23 August 2011

Tax credits renewals - missed the 31 July deadline?

If your client has missed the 31 July deadline, they are likely to receive from HMRC a ‘statement of account’ telling them that they have stopped their payments. In addition, HMRC are likely to ask for all of the tax credits paid since the start of the tax year in April to be repaid to them. If your client contacts HMRC within 30 days from the date on the 'statement of account', HMRC will process the renewal and reinstate their 2011/12 claim back to April. Last year, HMRC extended this legislative 30-day grace period to 60 days due to the problems some people had getting through to the helpline to renew. It is not clear whether a similar extension will be given this year, therefore our advice is to respond to the statement of account within 30 days to ensure the claim is reinstated. 

Update (22 sept 11), HMRC have now confirmed that they will give an extra concession again this year by extending the 30 day legislative time limit to 60 days.  We recomend, however, that anyone who has missed the deadline try and contact HMRC within the 30 day time limit to ensure their claim is reinstated under the legislation. 

If your client misses that further grace period, they can only renew and secure their entitlement for the whole of 2011/12, if they:

If good cause doesn’t apply, HMRC will ask them to repay all payments made to them from the start of the tax year, and they will need to make a new claim for tax credits which can only be backdated 93 days.

If the deadline has been missed, contact HMRC as soon as possible. Claimants should telephone the Tax Credits helpline on 0345 300 3900 (Textphone 0345 300 3909).  Authorised Intermediaries acting on behalf of their clients should contact the Intermediaries helpline.

We have written a detailed guide about the renewals process which explains what packs claimants should receive, what they need to do and other points about the process that advisers should be aware such as what to do if your client has missed the deadline or wants to withdraw from the system.

HMRC have also produced a help sheet for advisers which gives an overview of the process. 

Did your client fail to complete their tax credits renewal because they no longer wished to claim?

Once in the tax credit system, it is notoriously difficult to get out again without incurring an overpayment. However, HMRC have now introduced rules that allow claimants to leave the system if they choose to do so.

Some people decide that they no longer wish to claim tax credits, and often don’t complete their ‘renewal’ forms as they don’t wish to claim any further tax credits. But this is the wrong way to leave the system, as any payments of tax credits made since April become overpaid and have to be repaid to HMRC.

If this has happened to your client, they may wish to consider renewing and reinstaing their claim for this current year by following the advice stated above within 30 days of receiving their 'statement of account'.  They could then make a request to withdraw from the system for next year by following the rules  that HMRC have introduced.