Tax Credit Uprating

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    Sorry if this has already covered but can’t find anything relating to this for April 2006. Last year due to the change in the way we calculated weekly income from Tax Credits the effective dates were 1st or 4th April 2005. What about this year?
    e.g., tax credit new rate which is effective from 3 April 2006. For council tax purposes should it be taken into account from 1st April or 3rd as the effective date. I seem to think that tax credits are not covered by the SSCB Act or the Jobseekers Act. Should it be treated differently from other uprated benefits.

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    No takers? Is this still a live issue or has it lapsed into dormancy until next year? I’ll have a go anyway. My thoughts on payment cycles might strike you as somewhat different from the real world, but in theory it’s what I would expect.

    You are right that the legal provenance of Tax Credits is outside the “Benefit Acts” as defined in the HB Regs. This means that the 14-day notional income rule in HB Reg 42(8) does not apply. But the 30-week rule in HB Reg 34 does apply: any change in the claimant’s Tax Credit income arising solely from the uprating of the Tax Credit elements can be disregarded for up to 30 weeks; but if TC changes for any other reason, such as the annual income reconciliation, the 30-week rule does not apply.

    I cannot see anything that allows you to roll TC changes up with the HB/CTB uprating, which I guess is what you were getting at – as far as I can see you could only do that if the claimant’s TC payment cycle actually coincided with the HB uprating in a particular case, in which case the change of circs rules would require both changes to take effect from the same benefit week.

    So much for the HB Regs.

    The actual uprating date for tax credits should be 6 April – always the start of the tax year. And because of the way the payment instalments are planned, I don’t think you should get too many cases where the claimant receives a “split” payment containing a mixture of their old and new tax credit awards.

    Now I am not sure how HMRC is playing it this year: in the past they said that in the few weeks between the end of the financial year and the income review they were not going to apply the uprated elements – claimants just carried on getting what they were getting before until their annual review was complete. If they have done the same thing this year, there shouldn’t be any altered payments for the early weeks of 2006/07 that have changed because of the uprating only and for no other reason. On the other hand, they might have programmed in the new element rates in advance of the annual income review, in which case you would expect the rates to have changed slightly when the first 2006/07 instalments go out. I cannot say which approach they have gone for by looking at my own Tax Credit award because we get the family element and the rate hasn’t changed – so I wouldn’t know whether I am still getting last year’s rate pending review or whether I’ve been uprated to this year’s identical rate.

    So, subject to the 30-week rule (which may or may not apply depending on whether HMRC have applied the uprating as described in the above paragraph), I would say that claimants should be receiving instalments that contain no part of last year’s award, only cover this year’s award, and fall to be treated under the normal rules in Reg 32: weekly in arrears, four weekly in arrears, two-weekly a week in advance and a week in arrears.

    If I am completely wrong about how payments cycles have panned out and you are seeing people with split 4-weekly payments covering part of this year and part of last year, then again I think Reg 32 applies subject to the 30-week rule but in those cases you might consider it impracticable and fiddly to apply the 30-week rule. If so, you would have two changes of circumstance – one just before the end of March and another one part way through April.

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