Late awards of the New Tax Credits

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  • #19711
    Mark
    Participant

    It is starting to look like there will be plenty of late awards of the New Tax Credits. So how do we treat them in HB/CTB?

    SI2003/308 was drafted to ensure that the effective date of change in HB/CTB will be 7th April 2003 in all cases. Simple? Well it seemed so at first.

    But what about late awards of Tax Credits (e.g. an award made in July 2003 back to April 2003). Without SI2003/308 this would have been capital from the date the payment was received in July(because of the new HB Reg 40) and income from July onwards (quite what date in July is another question entirely!!).

    But does SI2003/308 change this? I think it does. My reading is that for the late award there are 2 changes of circumstances and 2 dates- the award of capital and the award of income. So does this mean that we have to take the Tax Credit arrears into account as capital from 7th April 2003 and not the date they are received in July? If so I doubt very much this was the intention.

    It is even possible to read SI2003/308 as meaning that the award made in July would have to be taken into account as income all the way back to 7th April 2003 (although I think I have convinced myself that this isn’t true because of reg 40).

    Anyone else want to put their ideas forward?

    #770
    Anonymous
    Guest

    The point you make could also be applied to anyone who claims late and gets automatic backdating to 6 April: they too would be covered by the words “commencement of entitlement to [a tax credit] on 6 April”.

    It seems obviously ludicrous that someone could be treated as possessing capital before they have received it.

    But I think Reg 68(1A) has to be read in context and it would be quite reasonable in my view to assume that it only applies between 1 and 6 April. To avoid any doubt at all, the new paragraph (1A) could be revoked on 7 April so that any payment of tax credit assessed back to the start of the year on or after 7 April gets dealt with under the normal rules with no retrospective effect.

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