People who receive tax credits must complete the renewals process by 31 July, even if they no longer want to claim or think they are no longer entitled.
23/07/2013, by Low Incomes Tax Reform Group, Tax Articles - General
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Introduction
This article by the Low Incomes Tax Reform Group (LITRG) aims 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 (2013/14). The other is to finalise your entitlement for the year just gone (2012/13). A ‘tax year’ runs from 6 April in one year to 5 April in the following year.
When the 2013/14 tax year started on 6 April 2013, HMRC looked at your circumstances at that time and your income for the previous tax year (2012/2013).
This information was used to set the provisional payments for 2013/14. Now the 2012/13 tax year has ended, HMRC need to know your actual 2012/13 income so that they can confirm whether they paid you the right amount in 2012/13. They will then use the actual 2012/13 income details to confirm your initial payments for 2013/14.
If your actual income for 2012/13 is lower than your 2011/12 income by more than £2,500, you may be owed some money from HMRC. If your 2012/13 income is more than £10,000 higher than your 2011/12 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 2013/14, you must still engage in the renewals process so that your 2012/13 award 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).
You should read the guidance notes carefully, particularly the parts that explain what counts as income for tax credits and what deductions are allowable from income. You must then carefully check the details on the 603R review form before sending the declaration form back by 31 July or contacting the tax credits helpline (0345 300 3900 or textphone 0345 300 3909) to complete the process over the phone.
Some claimants will receive only one form (603R). If you are:
- receiving the full family element of child tax credit only
- received income support, income based jobseeker’s allowance, income related employment and support allowance or pension credit for the full year
- have a nil award.
These are known as ‘auto-renewal’ cases because you only need to contact HMRC if your circumstances have changed, or your income is no longer as shown on the form. If your circumstances and income are still the same as shown on the form then you need do nothing further and your claim will automatically be renewed.
Whether you are required to reply or are an auto-renewal, it is important you take any necessary action 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 2012/13 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 build up. Alternatively, if you have been paid too little up to the time you renew, it could be some time before you receive that underpayment.
If you have been in more than one relationship during the year, which meant you had more than one claim, you must complete a fresh set of papers for each claim even if they request the same information.
If you cannot yet give an accurate figure for your previous year (2012/13) income, you must send HMRC an estimate by 31 July. You will then have until 31 January 2014 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 or other people who have to fill in self-assessment forms for income tax.
Once you have renewed, your claim to tax credits for the current year 2013/14 is confirmed and your entitlement backdated to 6 April 2013.
What if you miss the deadline?
If 31 July comes and goes and you have not taken any action required by HMRC, 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 2013/14 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 2013/14 if you:
- have ‘good cause’ for your failure to renew so far, and
- complete your renewal by 31 January 2014.
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 31 days. It is therefore important that you take any action needed by 31 July.
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