Employment and support allowance and tax credits
New regulations have been introduced which set out the interaction between the new employment and support allowance (ESA) and tax credits. ESA replaces incapacity benefit and income support on the grounds of incapacity for work for new claimants from 27 October 2008. The regulations amend tax credits legislation by adding ESA to provisions which refer to incapacity benefit or income support on the grounds of incapacity for work. The specific effects are as follows:
- contributory ESA is included as income for tax credits
- income-related ESA is disregarded as income for tax credits
- entitlement to income-related ESA is a passport to maximum tax credits
- someone who claims ESA immediately after stopping work is treated as still in work for the first 28 weeks and can still be entitled to working tax credit (WTC)
- someone who was getting ESA before starting work is eligible for a disability element in their WTC if they had been getting ESA or statutory sick pay for 28 weeks
- receipt of ESA for at least 20 weeks is a qualifying condition for claiming the disability element under the fast track proceedure, as long as other conditions are also met
- receipt of ESA is a qualifying condition for the 50 plus element in WTC
- someone who gets contributory ESA and has been getting it, or SSP in certain circumstances, for at least 28 weeks is 'incapacitated' and eligible for the childcare element in WTC if they have a working partner
- a young person who receives ESA is no longer a qualifying child for child tax credit
These provisions come into force on 27 October 2008, when ESA is introduced.
Click here to view the regulations in full.
Reminder: missed deadline for return of annual declaration
This year sees a change affecting claimants who missed the deadline of 31 July for return for their annual declaration, as first reported in CPAG’s March 2008 e-bulletin. The Revenue should send the claimant a notice stating that provisional payments have ceased and the claim is being terminated. If the claimant returns the annual declaration within 30 days of the date of this notice, their claim is restored. If the claimant fails to meet this additional 30 day deadline but returns the annual declaration before the final deadline of 31 January, they will need to show good cause for the delay in order to get their claim backdated to 6 April. In any other case, the return of the annual declaration should be treated as a new claim, subject to three months backdating.
This change was introduced by regulations but is not obvious in the Revenue’s information or guidance, so it will be worth monitoring closely how it works in practice.
Q&A: Have people who have had a new baby and are still getting income support for their children lost out on the extra £545 in child tax credit?
People who were getting income support (or income-based JSA) for children since before 6 April 2004 can continue to get it, including an increase for a new dependent child. There is no extra income support (or income-based JSA) for babies, but they should not have lost out because there is an additional disregard of child benefit. If they are getting child benefit for a child under one year old, £10.50 a week is ignored as income for the income support (or income-based JSA) assessment. This equals the £545 baby addition to the family element in child tax credit. They may choose to transfer to child tax credit, but should first seek advice as to whether they will be better off.
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