A taxing time ahead

A few weeks ago, I briefly mentioned the introduction of new tax
credits in April 2003 which may lead readers to think credits do
not have to be considered until maybe March 2003. This would be
wrong. The impact of this huge change to financial support for
families is already being felt and will certainly need social care
workers’ attention in the next few months.

First, let’s make it clear what is meant by “tax credits”.
These are payments that will be administered by the Inland Revenue
but are, in fact, the latest version of means-tested benefits that
have been in place for many years.

The child tax credit streamlines all the income-based support
for children into one payment, paid directly to the “main carer” of
the children.

There will also be a new working tax credit, paid through the
payroll, for low-income working households, with or without
children. The WTC will include an element of help with child care
costs (also paid direct to the main carer – the rest of the WTC
will be paid through the wage packet). The introduction of a system
of support for childless workers is a major departure for the
benefit system, and is also seen by some as a virtual admission
that the national minimum wage is set at too low a level.

These two new credits will replace:

• Children’s tax credit.
• Working families’ tax credit.
• Disabled persons tax credit.
• The child elements of income support and income-based
  jobseeker’s allowance.

This represents a seismic shift in support for families and
low-paid workers. The gains are potentially impressive but so are
the consequences for social work agencies. If nothing else, all
your financial policies and forms will need a full rewrite, and
staff across a wide range of disciplines will need training.

Council policies on home care charging need to take the new tax
credits into account, as do council rules on fostering, adoption
and residence order allowances, section 17 payments, childminding
and day care subsidies and so on.

Awards of the new tax credits will be based on annual income,
not the most recent income as with WFTC. Indeed, claims made from
April 2003 will be based on a claimant’s gross income for the
tax year 2001-2 (as the 2002-3 income figures won’t be
available) so social welfare workers should tell their clients to
keep their P60s in readiness for making claims for the new tax
credits.

Awards of working families’ tax credit and disabled
persons tax credit that started on or after 4 June 2002 will now
run until 7 April 2003, instead of the normal six months. Awards
starting before 15 October will run for more than the usual 26-week
period, and those starting after that date will run for less.

There are circumstances, such as the birth or adoption of a
child, in which people can break into an award and reapply. That
remains the case for extended awards.

For more information go to the Inland Revenue’s website
www.inlandrevenue.gov.uk or phone their helpline on 0845 6095000.
You can request regular briefings on tax credits which will
include:

• A comprehensive information pack to be issued in the
  autumn.
• Regular bulletins that readers can use within their own
  organisations (perhaps to include in in-house publications and
  websites).
• A set of electronic slides (in PowerPoint format) that readers
  can use within their own organisations.

Gary Vaux is head of money advice, Hertfordshire
Council. He is unable to answer queries in person, either by post
or by telephone. If you have a question to be answered in Welfare
Rights, please write to him c/o Community
Care.