who does this tax credit "belong to"?

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  • #19907
    Anonymous
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    We have a claimant who has split from his wife and kids.She is not claiming
    He has not claimed HB/CTB before.
    After his wife left he lost his job and started claiming JSAC. He failed to tell Inland Revenue of his change in circs and continued receiving child tax credit.
    This, according to the award letter was in joint names. His tax credit has now ceased and we have removed it from his income from 17.01.05 the date the Inland Revenue advised us he had ceased to be entitled. (actually on the phone the Inland Rev told us he shouldnt have had it at all and they are deciding how to recover).
    The claimant is now saying we should not take the tax credit into account as his wife had access to the bank account and she spent the money.
    We are arguing that it is in the joint account and in his name so it was his income until the date it ceased.But, he then said we should only take half the income as it was awarded jointly to himself and his wife.

    Surely, as a single man with no kids, he wasnt entitled to child tax credit, so we shouldnt take it into account, but if he actually received it at the time it counts as his income and the fact that he let his wife use it is neither here nor there?

    Sorry if this is confusing!
    What I need to be sure of is, do we count the incorrectly paid tax credit as his income during the period he received it? If so, do we take all of it or half of it?

    #1454
    Anonymous
    Guest

    Hmmm… tricky.

    My theory is this:

    He chose to accept the ongoing income. He could have opted to notify the IR and stopped it. The income actually [b:51a130e016]was[/b:51a130e016] paid to him during that period.

    The fact that he chose to make it available to his wife thought their joint bank account is another rash decision/omission on his part, but one that doesn’t alter the fact that he accepted the income.

    Imagine it was wages we were discussing. Client says – “I choose to give half my wages to my ex-wife every week”. Would we treat that as an “expense” and deduct it from his gross pay? Doubt it.

    Looking at the matter of entitlement, and the fact that he did not qualify for the CTC he was receiving…

    Again imagine it was wages. Client says – “My employer has paid me these wages even though I didn’t do the work. I have spent some of it and given the rest away – please disregard all that income” Would we disregard those wages as income? Doubt it.

    Fact is, he has screwed up. Unfortunately the regs do not cover a situation where a customer benefits from an income they are not entitled to which they then choose to informally share with someone else who possibly is entitled to it.

    So my theory is that he had the income paid to him and it should therefore count as income for the period concerned. The rest of the mess is between him and the inland revenue. Don’t get involved.

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