CPAG Tax Credits E-Bulletin February 2008

Dear Colleague,

Welcome to the February 2008 edition of CPAG’s tax credits e-bulletin keeping you up-to-date with tax credits news and developments.

Contents:

        CPAG news and events
            Tax credits factsheets
            Tax credits training

Tax credits news
             New COP26
             Provisional payments income uprating
             Caselaw
             Maternity leave and sickness leave

CPAG news and events

Tax credits factsheets

We have 15 factsheets providing information for advisers on a wide range of tax credits issues. To request printed copies of our latest factsheets please email acarr@cpagscotland.org.uk.

• Tax credits - the basics has now been updated from January 2008.
• Click here to read or print all the factsheets in this series

Tax credits training
 
CPAG's 2008-9 training programme is available now (200kb pdf file)

or click here for a calendar of courses in London

Forthcoming CPAG training courses in London on tax credits:

Tax credits - the basics is suitable for people who have little or no experience of advising on tax credits.

Courses on child tax credit and working tax credit and calculating tax credits are for advisers with a working knowledge of the tax credits system.

Our training for experienced advisers includes courses on:

• overpayments
• Judicial Review 
• compliance and appeals 

We also offer a social security and tax credits law update.

If you would like extra copies of our new training programme please email training@cpag.org.uk or contact us on 020 7812 5228/5217

'In house' training

Most of CPAG's existing courses can be provided 'in house' to meet the training needs of your group or organisation. 

Providing a course 'in house' can be more cost effective - saving on time, travel and accommodation costs.  We provide the expert tutor(s) and all the training materials.  Please email training@cpag.org.uk or contact us on 020 7812 5228/5217 for more information.

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Tax credits news

New COP26

The Revenue has revised its code of practice on dealing with overpayments, COP26, replacing the ‘reasonable belief’ test with a new balance of responsibilities test. This takes on board many of the criticisms made by the Ombudsman and is intended to set out a fairer allocation of responsibilities between the claimant and the Revenue.  If the claimant has met all their responsibilities, but the Revenue has failed to meet one of theirs, the overpayment will not be recovered. 

The claimant’s responsibilities are:

• providing accurate, complete and up-to-date information when making or renewing a claim
• notifying changes of circumstances
• checking award notices according to TC602 (SN)
• checking the amount of payments made into the bank account match payments shown on the award notice
• reporting errors shown on award notices within one month.

The Revenue’s responsibilities are:

• giving correct advice
• accurately recording information
• paying the right amount
• including information the claimant has provided on award notices
• sending out new award notices within one month of the claimant reporting a change of circumstances.

After notifying of a change of circumstances, it is implied that the responsibility falls back on the claimant if they have not received a new award notice within one month, so claimants should contact the Revenue again. However, where there is an error on the award notice, if the claimant notifies the Revenue, any overpayment as a result of the Revenue’s failure to correct the error will not be recovered – there is no requirement for the claimant to keep re-notifying of errors or to reasonably believe their award was correct. At the time of writing, the form to dispute recovery (TC846) and the guidance manual for helpline operatives had not been updated. Both referred to reasonable belief, which is not mentioned in the new COP26 at all.


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Provisional payments and income uprating

Regulations enable payments of tax credits to continue at the start of each tax year while claims are being renewed. These are known as provisional payments. From April 2008, there will be a change to the way that provisional payments are calculated. If the claimant has not provided an up-to-date estimate of income, these provisional payments will be based on the assumption that their income for 2007/08 increased on 2006/07 in line with average earnings. This is aimed at reducing the risk and size of overpayments.

It is best to notify the Revenue of actual 2007/08 income as soon as possible from April 2008 to allow the initial award for the new tax year to be accurate.

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Caselaw

A new income support case (CIS/1813/2007) has looked at whether overpaid tax credits should be treated as income. The claimant had stopped work and claimed income support. She informed the Revenue immediately that she stopped work because she knew she would cease to be eligible for working tax credit. Despite her best efforts, working tax credit continued to be paid, and was later subject to recovery as an overpayment. Her income support claim was made dormant while working tax credit was in payment. She reclaimed income support after working tax credit payments stopped. Her request for backdating to the date of her first claim was refused.

On appeal, the Commissioner decided “It appears to me to be an abuse of language to treat these payments as income. I am satisfied that the payments were not income within the meaning of Regulation 28 (Income Support (General) Regulations 1987) at all. If, however, that is wrong, then in my judgement they are voluntary payments which were to be disregarded… For such payments to prevent the award of income support would mean that one branch of the government could foist on a claimant money that the claimant does not want and that that branch can later reclaim, and so deprive the claimant of money that she could otherwise legitimately claim from another government department.”

In cases where a claimant has informed the Revenue and asked for payments to be stopped, it follows that any subsequent payments should not be treated as income at all. Claimants in this situation should appeal the income support or income-based jobseeker’s allowance decision, citing this case.

Note that in another case, CIS/647/2007 (noted in November’s ebulletin), it was held that WTC overpayments do count as income. However, the facts in that case were different: the claimant had not reported her change of circumstances to the Revenue.

• Click here to read the decision

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Maternity leave and sickness leave

Regulations allow women to still be treated as in work for periods of up to 39 weeks maternity leave and up to 28 weeks sickness, as long as they were engaged in qualifying remunerative work immediately before the beginning of the period.

The Revenue has confirmed the policy intention is that once someone had satisfied the qualifying criteria for WTC, they would continue to receive it during periods of sickness and maternity leave. A woman who is off sick before or after maternity leave, should therefore continue to receive working tax credit throughout. (If their annual income is less than the previous year, this may also lead to an increase in working tax credit.)

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