instant you receive it.

But then if you spend it, it is obviously not your capital any more: it’s only capital for as long as you still have it. Just like spending some of your savings that took years to accumulate – once they’re gone they’re gone.

So in conclusion: “treated as capital” just means “not treated as income”. capital used in the HB assessment will always be the amount that the claimant curently has, regardless of where it came from or how long it’s been there.

[Mark]

I’ve noticed that some LA’s software has a special code to use where Tax Credit arrears are paid. For example, if £5000 worth of arrears are paid this gets input as capital of £5000 and a code of TAXCRED (or some such). For the resons that Peter outlined I maintain that it is a serious mistake to do this sort of thing. Capital is of course only capital if you still have it (notional issues aside). So to any LA that is loading Tax Credit arrears as capital onto your computers I offer the following questions:

1) When will you know to remove it?

2) How do you know they still have it?

3) How do you know you’re not counting it twice (because presumably if they still have it it is invested in some way now and you’ve to count that investment too).

So I reckon that where someone does get a Tax Credit arrears payment you won’t know how to count it until you’ve found out what happened to it once it was paid. And you should certainly not just blindly use it as a capital figure in the HB/CTB assessment.

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