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HMRC internal manual

Tax Credits Manual

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HM Revenue & Customs
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Stopping Tax Credits - In Year Finalisation (A-K) - income check

Checklist

Before you follow this guidance, make sure

  • you have been directed to use this guidance from another guide or your manager has instructed you to do so
  • you have the correct user roles to follow this guidance. Use the B&C Roles and Access Catalogue. You can find this by going to the Benefits & Credits homepage, selecting ‘R’ on the B&C A-Z index, selecting ‘Roles and Access Process’, selecting ‘Roles & Access Catalogue’ from the Related links menu
  • you are in the correct MU. Use TCM0322460 for the correct MU number.

Background

As part of the tax credits commitment to reducing error and fraud, we should check the income declared on the Award Declaration. Where any one of the scenarios detailed in exists, you need to contact the customer and query the income they have provided.

Guidance

Note: When sending customer, staff or process data to another individual or team, make sure you follow the latest data security guidelines or contact the Data Guardian or Data Security Team for advice.

Step 1

The following scenarios may exist

  • employed customers are not receiving National Minimum Wage (NMW) when comparing hours worked with earnings declared (earnings declared appear to be weekly or monthly figures)

Note: A ‘NMW’ table is available in the CAG Toolkit within the Customer Adviser Guide.

  • earnings declared are nil but customer is still employed on the system
  • earnings have reduced significantly from the amounts provided to finalise earlier years but there has not been any corresponding change to work history reported (for example, reduction in hours, change of employer, change to self-employment) and there is not any clear documented evidence to suggest that any income disregards have been applied. Consider the guidance in TCM0116060 and, if the customer is self-employed, also consider the guidance in TCM0118180, in particular the ‘Trading loss’ section and the TC825 (PDF 969KB) worksheet.

If any of the scenarios exist, go to .

If none of the scenarios exist, return to the guidance you were previously following.

Step 2

Check for the following in the ‘Application Correction’ function, as these would indicate reasons for lower income figures. For how to do this, use TCM1000005

  • check the hours worked and/or likely earnings will not affect the award level (that is, income is below taper start point) by selecting the ‘Wk1’ and/or ‘Wk2’ and ‘Inc1’ and/or ‘Inc2’ from the toolbar
  • check for female customers who have recently had a baby (as a reduction could be accounted for by Statutory Maternity Pay) by selecting the ‘Ch’ from the toolbar
  • check for customers who have a new child in the household (as a reduction could be accounted for by Statutory Adoption Pay or Statutory Paternity Pay) by selecting ‘Ch’ from the toolbar
  • check that there is clear documented evidence on Household Notes that the customer is in receipt of a bursary, salary sacrifice scheme or is contributing wholly to a private pension. For how to do this, use TCM1000067.

Note: An effective salary sacrifice scheme cannot reduce a customer’s income to below NMW. If the only documented evidence for pay being below NMW is because the customer is in a salary sacrifice scheme, then these criteria do not apply.

If any of these criteria apply, return to the guidance you were previously following.

If these criteria do not apply

  • make a note of the income details provided and why the income check has failed as you will need to query the income discrepancy with the customer
  • return to the guidance you were previously following.