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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Working the enquiry: Consider your enquiry’s impact on tax credits

If you are making an enquiry into a taxpayer’s tax return, you must consider whether your findings will have any impact on the amount of any tax credits they may be entitled to claim.

To help you identify relevant cases the standard intelligence package (SIP) should contain the following information.

  • The amount of income used by Benefits and Credits to calculate the tax credit award.
  • The level of the tax credit award that has been set.
  • The amount of income reported to Benefits and Credits by the claimant.
  • Whether the award included child tax credit, working tax credit or both.

The amount of tax credits that individuals are entitled to claim will be affected by changes to the level of income shown on the return. This includes any changes to

  • the level of business profits or losses, including business-related rental income or income from property
  • a director’s income, including remuneration, shares and dividends
  • an employee’s earnings, including tips, gratuities, bonus, commission and benefits in kind
  • other income, including interest on savings, investments on dividends, income from property, trust income, foreign income, occupational, state or personal pensions
  • a taxpayer’s employment status.

When you identify that income has been under-declared, you should explain to the taxpayer that this may affect the level of any tax credits that they have been awarded.

You do not need to work your enquiry jointly with Benefits and Credits or to obtain their consent before you close an enquiry.

But when you have completed your enquiry you must 

  • calculate the amount by which the level of income shown on the return has changed, and
  • follow the guidance at EM3975 about making a report to Benefits and Credits.