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Spring 2004 Bulletin

TAX  CREDITS

People who have claimed Working and/or Child Tax Credits for 2003/2004 should note that the Inland Revenue have changed, or at least fine tuned, the previously- announced arrangements for renewing claims for 2004/4005.

The renewal process has two objectives.  Firstly, payments made during the 2003/04 tax year were made under provisional awards based (usually) on a declaration of income for the 2001/02 tax year.  Those awards must now be finalised by being reworked to take account of the claimant’s actual income for 2003/04, which may give rise to either an additional payment of Tax Credit for 2003/2004 or a clawback of Credits already paid.  Secondly, 2003/04 details are required to set the provisional award for 2004/05.

To smooth the workload, renewal forms will be sent out between April and July, with a return date in August or September.  Meanwhile, Tax Credit payments will continue at their existing rate.  We would however recommend that the forms be dealt with as soon as possible: if an additional payment is due, the sooner the form is submitted, the sooner the money will be received: and if the existing rate of payment is overgenerous, the sooner it is corrected, the sooner the overpayment will cease accumulating.

In most cases, any overpayment for 2003/2004 will be collected by reducing the Tax Credit award for 2004/2005.  Any underpayment will be corrected by a lump sum payment.

Renewal procedures simplified by personalised forms

The renewal forms will be personalised, setting out details (such as the names and dates of birth of children) which the claimant will be asked to confirm or correct.  People who received only the Family Element of Child Tax Credit in 2003/04 will, in most cases, simply be asked to confirm that their income for 2003/04 fell between stated minimum and maximum figures; other claimants will be required to submit a full Declaration of Income.  (The Family Element is equivalent to the old tax allowance and worth £545 a year, or doubled to £1,090 for a baby under a year old.)

Notify changes in circumstances promptly

If there is any change in your circumstances – such as the birth of a new baby or an increase or reduction in childcare costs – you should not wait for the renewal form but telephone the Tax Credit Helpline immediately.  In some cases, there is a legal requirement for prompt notification, in others it may increase the Tax Credit payable.

Furthermore, if you wish, you need not wait for the renewal forms, but can telephone details of your taxable income for 2003/04 as soon as these are known.  This may be worthwhile if your actual income for the year was substantially lower, or higher, than that assumed in the original Tax Credit calculation, as it will bring forward the additional payment due, or stop the overpayment accumulating.

Childcare during the summer holidays

Finally, a point that is sometimes overlooked is that the Childcare Element of Working Tax Credit is not limited to permanent childcare arrangements, but can be claimed for blocks of childcare lasting four weeks or more, and up to the beginning of the September following a chlld’s 15^th birthday.  Thus, for example, it can be claimed for children attending the summer holiday activities offered by some schools, local authorities, clubs etc: the organisers will be able to tell you whether their activities qualify.