LITRG explains that by 31 July most people who receive tax credits must complete the renewals process - even if you no longer want to claim, or think you are no longer entitled.
Introduction
In this short article we try to explain what tax credit renewals are, what you need to do by 31 July, and what happens if you are late.
Why renew?
Tax credit claims generally only last for one tax year. At the end of each tax year, you need to make a new claim in order to keep on getting tax credits. So that payments don’t stop while you make the new claim, HMRC continue to pay ‘provisional payments’ until they receive the renewal forms back.
In some ways the name ‘renewals’ is misleading because there are two main reasons for this process, only one of which is to renew your claim for the current tax year (2010/11). The other is to finalise your entitlement for the year just gone (2009/10). A ‘tax year’ runs from 6 April in one year to 5 April in the following year.
When the 2009/10 tax year started on 6 April 2009, HMRC looked at your circumstances at that time and your income for the previous tax year (2008/09). This information was used to set the payments for 2009/10. Now the 2009/10 tax year has ended, HMRC need to know your actual 2009/10 income so that they can confirm whether they paid you the right amount in 2009/10. They will then use the actual 2009/10 income to set your payments for 2010/11.
If your actual income for 2009/10 is lower than your 2008/09 income, you may be owed some money from HMRC. If your 2009/10 income is more than £25,000 higher than your 2008/09 income, you may have been overpaid and HMRC will want to recover some of the tax credits they paid you last year.
Even if you don’t want to continue to get tax credits in 2010/11, you must still engage in the renewals process, so that your 2009/10 claim can be finalised.
How to renew
You should have received two forms with accompanying guidance notes:
- Form 603R (annual review), plus in most cases
- Form 603D (annual declaration).
If you are receiving the full family element of child tax credit only, or you have a nil award, HMRC will send you form 603R only. If your circumstances are still the same, and your income is still within the range shown on the form, you need do nothing more. You need only contact HMRC if your circumstances have changed, or your income is no longer within the range shown on the form.
These are known as ‘auto renewal’ cases.
But if, like the majority of claimants, you are receiving more than the family element, or are getting something less than the full £545, then you must complete and return form 603D as well as checking and responding to form 603R. These are called ‘reply required’ cases. As an alternative to completing the forms, you can also renew by telephoning the helpline.
Either way, it is important you do so as soon as possible so that HMRC know how much to pay you for the rest of the year, or if you are no longer entitled to credits so they can finalise your 2009/10 claim. If it turns out that they have been paying you too much since the start of the tax year in April, you could be overpaid and renewing promptly will stop any overpayment from continuing to accrue.
Alternatively, if you have been paid too little up to the time you renew, it could be some while before you receive that underpayment.
If you have been in more than one relationship during the year, and made a claim in each capacity, you must complete a fresh set of papers for each claim even if it requests the same information.
If you cannot yet give an accurate figure for your previous year (2009/10) income, you must send HMRC an estimate by 31 July. You will then have until 31 January 2011 either to confirm the estimate, or to give actual figures. This option can be useful to self-employed people who have not yet finalised their accounts.
Once you have renewed, your claim to tax credits for the current year 2010/11 is confirmed and your entitlement backdated to 6 April 2010.
What if you miss the deadline?
If 31 July comes and goes and you have still sent HMRC nothing, you will receive from them a ‘statement of account’ telling you that they have stopped your payments. Worse still, HMRC are likely to ask for all of the tax credits paid since the start of the tax year in April to be repaid to them. If you contact HMRC within 30 days of receiving this document, HMRC will process the renewal and reinstate your 2010/11 claim back to April.
If you miss that further 30 day grace period, you can only renew and secure your entitlement for the whole of 2010/11, if you:
- have ‘good cause’ for your failure to renew so far, and
- complete your renewal by 31 January 2011.
If good cause doesn’t apply, HMRC will ask you to repay all payments made to you from the start of the tax year, and you will need to make a new claim for tax credits which can only be backdated 93 days.
Useful links
On LITRG’s website, you can read a more detailed account of the renewal process.
HMRC have also produced a helpsheet for advisers which covers some of these issues in more detail.
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