Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Tax Credits Manual

From
HM Revenue & Customs
Updated
, see all updates

Extra information - miscellaneous information: Notional entitlement calculations - household breakdown cases reported late - examples

Note: The backdating period is 93 days up to 05/04/12 and 31 days from 06/04/12

Guidance

Example 1 - Joint to Single - one new claim received

This example covers a joint claim and the household breakdown has been reported within the same tax year and only one customer makes a new claim.

Jack and Jill are receiving tax credits as a couple. On 01-06-2009, Jack and Jill separated but neither of them reported this change at the time. On 20-02-2010, Jill reported the change and made a single claim. A household breakdown is entered as 01-06-2009. Jill’s single claim is backdated 93 days to 19-11-2009.

The total amount overpaid to Jack and Jill on the joint claim is

2009-2010 (02-06-2009 to 20-02-2010) £4,150
   

If the household breakdown was reported at the correct time and, if Jill made her single claim at the correct time, she would have received tax credits for a period not covered by her backdated single claim. This period is classed as the notional entitlement period.

2009-2010 (02-06-2009 to 18-11-2009) £1,430
   

Note: The period of the notional entitlement ends on 18-11-2009. This is because the new single claim was backdated and awarded from 19-11-2009.

Note: There is a maximum period of notional entitlement that will not exceed the day after the household breakdown to the date the customer notified us of the breakdown.

Note: In this example, the new claim has been backdated into the period in which the customer delayed telling us of the household breakdown. Therefore, our notional entitlement period would be from the day after the household breakdown to the day before the new effective date of claim.

Note: If the new claim was backdated to a date outside the period in which the customer delayed telling us of the household breakdown, our notional entitlement period would be from the day after the household breakdown to the date the customer notified us of the breakdown.

We will offset what Jill would have been entitled to (£1,430) on her single claim against the outstanding overpayment (£4,150) on the joint claim, leaving a total outstanding overpayment on the joint claim of

2009-2010 £2,720
   

Example 2 - Joint to Single - two new claims received

This example covers a joint claim where the household breakdown has been reported within the same tax year and both customers make a new claim.

Jack and Jill are receiving tax credits as a couple. On 01-06-2009, Jack and Jill separated but neither of them reported this change at the time. On 20-02-2010, they reported the change and both made a separate single claim. A household breakdown is entered on 01-06-2009. Both Jack and Jill’s single claims are backdated 93 days to 19-11-2009.

The total amount overpaid to Jack and Jill on the joint claim is

2009-2010 (02-06-2009 to 20-02-2010) £7,000
   

Both Jack and Jill’s single claims were made on 20-02-2010. Both single claims were backdated 93 days to 19-11-2009 (19-11-2009 to 20-02-2010).

If the household breakdown was reported at the correct time and, if Jack made his single claim at the correct time, he would have received tax credits for the period not covered by his backdated single claim. This period is classed as the notional entitlement period.

2009-2010 (02-06-2009 to 18-11-2009) £1,500
   

If the household breakdown was reported at the correct time and, if Jill made her single claim at the correct time, she would have received tax credits for the period not covered by her backdated single claim. This period is classed as the notional entitlement period.

2009-2010 (02-06-2009 to 18-11-2009) £4,000
   

Note: The period of the notional entitlement ends on 18-11-2009. This is because the new single claim was backdated and awarded from 19-11-2009.

We will add together what Jack and Jill would have been entitled to (£1,500 plus £4,000) on their single claims and offset this against the outstanding overpayment (£7,000) on the joint claim, leaving a total outstanding overpayment of

2009-2010 £1,500
   

Example 3 - Joint to Single - one new claim received - multiple tax years

This example covers a joint claim when the household breakdown has been reported outside of the same tax year and only one customer makes a new claim.

Note: It is assumed in this example that the change has been made by following the correct guidance to ensure the change is legal.

Jack and Jill are receiving tax credits as a couple. On 01-06-2008, Jack and Jill separated but neither of them reported this change at the time. On 20-02-2010, Jill reported the change and made a single claim. A household breakdown is entered on 01-06-2008. Jill’s single claim is backdated 93 days to 19-11-2009.

The total amounts overpaid to Jack and Jill on the joint claim is

2008-2009 (02-06-2008 to 05-04-2009) £6,275
   
2009-2010 (06-04-2009 to 20-02-2010) £6,410

If the household breakdown was reported at the correct time and, if Jill made her single claim at the correct time, she would have received tax credits for the period not covered by her backdated single claim. This period is classed as the notional entitlement period.

2008-2009 (02-06-2008 to 05-04-2009) £2,950
   
2009-2010 (06-04-2009 to 18-11-2009) £2,005

Note: The period of the notional entitlement ends on 18-11-2009. This is because the new single claim was backdated and awarded from 19-11-2009.

We will offset what Jill would have been entitled to in each year (2008-2009 equals £2,950 and 2009-2010 equals £2,005) on her single claim against the outstanding overpayment in each year (2008-2009 equals £6,275 and £6,410) on the joint claim, leaving a total outstanding overpayments of

2008-2009 £3,325
   
2009-2010 £4,405

Example 4 - Single to Joint - joint new claim received - same tax year

This example covers a single claim when the household breakdown is reported in the same tax year and a new joint claim is made.

