Advisers have found that claimants affected by the recession have had difficulties with tax credits. It may be useful to bear in mind the following points:

• Someone who has lost their job, or reduced their hours to less than 16 a week, is entitled to the four-week run-on of working tax credit (WTC). This should be paid as soon as possible and counts as income for means-tested benefits. If it is not paid within four weeks, it is a payment of arrears which should be treated as capital for housing benefit (HB) and council tax benefit (CTB) and disregarded for 52 weeks.
• Someone who is entitled to income-based job seekers allowance (JSA), income-related employment and support allowance (ESA), income support (IS) or pension credit (PC) is entitled to maximum tax credits. The maximum tax credit should be paid for the period in receipt of benefit with no income test. In most cases this will be child tax credit (CTC) only, but people on sickness or maternity leave may still qualify for WTC, (although this may cause problems as WTC is then treated as income for these benefits).
• People who are not on the above benefits but whose income has reduced can ask for their tax credit award to be revised on the basis of estimated current year income, which could lead to an increased payment. However, it is very important to be accurate with the estimate and keep the Revenue informed of any subsequent increase, as this is not disregarded. An alternative option is to wait until the end of the tax year to report exact income, which should reduce the risk of overpayment and may lead to a lump sum payment, which may be preferable for people on HB/CTB.
• Employees who have been given gardening leave or put onto a two or three day week may lose WTC. Workers who are no longer ‘normally working’ at least 16 (or 30) hours a week for more than four weeks must report this change to the Revenue and may no longer qualify for WTC. If hours fluctuate, the decision on ‘normal’ working hours carries a right of appeal.
• Redundancy pay, pay in lieu of notice and other taxable payments made when a job ends are ignored as income for tax credits unless they amount to more than £30,000 (then the amount over £30,000 counts).
• 'Protective claims’ for tax credits should be made if income is uncertain – leading to a ‘nil award’ which can be revised at the end of the tax year if income turns out to be less than in the previous year. Self-employed people and others whose income has reduced may find they qualify for tax credits for the whole period when previously their expected annual income was too high. Waiting until the end of the tax year to make a new claim could mean losing out, as this can only be backdated 3 months.
• Self-employed people can still qualify for WTC if they spend at least 16 (or 30) hours a week on their business. This can include time spent visiting potential customers, making trips to wholesalers/retailers, advertising, cleaning premises or equipment, book-keeping and research.