Hi All,
I have been looking in to Working Tax Credits and the way the income used for the calculation is arrived at.
Obviously you have standard income and deductions that are shown on HMRC's simple guidance, but what about some of the more complicated tax reliefs?
For example, if a director converts a loan in to equity and claims s.131, ITA/07 relief? Can this be deducted from Employment income (or indeed Self Employment or other income) of the same year to come to the income used for calculating Working Tax Credits?
What about other reliefs that may be deducted from income on a SA return - can any be used to deduct from income on Working Tax Credits to calculate the income amount used?
Any help you could provide would be very gratefully received.
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A number of years ago, I had a tax credit client who claimed qualifying loan interest relief on their Return. I asked the Tax Credit Office for advice and was told, in essence, that the calculation of income for tax credit purposes was as closely aligned to the calculation of income for tax purposes as possible. Therefore, if you claim for tax, you should be able to claim for tax credits.
In the past, I have always shown these kind of 'odd deductions' against PAYE for tax credit purposes but be warned that the Tax Credit Office now seek to match what you advise to RTI and are likely to throw up an error. Just be clear that it is 'X PAYE with X deducted for X reason'. If it is a large amount, I would probably confirm in writing in case there is an issue with the claim in future.