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HMRC internal manual

Claimant Compliance Manual

Penalties and interest: overview of failure to notify a change of circumstances

Tax Credits are awarded on a provisional basis for the whole of the next tax year or the remainder of the tax year if the claim is made during the year. After the end of the tax year customers are asked to confirm their income and circumstances.

The provisional nature of the award means that if someone’s circumstances or income changes significantly during the tax year they might either have received too much or too little tax credits. We want people to receive the right amount of tax credits at the right time so we will encourage customers to tell us when their circumstances or income change. However, a balance needs to be struck because, for example, some people’s income changes on a weekly basis and we do not want them having to call us each week.

To avoid people running up large debts (because they have received more credits than they should do) for certain changes there is a mandatory requirement to notify the change of circumstances within a specified period. These circumstances are:

  • A single customer could no longer make a single claim
  • Joint customers could no longer make a joint claim
  • The relevant child care charges become less than the previously calculated average weekly charge by £10 a week or more for 4 weeks
  • The relevant child care charges become nil
  • when someone’s entitlement ceases because they:

    • permanently emigrate from the UK
    • lose their right to reside in the UK
    • are no longer classed as being in the UK
  • when someone’s entitlement ceases because their temporary absence lasts more than 8 weeks, or 12 weeks in exceptional circumstances. The exceptional circumstances are when the absence is in connection with

    • the treatment of illness or physical or mental disability of

    the person

    their partner

    a child or qualifying young person they or their partner are responsible for

    the person’s or their partner’s relative

    • the death of

    their partner

    a child or qualifying young person they or their partner are responsible for

    the person’s or their partner’s relative

  • when someone’s usual working hours change so that they work less than 16 or 30 hours a week. For couples with children it is their joint working hours that count towards the 30 hours.
  • they have been on strike for more than 10 days
  • when one of their children leaves the family and moves to live with someone else. This includes a child who has been:

    • taken into care or fostered to another family
    • found guilty by a court and sentenced to custody or detention for a period of 4 months or more

Note - In England and Wales a young person under 18 yrs of age is treated as being ‘looked after’ if placed on remand in local authority care. The local authority is therefore responsible for accommodating and providing the cost of the accommodation. Once the period on remand has ceased, normal responsibility conditions will apply.

  • when a child or young person they are responsible for stops qualifying for support, for example the child or young person:

    • leaves Full time non-advanced education or approved training before they reach 20
    • starts to have their training provided under a contract of employment
    • stops being registered with a careers service, or the Connexions/Local Authority Support Service or equivalent
    • starts to claim Income Support, Incapacity Benefit, Employment and Support Allowance, income-based Jobseeker’s Allowance, Child Tax Credit or Working Tax Credit in their own right
    • dies.

Customer must tell us about such changes within 1 month of the date:

  • on which the change of circumstances occurs
  • the customer realises the change has happened if this is later

Any overpaid tax credits will still be calculated from the date the change happened.

For example if a customer’s usual working hours dropped to less than 30 hours on the 12 November 2010, but because the number of hours they work each week varies so much that they did not realise until 2 December 2010 that there had been a change:

  • they will have 1 month from 2 December to report the change
  • their award will be adjusted to reflect their new usual hours from 12 November and they will have to repay any overpaid tax credits.