TFC40200 - Termination of a tax credit claim: warning notice following a new tax credit claim

Childcare Payments Act 2014, section 32 and 33

A successful TFC declaration of eligibility will terminate any tax credit award, and to meet the conditions of eligibility a person must not be claiming Universal Credit (UC) on the date of their declaration. However, there is no provision that prevents a person from claiming tax credit or UC during an active entitlement period after their declaration of eligibility is found valid. This is deliberate policy to prevent parents being unable to claim tax credit or UC for up to 3 months when their circumstances change.

Note: tax credit has been replaced by UC for most people. In very limited scenarios however, a person may be able to claim tax credit.

Section 32 and 33 intend to limit opportunities for people to abuse this facility by allowing HMRC to disqualify a person from receiving top-up payments by giving them a warning notice. A warning notice is a notice stating that if any of the below applies to a person at any time during the period of 4 years beginning with the day on which the notice is given, HMRC may give the person a disqualification notice.

HMRC may give a person a warning notice when:

  • a person or their partner makes a claim (whether a single or a joint claim) that results in an award of a tax credit being made for any period that includes the whole or any part of an entitlement period and the claim is made during an entitlement period for which the person or their partner has made a valid declaration of eligibility

  • a person or their partner makes a claim (whether a single claim or a joint claim) that results in UC becoming payable for any assessment period that includes the whole or any part of an entitlement period and the claim is made during an entitlement period for which the person or their partner has made a valid declaration of eligibility
  • there has not been a change of circumstances in relation to the person or their partner since the beginning of an entitlement period and the person or their partner makes a declaration of eligibility within the period of 12 months beginning with the day on which the claim to tax credit or UC was made

Childcare Payments (Eligibility) Regulations 2015, regulation 18

The following are changes of circumstances in relation to a person for the purposes of sections 32 and 33 of the Act (power to disqualify tax credit or UC claimants from obtaining top-up payments):

  • a person is no longer responsible for the relevant child. ‘Relevant child’ means the child in respect of whom the person making the declaration holds or seeks to hold, a childcare account

  • a person is not or cannot be treated as being in the UK on the date of the declaration

  • a person or their partner are not or cannot be treated as being in qualifying paid work on the date of the declaration

  • the composition of a person’s household changes, including where a person’s partner joins the person’s household or the person joins the partner’s household, a person or a person’s partner takes responsibility for another child or qualifying young person, a person’s partner or a child leaves the household or a person’s partner or child dies

  • a person or their partner is absent from the household for at least one month

  • a person’s child or their partner’s child is awarded, or ceases to be entitled to, disability living allowance (including disability assistance in Scotland), personal independence payment or armed forces independence payment

  • the principal employment of a person or their partner changes

  • the employment status of a person or their partner changes

  • a person becomes liable to pay HMRC an amount under section 35(2), 36(2), 37(2) or 38(3) of the Act (recovery of top-up payment where award of tax credit or UC made on review, revision, or appeal)

  • any other change that results in a person or their partner being entitled to a first award of a tax credit or a first award of UC

For section 32 of the Act: a person takes responsibility for a child or qualifying young person where the person takes such responsibility in accordance with the rules in regulation 3 of the Child Tax Credit Regulations 2002 and ‘qualifying young person’ has the meaning given in regulations 2 and 5(3) and (4) of those Regulations.

For section 33 of the Act: a person takes responsibility for a child or qualifying young person where the person takes such responsibility as determined by regulations 4 and 4A of the Universal Credit Regulations 2013, ‘qualifying young person’ has the meaning given in regulation 5 of those Regulations and ‘child’ means a person under the age of 16 who is a qualifying child.

Principal employment’ is the employment in which the greater part of a person’s working time is spent.

Example 1

Bryony makes a successful declaration of eligibility for TFC at the beginning of June but is made redundant 4 weeks later in July. She realises she is entitled to UC due to her change in circumstances and makes a claim straight away. Despite making a successful claim to UC, Bryony’s entitlement to TFC and any relevant top ups will continue during the current 3-month eligibility period but will cease at the beginning of the next declaration period once she confirms she has a live claim for UC. As Bryony’s UC claim was caused by a change of circumstances, HMRC will take no action to prevent future moving between schemes.

Example 2

Laura has been claiming UC for several months, but her circumstances have improved to a point where she will get more support from TFC than her UC award. She decides to stop her UC claim and apply for TFC. But Laura then decides she would like to receive both UC and TFC, so restarts her UC claim without a further change of circumstance, whilst continuing to receive TFC top up payments. As Laura was receiving dual entitlement without a change of circumstance, she would initially be liable to receive a warning notice. Following receipt of the notice, if she decides to stop her UC claim again, make a declaration for TFC, and subsequently restart her UC claim without a change of circumstance, she could then be disqualified from using her TFC account or making a further application to TFC for a set time period. However, before any action is taken, due consideration will be given to individual circumstances and discretion applied if it is found a genuine error has been made.