Fred is receiving tax credits on a single claim. On 01-06-2009, Wilma moved in with him but neither of them reported this change at the time. On 20-02-2010, Wilma reported the change and made a joint claim on 25-02-2010. A household breakdown date is entered as 31-05-2009 on Fred’s single claim. The joint claim is backdated 93 days to 24-11-2009.

The total amount of overpayment on Fred’s single claim is

2009-2010 (01-06-2009 to 19-02-2010) £6,275
   

Fred will be responsible for repaying the overpayment on his single claim.

Fred and Wilma’s joint claim was made on 25-02-2010 and was backdated 93 days to 24-11-2009. This is the new effective date of claim.

If the household breakdown and the new joint claim had been reported at the correct time, they would have received tax credits for the period not covered by their backdated joint claim. This period is classed as the notional entitlement period.

2009-2010 (01-06-2009 to 23-11-2009) £2,950
   

Note: the period of the notional entitlement ends on 23-11-2009. This is because the new joint claim was backdated and awarded from 24-11-2009.

When we offset what Fred and Wilma would have been entitled to (£2,950) on their joint claim against what Fred has been overpaid by (£6,275) on his single claim, we will leave a total outstanding overpayment on Fred’s single claim of

2009-2010 £3,325
   

Example 5 - Two Single claims to Joint - joint new claim received - multiple tax years

This example covers two single claims when the household breakdown is not reported in the same tax year and a new joint claim is made.

Note: It is assumed in this example that the change has been made by following the correct guidance to ensure the change is legal.

Fred and Wilma are both receiving tax credits on single claims. On 01-06-2008, Wilma moved in with him but neither of them reported this change at the time. On 20-02-2010, Wilma reported the change and made a joint claim on 25-02-2010. A household breakdown date is entered as 31-05-2008 on both single claims. The joint claim is backdated 93 days to 24-11-2009.

The total amounts overpaid to Fred on his single claim are

2008-2009 (01-06-2008 to 05-04-2009) £6,275
   
2009-2010 (06-04-2009 to 25-02-2010) £6,410

Fred will be responsible for repaying the overpayment on his single claim.

The total amounts overpaid to Wilma on her single claim are

2008-2009 (01-06-2008 to 05-04-2009) £4,275
   
2009-2010 (06-04-2009 to 25-02-2010) £4,410

Wilma will be responsible for repaying the overpayment on her single claim.

Fred and Wilma’s joint claim was made on 25-02-2010 and was backdated 93 days to 24-11-2009. This is the new effective date of claim.

If the household breakdown and the new joint claim had been reported at the correct time, they would have received tax credits for the period not covered by their backdated joint claim. This period is classed as the notional entitlement period.

2008-2009 (01-06-2008 to 05-04-2009) £2,950
   
2009-2010 (06-04-2009 to 23-11-2009) £2,005

Note: The period of the notional entitlement ends on 23-11-2009. This is because the new joint claim was backdated and awarded from 24-11-2009.

We will divide equally what they would have been entitled to on their joint claim (2008-2009 equals £2,950 divided by two equals £1,475 and 2009-2010 equals £2,005 divided by two equals £1,002.50) and use this amount to offset against both outstanding single overpayments, leaving a total outstanding overpayments of

Fred’s single claim

2008-2009 £4,800
   
2009-2010 £5,407.50

Wilma’s single claim

2008-2009 £2,800
   
2009-2010 £3,407.50

Example 6 - Household breakdowns covering more than one tax year

If the household breakdown covers multiple tax years and the household breakdown date is in a tax year that has already been finalised, it may not be possible to apply the change. If the change cannot be applied, use the date of the household breakdown from the start of the unfinalised year.

For example: the customer notified HMRC on 01-09-2010 that the household breakdown had occurred on 01-02-2010. The 2009-2010 tax year has now been finalised and the change cannot be applied. Use 06-04-2010 as the household breakdown date when working out the notional entitlement.

Example 7 - Compliance activity including CRA interventions- Failure to notify more than one change

There will be cases where the customer failed to tell us about a partner joining or leaving their household and there has been subsequent changes which they did not tell us about. This is a situation you will come across.

The change created a different household. For example, the customer failed to tell us that a partner joined their household and then failed to tell us that the partner left the household when a different partner moved in

Notional entitlement can only be considered where a new, correct claim has been made so in these cases you will not be able to calculate notional entitlement for the ‘middle’ period.

Situation - A customer failed to tell us they had started living with someone but have since separated from that person and is living with someone else.

Christine claimed tax credits as a single mum in 2006. Christine failed to tell us that Alfie had moved in on 17 October 2008. However, Christine then met Nick and he moved in with Christine on 1 August 2009 on the same day as Alfie moved out. On 17 February 2010 Christine admitted she had not kept us updated about her changes in household but on 26 February 2010 Christine and Nick make a new joint claim.

Christine and Alfie can no longer make a correct joint claim so notional entitlement cannot be calculated for the time they are together. However, as a new correct joint claim has been made with Nick you can calculate notional entitlement from 1 August 2009 to the date the new award begins.