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Your Claim for tax credits will end from April 2012 unless you contact us

Your Claim for tax credits will end from April...

I have a few cilents who have been getting tax credits, and are contacting me in a panic to ask what the HMRC knows about thier income that they don't know!

The first line of the letter starts:

This is because:

- Your household inocme is too high to get a payment of tax credits now or

- Changes taking effect from April mean that your household income will be too high based on the information we hold to get a payment of tax credits.

I have one client, would need the joint income to go up by 62% from the amount HMRC was given for 2010/11 before the entitlement will cease completely. 

What is going on?

Anyone any ideas? Are HMRC no longer going to wait until 31 July to get the information anymore?


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01st Mar 2012 19:12

I believe it's because...

... you can't make a new claim for Tax Credits after April.  So if they get people to accept dropping off the radar, they won't have to pay them anymore.  It's nasty, and it's underhand.  They're not even advising people of the consequences.

Everyone should renew, regardless of circumstances, because those circumstances may change before the Universal Credit gets introduced.

We now know from the coalition that there are two parties we just shouldn't trust, I guess.

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By DMGbus
01st Mar 2012 22:44

HMRC hoping to lose some claimants

Given that Tax Credits are "on the way out" - to eventually be replaced by the Universal Credit, it rather appears to me that HMRC are trying to deprive some existing claimants of rightful entitlements effective April 2012.

Unethical maybe, but then HMRC don't work by ethics (unless I've missed something here).

As part of an apparent drive to reduce claimant numbers a new claimant last year was given a ridiculously long list of information to be provided - including a requirement to send ORIGINAL DOCUMENTS such as vehicle registration documents by post to TCO.  My guess is that some claimants will be ground down by this and withdraw their legitimate claims.



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02nd Mar 2012 08:01

Income limit dropping

I too have had clients contacting me in a panic and with good reason as many families will be losing income they have come to rely on. Think the main reason for these letters going out is to put people on notice of the dramatic drop in the income limit. For many people the limit drops from £41300 to £26000 depending on individual circumstances (many of the "austerity cuts" hit those with children most), see

not so relevant on this thread I know but many people will also be caught by the change in working hours rule from 16 to 24 as many employers only offer 20 hours a week (one reason is they do not then need to give breaks if spread over 5 days).


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02nd Mar 2012 08:04

What's changed?

Very similar letters were sent out last year and there is a prominent paragraph about continuing claims without payments and the consequences of not doing so.

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02nd Mar 2012 10:07

Business as usual with tax credits

I can agree with the previous post that we have seen letters like this before.  There are a number of very important changes being made to the tax credits system over the the next two years before we see the introduction of Universal Credit.  That isn't to say that Tax Credits will go completely in October 2013.  There will be a transitional period between October 2013 and 2017 were claimants will start to be moved from Tax Credits to Universal Credit.  What has been agreed is that there will be no NEW tax credit claims from April 2014.

As part of the Tax Credits Team ( we are advising our member firms to advise the TCO that their clients should remain in the system from 6 April 2012.  We don't have crystal balls and can't predict what our clients actual income is going to be in 2012/13 and certainly not by 31 March which is the deadline mentioned in the recent letter from the TCO. 

Additionally, if clients are removed from the system this may well trigger a demend for any overpayments of tax creidts from earlier years which up until that time were only being collected via a small restriction in their award.  By keeping the clients in the system, even if they end up getting nothing for 2012/13, it will delay the demand for repayment for at least another 12 months.  Enough time to tell the clients that they will have to plan for this in 12 months time.

Because we can't predict our clients 2012/13 income with certainty, if the clients were to leave the system and at some later point in the 2012/13 tax year it becomes apparent that a claim can be made, the best your client can do is submit a claim and have it carried back for 1 month (currently 3 months for an claims submitted prior to 5 April 2012).  Better to keep then in the system just in case.  We do this in our practice and are still able to charge our clients or basic tax credits compliance fee.

Finally, by keeping your clients in the system for 2012/13 it does enable you to consider the planning possibilities to maximise your clients tax credits claim for that year which in turn may well increase their entitlement for the 2013/14 tax year.

There is still enough time for practices to benefit from offering a tax credits service but even if that is not of interest to some practices, it is so important that they have an understanding of the tax credits system and how the basic income/corporate tax planning advice they give out to clients impacts on their clients tax credit entitlement.  The changes for 2012/13 and 2013/14 will have a major impact on clients household income, particularly at the lower end with clients earning around £25K a year and under.  If accountants start giving tax advice without considering the tax credits position there will be a lot of unhappy clients as they may see a huge drop in their entitlement to tax credits which a lot of these people are relying on to meet their day to day living costs.


Steve Marsland - The Tax Credits Team


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