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HMRC internal manual

Tax Credits Technical Manual

Calculation of entitlement: Step 1 - establishing the award period and the relevant period

Sections 5 and 16, Tax Credits Act 2002

The Tax Credits (Income Thresholds and Determination of Rates) Regulation 2002, Regs 7(2) and 8(2)

The award period runs from the effective date of the claim to the end of the tax year, or until an award is terminated.

A relevant period is a period within an award period requiring a separate award calculation. If a claimant’s circumstances change during the year, such that it affects the elements they are entitled to, then a new relevant period will begin. The new relevant period will be calculated on the basis that it will end at the end of the tax year.

Dividing the award period up into relevant periods and calculating the rate of award due for each period separately helps to ensure that the rate of tax credit paid changes in line with changes in the claimant’s circumstances.

It is possible that a change in tax credits eligibility will need to be taken into account. This can occur, for example, where entitlement to one of the elements of tax credits ceases during the period of the award.

For example

A person claims on 2 May 2015 and satisfies both the WTC and CTC eligibility rules but has a child whose 16th birthday is on 20 August 2015. The award period is 2 May 2015 to 5 April 2016.

However, eligibility to the CTC child element is assumed to end on the 31 August on/following the child’s 16th birthday. There will be a change in eligibility needing to be taken into account from 1 September 2014. As a result, two relevant periods will need to be considered in the award calculation, which are:

  • 2 May 2015 to 31 August 2015, and
  • 1 September 2015 to 5 April 2016

See worked example (TCTM07APPX2)