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HMRC are writing to explain to tax credits claimants whose working tax credit (WTC) payments were stopped on 6 April 2012 that they may still be entitled to WTC.

Background

LITRG and other organisations had urged HMRC to tell claimants that they needed to contact HMRC as soon as possible if they might come within the exceptions to the new rule and be able to have their payments reinstated.

The new rule

Before 6 April 2012, a couple with children qualified for WTC as long as one of the couple was working at least 16 hours a week. Since 6 April, to qualify for WTC, a couple with children need to work at least 24 hours a week between them with one person working at least 16 hours a week.

Because of this rule change, on 6 April 2012 HMRC stopped the WTC payments of most couples with children who did not work at least 24 hours a week between them (with one person working at least 16 hours). Only those who qualified for WTC in another way (because they were aged 60 or over or qualified for the disability element of WTC) did not have their tax credits stopped.

Exceptions

However, there are exceptions to the new rule. Couples with children can still qualify for WTC if one of them works 16 hours a week and the other is:

• incapacitated (in receipt of certain benefits due to ill health)
• an inpatient in hospital
• in prison
• entitled to carer’s allowance.

HMRC were not able to identify those people who came within any of the exceptions, and did not tell claimants that they needed to contact HMRC to ensure their payments continued. LITRG therefore urged HMRC to write to claimants informing them of the exceptions and the action required to be taken before 6 April.

HMRC letter

HMRC have now written to all couples with children who had their WTC stopped on 6 April, explaining that they should contact HMRC as soon as possible if one of the exceptions applies to them or if they have increased their working hours so that they now qualify. A copy of the letter can be downloaded from the LITRG website. 

The letter also explains that claimants who are not covered by one of the exceptions may be entitled to claim other benefits, such as income-based jobseeker’s allowance, housing benefit, council tax benefit and free school meals from DWP. LITRG recommends that anyone affected by this should contact a local advice organisation for a full benefits check.

LITRG welcomes the steps HMRC have taken in writing to claimants but remains concerned that people may have been without payments for nearly two months. It is anticipated that HMRC will backdate payments to cover the period from 6 April for those whose payments should not have been stopped.

In future, particularly with the forthcoming migration of tax credits claimants to Universal Credit (UC), HMRC must fully consider the impact of any major changes on claimants. It is critical that their communications are clear, accurate and give enough warning in circumstances where some action is required.