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HMRC internal manual

Claimant Compliance Manual

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HM Revenue & Customs
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Particular aspects: income - customer tells you about an unreported source of SA income

You will not normally challenge the income a customer(s) has reported on their SA return, unless there is a discrepancy between the income on their SA return and their TC claim form, see Chapter 17 (CCM17000). But, exceptionally, you may receive information from the customer(s) during the course of your compliance check which indicates that they had another source of income during the relevant year, which they failed to include on their claim form.

For example, for 2006/07, a customer may have correctly reported for tax credits the amount of the self-employed income they returned for SA on their 2007 return. But they may have omitted the income they received from a buy-to-let property during 2006/07 - from both their TC claim form and their SA return.

If a customer tells you about an unreported source of income, you should confirm which year the income relates to. This will usually be the previous year, PY-1 or an earlier year. Occasionally the customer may tell you about a new source of income for the current year.

Income relates to current year

For example, you are examining a 2007/8 claim, and the customer tells you they have additional income from consultancy where the income source did not exist, or the source did not give rise to any income, in 2006/7

Where the income relates to the current year they will not have made an incorrect claim. You should advise them that they should consider asking for their TC award to be revised using an estimate of current income to avoid building up a debt. See CCM6890 for more information about using an estimated CY income figure higher that the PY figure. You should also advise them that they must include the income on their SA return. You should make a report to the CCRO of the circumstances, and tell the customer(s) that you will be doing so.

Income relates to previous year or PY-1

Where the income relates to the year of your examination or enquiry you should explain that they have made an incorrect TC claim. You should tell them that they may also have

  • made an incorrect SA return (if they have received and filed their return), or
  • failed to notify chargeability to tax (if they do not currently receive SA returns).

You should advise the customers to get in touch with the office that deals with their tax affairs at the earliest possible date. If they have made an SA return, they may still be within the time limit for amending the return. If they have not received SA returns in the past, they may still be within the time limit for notifying chargeability.

Note that it is not your responsibility to determine whether or not the customer(s)

  • are within the time limit for amending their return, or
  • may have committed an offence (fraud or neglect) in relation to their SA return, or
  • may have failed to notify chargeability to tax.

The SA team will be responsible for making that decision, and you should explain this to the customer(s) if they ask for your views.

You should make a report to the CCRO of the circumstances, and tell the customer(s) that you will be doing so.

You should ask the customer(s) to supply the income figure from the omitted source for the relevant year. The customer(s) may be able to provide an exact figure, or they may only be able to provide an estimate (for example, if the omitted source is a self-employed one). In either case, you will not be expected to agree the amount of the income with the customers(s), and you should not do so - any enquiries into the amount of the income will be a matter for the SA team.

You should explain to the customer(s) that you are neither agreeing nor disagreeing the amount of the omitted income they have supplied.

In examinations you can use their figure as the basis for revising the provisional TC award. If the figure changes following enquiries from the SA team, the SA team should advise the Tax Credits consultant of the amount of SA income, see CCM3085. You should also tell the customer(s) that they should advise HMRC of the revised amount, which will be used to revise the amount of the TC award again. Remind the customer(s) that they will be expected, after the end of the year, to report the actual figure of income from all sources.

In enquiries, the action you can take depends on whether the customer is in SA or not, see CCM3050:

  • if the customer is not in SA, you can amend the award. If the figure changes following enquiries from the SA team the award can be amended as a discovery decision under S20, see Chapter 13 (CCM13000)
  • if the customer is in SA, settlement of the Tax Credits enquiry must be delayed until the SA team either decides the information does not merit an enquiry or the correct level of income is established and reported back to Tax Credits

You should explain to the customer(s) the consequences of them having made an incorrect claim - see CCM Chapter 10 (CCM10000).

Income relates to PY-2 or earlier

If the income relates to PY-2 or earlier you should consider whether a tax credit enquiry can be opened and liase with the SA enquiry team to see if they can/want to open an SA enquiry see CCM3080.

If a tax credit enquiry cannot be opened consider if you can make a discovery decision, see Chapter 13 (CCM13000)