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HMRC internal manual

Tax Credits Technical Manual

HM Revenue & Customs
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Entitlement: Tax credits and European Law: The general principles


The underlying principle of the EU coordinating legislation as it applies to workers moving within the EEA is that they should be entitled to the same social security treatment regardless of which Member State they live and/or work and there should be no restriction on their right to move freely and work in any Member State.

From 1 May 2010, for the purpose of child tax credit (CTC), child benefit (CHB) and guardians allowance (GA), the treatment of nationals from the EU Member States under European law is governed by Regulation (EC) 883/2004 as amended by Regulation (EC) 988/2009 and implemented by Regulation (EC) 987/2009. 

Regulations 883/2004 and 987/2009 were introduced to consolidate and reinforce earlier legislation and represent a simplification of the co-ordinating rules, including relating to family benefits.

The main changes in relation to family benefits are:

  • the concept of family allowances is abolished
  • priority rules have been established to determine the responsibilities of the relevant competent institutions
  • a duty of co-operation has been placed on the competent institutions to ensure that those priority rules are respected regardless of the wishes of the claimants thereby focussing on delivery of benefit entitlement according to the priority rules.

Under EU law, CTC, ChB and GA are classed as family benefits. Where a worker is subject to the legislation of the UK, the UK is generally competent to pay family benefits in respect of that worker’s family members, even though the family members may live in a different Member State.

Working Tax Credit (WTC) is a ‘social advantage’ under EU law but is not a ‘family benefit’. The European law which covers WTC can be found in Regulation (EU) 492/2011. The main purpose of Regulation (EU) 492/2011 is to prevent migrant and cross border workers losing entitlements if they exercise their EC right of free movement for workers. Regulation (EU) 492/2011 was introduced to replace and codify its predecessor (Regulation 1612/68 of 15 October 1968) which had been substantially amended on several occasions.