HMRC ‘misleading’ Working Tax Credit claimants affected by the pandemic – should you act?
Budget 2021: Tax rises slammed by Andrew Neil
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Working Tax Credit claimants saw their claiming rules altered in 2020 as coronavirus hit the economy. In response to the pandemic, HMRC introduced easements for claimants which allowed claimants who could not work their normal hours because of the pandemic to still receive their payments uninterrupted.
Reduced hours were essentially treated as the same hours as they were before the pandemic. This meant Working Tax Credit payments were not lowered but these special rules ended from October 1 and the Low Incomes Tax Reform Group (LITRG) has warned the current guidance is “misleading for some claimants”.
LITRG said a complex series of rules replaced them for claimants who were still not able to resume their usual working hours (or the level needed to qualify for Working Tax Credit) as a result of the pandemic.
For people in this situation, the new rules mean the point at which a claimant needs to notify HMRC about their situation depends on whether they expect their hours to return to the level needed to claim Working Tax Credit by November 25 2021.
If they do expect to reach the required level by November 25, they do not need to do anything immediately, and only need to tell HMRC on November 25 if their hours do not return to the required level.
However, at any point from October 1, 2021, if they do not expect their hours to reach the required level by November 25, 2021, even if the situation is temporary, they must inform HMRC immediately as HMRC are treating that as a permanent change. Their Working Tax Credits will then continue for a further four weeks before ending.
“It may be too late”
LITRG explained: “For example, suppose that a claimant who was working reduced hours (below the level required for working tax credit) before October 1, 2021 was told on October 1 that they will continue on reduced hours until December 1, at which point they will then return to their usual hours – in that situation, they should have reported that to HMRC on October 1.
“However, the information on GOV.UK currently says they do not need to tell HMRC until November 25. We understand HMRC will be writing to people who they think may be affected by these new rules and those letters should relay the correct instructions – but it may be too late for some people to avoid an overpayment of tax credits.”
Victoria Todd, the Head of LITRG, commented: “The tax credits easements introduced due to the pandemic were welcome for claimants. It is unfortunate but not unexpected that the rules for the ending of the working hours easement are so complex: HMRC are attempting to provide a series of run-ons to avoid a ‘cliff-edge’ end to entitlement for those still struggling to resume their normal hours.
“We are urging claimants to check LITRG’s website guidance to understand the full rules and check whether they need to report any changes to HMRC before November 25.”
Capital Gains Tax receipts to more than double in 5 years – act now [WARNING]
Pension tax oversight for doctors & public workers rectified [INSIGHT]
SEISS paybacks: Ineligibility repercussions ‘far from over’ [EXPERT]
Ms Todd went into detail on why she felt the guidance is confusing.
“The GOV.UK guidance is over-simplified and, as a result, misleading,” she said.
“It indicates that all claimants who benefitted from the working hours easement, and whose hours are still not back to the required levels, do not need to do anything before November 25, 2021 unless they have a permanent change. This is not correct in cases where the change in their working hours remains temporary but is expected to last beyond November 25. In those cases, they must tell HMRC immediately.
“Anyone in that position who has not told HMRC may build up an overpayment, which can be minimised if they tell HMRC of the change now. We urge HMRC to correct the GOV.UK guidance as soon as possible and also to confirm that no-one will receive a penalty as a result of following the guidance.
“In addition, HMRC should write-off any overpayments resulting from people following the GOV.UK guidance – which their dispute policy allows them to do in a situation such as this.”
The current rules on this state tax credits could go up, down or stop if there are changes in the claimants family or work life. These changes must be reported as soon as possible and claimants will need to pay back the money they were overpaid. It is also important to note if a person’s tax credits stop, they cannot claim them again.
The list of changes which must be reported is extensive but it includes the ending of a relationship, childcare costs alterations and going abroad.
While working hour changes as a result of the pandemic can be reported up to November 25, claimants will still need to report any changes in income, childcare or a permanent change in their working hours as soon as possible. Claimants must contact HMRC if they are made redundant, lose their job or are self-employed and stop trading.
These kinds of changes must be reported within one month and if they’re reported as they happen, claimants are less likely to be paid the wrong amount. This is important to note as claimants could be fined up to £300 if they do not report certain changes within one month, and up to £3,000 if they give wrong information.
How to report changes
Most changes can be reported online through the Government’s website. For certain changes that cannot be reported online, such as changing the bank account the claimant wants to use or how often they’d like to be paid, the Government can be contacted through phone, webchat or post.
Before starting on this process, claimants will need to have as much information as possible about the change in circumstances. For example, if they’ve changed jobs they’ll need their employment dates and PAYE reference number for both jobs.
Those signing into the online service for the first time will need a Government Gateway user ID and password and a permanent National Insurance number.
They’ll also need to prove their identity. This can be done through the use of two documents which includes their Tax Credit Claim details, P60, UK passport or one of their three most recent payslips
Express.co.uk has contacted HMRC asking for comment.
Source: Read Full Article