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HMRC internal manual

Tax Credits Technical Manual

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HM Revenue & Customs
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Entitlement: WTC entitlement: Childcare element: Changes in circumstances

 
 
 
 

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 16(1)

Relevant changes in circumstances

A change in ‘relevant childcare charges’ means either

  • an increase or decrease in the claimant’s ‘relevant’ average weekly charge of £10 a week or more

    • for claimants who pay fixed weekly childcare charges, there is an increase or decrease in their actual weekly childcare costs by £10 or more, and the change applies in each week for at least 4 weeks in a row,
    • for claimants who pay variable childcare charges (or monthly childcare charges), there is an increase or decrease in their average weekly childcare costs by £10 or more. (The rule for the change in childcare costs to last for 4 weeks in a row, does not apply here because the claimant’s new weekly average childcare costs are already calculated from a whole year’s costs, and so any change is treated as being in place straight away)
  • the average weekly charge is reduced to nil, or
  • the childcare provider no longer meets the conditions required at regulation 14(2) (see TCTM02630) and consequently average costs cease.

Changes of circumstances which must be notified

There is no requirement for increase in costs to be notified within 1 month. However, we can only backdate increases for a maximum of 1 month. For more information see details in Regulation 16(5) (a) below.

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 Reg. 16(2) & (3)

How to calculate whether a relevant change has occurred

  • Where charges are fixed weekly amounts, the actual weekly costs must have changed by £10 or more, and the change applies in each week of the last 4 weeks. To establish whether there has been a relevant change in the weekly childcare charges, look at the actual amount being paid in each of the 4 consecutive weeks in which the change occurred. If the amount paid in each one of the 4 weeks is £10 or more higher or lower than the current average then there is a relevant change.
  • Where charges are fixed monthly amounts, multiply the new monthly charge by 12 and divide that by 52. If the weekly average is £10 or more higher or lower than the current weekly average then there is a relevant change.
  • Where charges are variable weekly amounts, by aggregating the anticipated weekly charges for the next 52 weeks and dividing by 52. If the weekly average is £10 or more higher or lower than the current average, then there is a relevant change.
  • Where charges are variable monthly amounts, by aggregating the anticipated charges for the next 12 months and dividing by 52. If the weekly average is £10 or more, either higher or lower than the current weekly average, there is a relevant change.

Only when it has been established that a relevant change has occurred can the new costs be calculated under regulation 15 (see TCTM2640).

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Reg. 16(4)

Where no information or insufficient information is available to calculate relevant childcare charges using the above, relevant childcare charges will be the amount estimated by an officer of HM Revenue & Customs in possession of information provided by the person or persons incurring the charges and calculated by any method which in the officer’s opinion is reasonable.

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 Reg. 16(5)(a)

  • If the change shows that childcare charges have increased by £10 or more a week, the change in the award will take effect on whichever is the later of either the first day of the week in which the change occurred, or
  • the first day of the week, 1 month prior to the change being notified (The 1 month backdating rule).

Example 1:

Notification received on 8 June 2012 that childcare charges increased on 20 May 2012. 1 month prior to 8 June 2012 is 8 May 2012. Therefore the increase will be effective from 20 May 2012 as this is within the 1 month period.

Example 2:

Notification received on 8 June 2012 that childcare charges increased on 13 April 2012. 1 month prior to 8 June 2012 is 8 May 2012. As the change occurred outside this 1 month period, the increase can only be effective from the Sunday prior to 8 May 2012 ie Sunday 6 May 2012.

The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 Reg. 16(5)(b)

If the change shows that childcare charges have decreased by £10 or more a week, the change in the award will take effect on either

  • the first day of the week following the end of a ‘fixed period’, where the duration of the childcare charges is for a fixed period which was known at the outset of the award, or
  • in all other cases, the first day of the week following the four consecutive weeks in which the change occurred

Note: A childcare week begins after midnight between Saturday and Sunday and ends at midnight one week later.

The Tax Credits (Claims and Notifications) Regulations 2002, Reg. 21(2)(b) & (3)

The claimant must notify any change in childcare costs within one month if

  • the average costs fall to zero; or
  • they have fixed weekly childcare costs, and their actual weekly childcare costs fall by £10 or more in each week for 4 weeks in a row;
  • they pay variable or monthly childcare costs, and their weekly average costs fall by £10 or more
  • the childcare provider stops being ‘registered’ or ‘approved’
  • they stop using a ‘registered’ or ‘approved’ childcare provider . For example, they start using a relative to look after their child at home.

If the claimant does not notify the changes then they will have been overpaid tax credits and will have to pay them back. They may also have to pay a penalty of up to £300 under section 32(3) of the Tax Credit Act 2002