Draft tax credits regulations now available – from 6 April 2012

7 February 2012 | by LITRG

HMRC have published two sets of draft tax credits legislation. These are draft items of legislation that have not yet been made as UK Statutory Instruments.

These draft regulations amend several tax credits Statutory Instruments to implement the amendments to the tax credits scheme from 6 April 2012, announced in the emergency Budget 2010, the Spending Review 2010 and the Autumn Statement 2011. The draft regulations also contain a number of technical amendments. 

            Explanatory memo

            Explanatory memo

We welcome your views on this draft legislation.

What are the main changes?

  1. WTC eligibility rules - couples with children will need to work at least 24 hours per week between them to qualify for working tax credit (with at least one person working 16 hours per week).  Previously the requirement was 16 hours.  The exceptions to this are where:
    • one member of a couple works at least 16 hours per week and that person is eligible for the WTC disability element or is aged 60 or over; or
    • one member of a couple works at least 16 hours per week and the other adult is incapacitated, an in-patient in hospital or in prison.
  2. The 50+ element is being scrapped.  From 6 April, the 50+ element will stop even if your client has not received the full 12 months.  These people will not only lose the extra tax credits associated with the 50+ element but will also lose their right to only work 16 hours.  Unless they have responsibility for a child, are aged 60 or over, or qualify for the disability element they will need to work at least 30 hours a week to claim.
  3. Income fall disregard – the first £2500 of a fall in income (from one year to the next) will not increase someone’s entitlement to tax credits. This provision was always in the tax credits Act but this is the first time they have used it and they have prescribed the amount (£2500) in the tax credits Up-rating Regulations.
  4. The removal of the second income threshold (£40,000) – this means that the family element of CTC will be tapered away as soon as the other elements have been tapered to nil.  For example: a lone parent, working <30 hours, with one child.  This year their tax credits entitlement would end at an income of £41,330.10.  From 6 April their entitlement will end at an income of £23,770.86
  5. Backdating is being reduced from 3 months (93 days) to 1 month (31 days).  This is for new claims and changes of circumstances that increase entitlement.  It also reduces the time limit to notify HMRC of receipt of a qualifying benefit (from 3 months to 1 month) for the purposes of backdating the disability elements of WTC back to the start date of the qualifying benefit. Equally, If a person has claimed asylum as a refugee and is then awarded refugee status, providing they apply for tax credits within one month (previously 3 months) of receiving notification of that refugee status, they will be treated as if they made their tax credits claim from the original date they claimed asylum. 

You can find further details of these changes in our policy section.

We are very interested in your views on these draft regulations.  Please leave us a comment on this blog post or write to us via our contact us page.

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