CHILD AND WORKING TAX CREDITS

Unexpected difficulties arising ...

The Tax Credits system is still relatively new and, quite apart from the widely-publicised problems with overpayments and the general administration of the scheme, unexpected difficulties are still arising.

One that has recently been identified is the situation following a bereavement. For example, suppose a married couple are claiming Child Tax Credit. Unexpectedly, the husband dies. His widow has too much to worry about to concern herself with Tax Credits and, in any case, she assumes the family’s entitlement will if anything increase because of the loss of her husband’s earnings.

In fact, she is liable to a financial penalty if she does not notify the Tax Credit Office within three months of her husband’s death. More importantly, the couple’s claim expires on the husband’s death and so any payments made subsequently are subject to clawback. The widow should make a new claim of her own and, as claims can only be backdated for a maximum of three months, she will lose money if she does not do so within that time limit.

It is to be hoped that, in the case of a bereavement, the Tax Credit Office would in practice take a reasonable approach and grant concessionary relief, but at the very least the stress of sorting it all out is likely to make a bad situation worse. So if you know anyone who may be affected, it might be kind to have a quiet word with them.

Similar rules apply where, instead of a bereavement, there is a separation, and here the Tax Credit Office is likely to be less helpful.

IMPORTANT: This newsletter deals with a number of topics which, it is hoped, will be of general interest to clients. However, in the space available it is impossible to mention all the points which may be relevant in individual cases, so please contact us for personal advice on your own affairs.