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As we approach 31 July, many tax credits claimants will be thinking about the summer holidays and hoping for some decent summer weather! However they should also be busy getting their income details together to deal with their 2009/10 annual tax credits renewal before the 31 July deadline.
The tax credits office must receive estimated or final income details for 2009/10 before 31 July otherwise the claim is automatically terminated and the payment of tax credits stops. Failing to meet this deadline can therefore cause real problems with your cash flow. In addition it is also then necessary to reapply for tax credits by completing the application form again and waiting for this to be processed which can take between 4 and 6 weeks. Payments will only be backdated for 3 months so depending on when the application form is completed there can be a period where no payments are received. To avoid this situation remember to deal with your renewal early - a classic case of the early bird catches the worm!
At Dodd & Co we can deal with tax credits annual renewals on our clients’ behalf. We have also helped clients where they have encountered problems when dealing with their own renewal. In a recent case we have helped with, the Tax Credits office caused problems when they incorrectly dealt with a July renewal four years ago. In the end, although they admitted their error recording incorrect income details, we had to correspond with them over several months so that they would pay the lump sum of additional tax credits that was due to the client. They initially refused to do this, so to move the appeal forward, we attended a first tier tribunal to present our evidence. The outcome was given in our favour and the clients’ award amended and the lump sum of payments made. In addition to this we obtained compensation for the client and a complete refund of our professional fees for dealing with the case and going to tribunal on behalf of our client.
Having persevered with the case for many years, at times we needed to encourage the client (and ourselves!) to continue arguing the case with the Tax Credits office. A successful outcome however proved that it was worth continuing with the appeal.
As speculated before the budget, the government has reduced eligibility for Child Tax Credits by reducing the family element threshold from £50,000 to £40,000 from April 2011. This means that families with income above £40,000 are less likely to receive any tax credits.
Currently tax credits awards are based on the household income of the previous tax year, so the 2009/10 award would initially be based on the income of 2008/09. It is then necessary to provide estimated income figures for 2009/10 by 31 July 2010 with final figures being provided no later than 31 January 2011. At the moment an award is only recalculated if the income of 2009/10 turns out to be more than £25,000 higher than 2008/09. This gives a lot of scope for the claimant’s income to increase but without the award being recalculated and tax credits needing to be paid back. However from 6 April 2011 this £25,000 income disregard is going to reduce to £10,000. It will reduce further on 6 April 2013 when it reduces to £5,000. This will have a large effect on the payment of tax credits and the planning that is currently possible.
If you have any queries regarding tax credits please contact Rachel Lamb on 01768 864466.
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