TAX CREDITS AND EARLY YEARS BULLETIN
IN THIS ISSUE
Our training programme for 2018/19 is available here. We are running the following courses which are particularly relevant to early years workers:
Find out more and book a place here
All our tax credits and early years factsheets have been updated and are available to download from our website. We have a limited printed supply of some of the most popular factsheets. If you would like to receive printed copies please email email@example.com.
PENSION CREDIT AMOUNTS FOR CHILDREN
Currently, people over pension credit age (approaching 65) who are responsible for children can claim child tax credit. However, tax credits are being abolished, and replaced by universal credit for working age claimants, but people over pension credit age cannot claim UC. From 1 February 2019, they will claim a child addition in pension credit instead. The pension credit rules have been amended so that an amount for a child can be included, but this does not apply to a claimant who is already getting tax credits. The basic amount for a child is the same as in CTC and UC, with a higher amount for one child born before 6 April 2017. However, the lower rate for disabled children is less than half the amount in CTC, as in UC. The way pension credit is calculated could also leave people significantly worse off. For example, a single person with a pension income of £16,000 who is responsible for two children would currently be entitled to maximum child tax credit, but would not get any pension credit, even when two child amounts are included.
The rules on responsibility for a child looked after and accommodated by the local authority also follow the more restrictive wording used for universal credit. Some kinship carers, who are responsible for a child where the local authority is not paying for maintenance or accommodation, may find that they can qualify for CTC but would not qualify for pension credit child amounts unless they have parental responsibility for the child.
One other difference, which could make some claimants better off with pension credit child amounts, is that there is no two child limit in the pension credit rules. Some claimants affected by the two child limit, if one or both of a couple reaches pension credit age, may be well advised to switch to pension credit from 1 February 2019, but to do so they would first have to give up their tax credits or universal credit award.
View the amending regulations
UNIVERSAL CREDIT AND CHILDCARE COSTS
The UK Government has rejected the idea that childcare costs under universal credit could be paid direct to the childcare provider, or that childcare costs could be paid in advance.
The Treasury Select Committee had heard evidence that upfront childcare costs are a barrier to starting work, and concluded that requiring parents to pay for their childcare costs up front, before seeking reimbursement later, is a fundamental design flaw that should be rectified as a matter of urgency.
The Government responded by saying that work coaches can explore whether claimants are eligible for a budgeting advance or use the Flexible Support Fund (FSF) for help with upfront childcare costs so that claimants can accept offers of employment.
Do you work in Glasgow, Edinburgh or Dumfries & Galloway?
If so, parents in your area may be able to get help with advance childcare costs from a new Deposit Guarantee Scheme trial being run by Early Years Scotland in partnership with the Scottish Government. Families with a child aged 0-2 and in receipt of qualifying benefits may be able to join the scheme so that they do not have to pay advance costs. Note that if an amount is covered by the deposit guarantee scheme, it cannot also be claimed in tax credits or universal credit, but help with ongoing costs can be claimed as normal.
The childcare provider needs to be based in one of these areas to be part of the Deposit Guarantee Scheme. Parents need to register by 21 December 2018, and this pilot scheme runs until the end of December 2019.
TAX CREDITS STATISTICS
The latest statistics on tax credits recipients for the year 2016/17 are available:
- 4.05 million households in the UK received tax credits in 2016/17. This is a slight drop from 4.28 million in 2015/16.
- 2.86 million of these households are in work
- 7.07 million children in UK households in receipt of tax credits in 2016/17
- Total tax credit expenditure was £27.03 billion in 2016/17
- £1.7 billion overpaid to approximately 1,572,000 claimants (of which an estimated £1.32 million attributed to claimant fraud or error)
- £558,000 underpaid to approximately 814,000 claimants
View tax credits statistics
OVERPAYMENTS AND SELF-EMPLOYED
HMRC has attributed approximately £55 million in overpayments on 30,000 claims where WTC claimants did not meet the new definition of self-employed as being ‘on a commercial basis with a view to making a profit’, which was introduced in April 2015. This indicates that HMRC has awarded WTC in these cases, and then at some later point decided that the claimant did not meet the definition, so had been overpaid. This approach may be worth challenging in some cases, with reference to recent caselaw:
- Although he had only just started off in business, he was also working “on a commercial basis and with a view to the realisation of profits”, essentially for the reasons that the Appellant himself gave so eloquently (“Why would I even bother with any of this if I didn’t intend to make a profit? Do you think I’m doing this for fun?”) (para 26 JF v HMRC (TC)  UKUT 0334 (AAC))
- the principle that, in the context of self-employment, remunerative work means “work carried out with the desire, hope and intention of claiming a reward or profit” still holds good in the context of the new definition of “self-employed” (para 30 JF v HMRC (TC)  UKUT 0334 (AAC))
- “It seems to me to be appropriate to take a fairly cautious approach to retrospective decision-making … care should be taken not to make too much use of hindsight when considering whether, at the time that relevant work was undertaken, the work was done for payment or in expectation of payment.” (para 13 MH v HMRC (TC)  UKUT 0079 (AAC))
Read the error and fraud statistics here
TWO CHILD LIMIT
The Government has also published statistics on the two child limit in its first year, which reveal:
- 73,530 households in the UK were affected by the two child limit
- 70,620 (96 %) are not receiving a child element for a child
- 2,900 households (4 %) are receiving an exception to the policy, of which
- 2,440 (84%) were due to multiple births
- 270 (9%), were for non-parental care
- 190 (7%) received an exception for non-consensual conception
- 59% of households affected by the policy are in work
- 62% of households affected by the policy are couples
The publication does not contain information relating to those who have applied for an exception but have not met the criteria to qualify.
CPAG in Scotland’s Early Warning System has been gathering evidence on the two child limit in its first year, and recently published a report.
INVITATION TO GIVE FEEDBACK ON THE DESIGN FOR THE NEW BEST START GRANTS:
The Scottish Government is looking for people to attend usability sessions who:
- have young children or are currently expecting a child; or
- have experience of Sure Start Maternity Grant.
These are individual feedback sessions where people can try out the new application process for Best Start Grant maternity payments. Best Start Grant is a one-off payment to help families on a low income meet the costs of having a baby. It will replace the Sure Start Maternity Grant for people who live in Scotland.
No preparation ahead of taking part is needed and there are no right or wrong answers. There are two remaining dates this summer and people are invited to book a time at one of them:
- 8 August 2018, Radisson Blu Hotel, Glasgow
- 22 August 2018, Norton Park, Edinburgh
Refreshments will be provided. The sessions will be held in accessible venues, and any other needs should be notified when booking onto the event.
Taking part in both these meetings is entirely voluntary and people can be involved as much, or as little, as they would like to.
To take part in this research, please book a place at https://beststartgrant.eventbrite.co.uk or by calling the FREEPHONE helpline on 0800 029 4974.