Tax Credits can be a lifeline for a number of taxpayers on lower income and most individuals will be aware that each year a renewal form must be completed prior to the deadline of 31 July in order for payments to continue without a gap.
As a result of the Covid-19 pandemic however HM Revenue & Customs (HMRC) have made a departure from the usual renewal process and taken the decision to automatically renew most tax credit claims this year. Individuals are being urged to check their renewal notices carefully since HMRC may not have used the most up to date information. This could lead to inflated awards being made, resulting in tax payers having to repay any overpaid tax credits as well as facing potential penalties for over claiming.
In the past if a taxpayer was already claiming tax credits, they would automatically receive a pack from HMRC asking for their income details for the previous year in order to determine the award going forwards. It was then important that these details were provided to HMRC before the deadline of 31 July so that payments continued without a gap.
This year, because of the pandemic, HMRC will automatically renew most tax credit claims. This means that HMRC will set out the claimant’s circumstances in a renewal notice leaving the claimant to contact them if the details are wrong. HMRC will finalise entitlement for 2019/20, and put in place a claim for 2020/21, on or shortly after 31 July 2020.
HMRC are using the last income figures they have on record in preparing the renewals. There have however been instances where the figures being used have not appeared on the notices sent out thereby making it difficult for recipients to check their claim. The Low Income Tax Reform Group (LITRG) have indicated that this issue mainly affects claimants who have income that HMRC do not know about, for example the self-employed, those who receive taxable social security benefits and those with other types of income such as rent. This is due to the fact that HMRC will not have the most up to date figures for the 2019/20 tax year for many individuals.
Even if HMRC have data from employers and pension providers, claimants should still check to see if they make any deductions from those income figures for things such as pension contributions, certain work expenses and some statutory payments.
Tax credit claimants are therefore being advised to carefully check their renewal notices and the income figures used. They should contact HMRC before 31 July 2020 in order to either correct the information or make sure the information held is correct. Those individuals who have not received a renewal notice should also ensure they contact HMRC before 31 July 2020 to renew their claims.
There are a number of ways taxpayers can renew their claims, check the information held and check their tax credits payments schedules with HMRC:
- Using the HMRC app;
- Phoning HMRC tax credits helpline (0345 300 3900);
- By going online using the personal tax account.
Given the possible glitch in the figures used by HMRC in calculating claims this year as well as the fact the renewal process will look different for many individuals, it is important that claimants check their renewal paperwork very carefully. HMRC have stated that if any information it holds is incorrect or incomplete then taxpayers may have to repay any tax credits that are overpaid as a result of this and could also incur penalties.
In April, HMRC announced Working Tax Credit customers would receive up to £20 extra each week from 6 April 2020 until 5 April 2021, as part of a number of measures to support the country during the Coronavirus pandemic.
There has been speculation in the media today regarding possible incentives the Chancellor may introduce to aid the economy in its recovery following the easing of many of the lockdown rules. These include the potential reduction in VAT and stamp duty.
The chancellor is due to make his statement on Wednesday of this week, 8 July 2020, and when full details are available we will keep you updated of any significant developments.
Our updated working arrangement – We remain ‘Open for business’
Our staff have returned to office based working on a rota basis, each attending two days a week, whilst continuing to work from home at other times. They can still be contacted in the usual way either via email or by calling the office number where reception will divert your call to the appropriate staff member.
If you would like more information or if you require our assistance regarding tax credits please speak to your usual contact at the firm.
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