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HMRC internal manual

Claimant Compliance Manual

Closing the Examination: Customer asks you to take into account reduced income

Obtaining evidence

If, during the course of the examination, the customer(s) tells you that their current year’s income is likely to be less than that on which their award is based, you should ask them for some evidence to support their statement. You should remind the customer(s) that they will have to confirm the estimated figure or state the correct figure, after the end of the year, and that an underestimate could lead to an overpayment of tax credits. Remember that you will not be seeking to test their statement in depth, so you should not carry out an extensive exercise to arrive at a figure of current year’s income.

Note in particular that you should not attempt to validate the figure the customer suggests by constructing means tests, capital statements, etc. If the customer(s) is in employment, you may want to see payslips for, say, the last 4 weeks. If the customer(s) is self-employed, you should explore their reasons for believing that their current year’s income has fallen, is their view based on a calculation of some kind, for example a half yearly account? Or is it based on nothing more substantial than a feeling?

Decisions on estimates

In many cases, the evidence is likely to fall somewhere between these two extremes. You should weigh up whatever evidence is presented to decide whether you consider it appropriate to amend the award on the basis of the estimated current year’s income figure. You should normally accept the customer’s estimate, unless you consider that it is seriously inaccurate and will lead to a large debt being built up. If you do not take the revised, estimated income into account when you amend the award, the customer(s) will be able to pursue the matter, if appropriate, by appealing against your decision.