Tax credits entitlement rules

The two tax credits (Working Tax Credit – WTC, and Child Tax Credit – CTC) have separate qualifying conditions, but some conditions are common to both. These are that the claimant is:

• Aged at least 16
• Resident in UK

The residence requirement in the Tax Credits (Residence) Regulations 2003 result in a requirement that the claimant(s) are present in the UK and ordinarily resident here. The term ordinarily resident is expressed for tax credit purposes as that they normally reside in the UK and their residence here has been adopted voluntarily and for settled purposes, being part of the regular order of their life for the time being. This is not the same as the tax or NI concept of ordinary residence so care with assessing residence will be necessary. In respect of claims only to CTC, with effect from 1 May 2004 the claimant must also have a “right to reside” in the UK.

When one partner in a couple is resident in the UK and the other is not, then the claim made depends on where the non resident partner lives. If they are within the European Economic area, then a claim must be made as a couple, and joint income taken into account. If the non resident partner is outside the EEA then the UK resident partner can claim tax credits as a single person. In this case if the non resident partner returns to the UK the claimant must terminate the claim (notifying HMRC within one month) and the couple should make a new claim as a couple.

Deemed presence in UK

Although the requirement to be in the United Kingdom implies physical presence here on a day-to-day basis, a person who is not physically present in the United Kingdom may nevertheless be treated as such for the following periods of time :

• Anyone absent for up to eight weeks is treated as present in the UK throughout that time. Claims may be made and renewed in the period.
• The period of absence during which the claimant is treated as present in the UK is extended to 12 weeks when the absence, or the extension beyond the eight week point is in connection with:

1. The treatment of the person’s illness or physical or mental disability
2. the death or treatment of an illness or disability of the person’s partner or a child or qualifying young person for whom they are responsible; or
3. the death or treatment of an illness or disability of one of the person’s relatives, or the person’s partner’s relative.

However, there are some limitations to this rule. First, the period of absence must be unlikely to exceed 52 weeks – this is decided at the beginning of the period of absence. Second, the person must remain ordinarily resident throughout the period of absence, and third, in calculating how long the person has been absent, the count starts with the day after the last day on which they were physically present in the UK.

There are quite complex rules associated with entitlement for immigrants to the UK, including rules for those granted refugee status. In general anyone whose right to remain in the UK is subject to limit or conditions are not entitled to claim tax credits. However, there are a number of exceptions to this rule, and there are also rules on the treatment of refugees. These can be reviewed in the Tax Credit Technical manual at TCTM02100.

Right to reside

The definition of “right to reside” is also quite complex. In summary, the following have the right to reside here : 

• UK nationals
• a ‘qualified person’
• A family member of a ‘qualified person’
• A person who has ceased activity as an employed person
• A workseeker
• A person who has a permanent right of residence
• A person who has leave to enter or remain in the United Kingdom
• Persons who have been granted exceptional or discretionary leave or humanitarian protection

There are transitional rules for those member states that acceded to the European Union in 2004 and 2007.

A qualified person is an EEA national or a Swiss national who is in the United Kingdom and by virtue of EU legislation is a

• worker
• self-employed person
• self-employed person who has ceased activity
• self-sufficient person
• retired person
• student
• family member of a ‘qualified person’

The explanations of these terms appear in the Tax Credits Technical Manual at TCTM02072 and following pages.

The next article will look at the separate qualifying conditions for Working Tax Credit and Child Tax Credit claims.