Tax Credits for debt advisers

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Tax Credit Basics 2007/08 Pre-Course Information
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TaxAid
This is a short slide show to prepare you for the
2007-08 training for the voluntary sector

• We will look at various aspects of the tax credit
  system including
• How to qualify for
• Child Tax Credit and
• Working Tax Credit
• Dealing with overpayments
• Looking at Childcare

Being familiar with this information will help
you get the most from the training day
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These new credits will tackle child poverty and
help to make work pay.
The Government Budget paper for 2002
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How to Qualify - CTC

• Right to live in UK Present and Resident
• Aged 16 or over
• Responsible for a child or Qualifying young
  person
• Children qualify up to 1 September following 16th
  Birthday
• Young people in qualifying (non advanced)
  education / training up to 20th Birthday

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How to Qualify - WTC

• UK Resident Present in UK
• Aged 16 or over, working at least 16 hours per
  week, and
• Have children, or
• Disabled
• Aged 25 or over and working at least 30 hours per
  week
• Aged 50 or over, working at least 16 hours per
  week, past 6 months on benefits

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How to Qualify - Childcare

• Must qualify for WTC first 80 qualifying
  childcare costs covered to a max limit (80 of
  175 one child/ 300 two of more children)
• Single parent / carer must at least work 16 hours
  per week
• Couple must each work at least 16 hours per
  week, unless one member of the couple is

• Incapacitated
• In hospital
• In prison

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How Much is available?

• 2007-08
• Single Worker at national minimum wage
• Aged 25, 30 hours per week at 5.52 per hour
• 1,180 (reduced from 2428 by taper)
• Couple, 3 children, full childcare, 35 hours at
  5.52
• 8,430 (reduced from 10,218 by taper) plus
  12,480 childcare
• NB minimum of 16 working hours each
• Increases for disabled workers (3,420 max) and
  disabled children (3420 max)

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Quick Quiz Yes or No?

• I am 35, earn 5.52 an hour and work 25 hours a
  week. Will I get tax credits?
• Im 22, out of work and have a baby. I must be
  entitled to tax credits.
• We have three children and an income of
  45,000pa. Im sure we would get tax credits.

X
v
v
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Key Features Renewal

• Awards are provisional
• Initial claim then renewal by 31 July
• Income and other details supplied / confirmed on
  renewal
• Could mean overpayments
• Claims lapse if not renewed
• Payments cease shortly after renewal date
• Tax credits already received (and spent!) are
  recoverable
• Need good reason for late renewal

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Key Features Income

• Income based on taxable income of the household
  for the tax year
• Eg. Maintenance payments are not taxable so not
  income but benefits can be tricky
• Foster carers not usually taxable so no income
• Awards initially based on previous years income
  but current year income used in specific
  circumstances
• In-year increases of up to 25,000 are ignored
• First 300 of pension income, investment income,
  property income, foreign income, notional income
  (not miscellaneous income)
• NB Losses, pensions and Gift Aid

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Examinations Enquiries

• Examination
• HMRC may ask questions before making an award or
  before it is finalised
• Enquiry
• HMRC may ask detailed questions after the award
  is finalised and charge penalties for errors
• Normal enquiry window
• 12 months from filing date of 31 July
• NB was 31 August 06 and 30 September for earlier
  years
• Can be later 12 months from 31 January
• Result may be an overpayment of tax credits!

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Key Features Overpayments

• An inherent part of the system!
• Awards are provisional finalised on renewal
• Based on annual income
• In year changes in circumstances impact awards
• Rules and administration are complex claimants
  (and HMRC) can make mistakes
• Claimants can
• Fail to notify changes on time (within I month)
• Make incorrect claims (eg single for joint
  disability)
• Fail to renew on time
• Be unsure of income levels
• Fail to tell HMRC of income changes or additional
  entitlement

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TaxAid
Thank you for looking through the pre-course
information on tax credits. We hope you have
found this introduction useful and look forward
to welcoming you on a course soon.
Further information on tax credits can be found
on the TaxAid website tax credit section
http//www.taxaid.org.uk/tax_credits.cfm
Please see our training brochure
at http//www.taxaid.org.uk/advisers.cfm?articlei
d284secnav16 http//www.taxaid.org.uk/news.cfm
?articleid289
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www.taxaid.org.uk advisers line 020 7803
4950 info_at_taxaid.org.uk