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The tax credit regulations have been amended with effect from 6 April 2007 to remove entitlement to Working Tax Credit (WTC) from those serving a custodial sentence. Child Tax Credit continues to be available to those prisoners who meet the eligibility criteria.

The regulations now make it clear that any work done by a prisoner, either within prison or outside prison on licence, is not ‘qualifying remunerative work’ for tax credit purposes income received for any work done, either within prison or outside prison on licence, is employment income.

These changes do not affect those prisoners who have been released into the community to be supervised by probation staff or electronic tag, post custody. These people are, at that point, no longer prisoners but ‘citizens under supervision’ and, as such, are entitled to tax credits as long as they satisfy the usual eligibility criteria.

Mother and Baby Units provide crèche or nursery facilities to support a mother’s rehabilitation back into the community. As a result of the changes made, mothers who choose to pay private childcare costs are not entitled to the childcare element of WTC because they are no longer entitled to WTC itself.

HMRC have liaised closely with the Home Office, the Northern Ireland Office and the Scottish Executive to publicise these changes within the prison environment. The arrangements with the Home Office include the revising of their Prisoner Induction Process so that new prisoners will get the message too.

Tax Credit claimants need to notify HMRC as soon as they know they are to serve a prison sentence so that any necessary adjustment to payments may be made. It is important they do this straight away, as entitlement to WTC comes to an end when someone receives a custodial sentence and any tax credits overpaid will have to be paid back.

In addition, as any income received for work done is employment income, prisoners should continue to report their income in their annual tax credit declaration.

Links

HMRC Tax Credits

Statutory Instrument: The Tax Credits (Miscellaneous Amendments) Regulations 2007 (SI 2007/824)