April sees introduction of return to work credit

Gary Vaux (pictured) explains the new return to work credit and the easing of the “permitted work” rules to help people back into employment

For a government that claims to be worried about personal debt, it seems keen on the word “credit”. Following on from child tax credit, working tax credit and pension credit, there is to be a new return to work credit (RTWC) from April. In addition, there is to be a slight easing of the “permitted work” rules from October.

The RTWC was introduced as part of the Pathways to Work programme in 2003, to get people with health problems back into employment. Currently 40% of the country is covered by Pathways to Work. Full national coverage, of both the Pathways To Work programme and the RTWC, will be achieved by 28 April.

RTWC is a non-taxable payment of £40 a week, payable for up to 52 weeks. It will be paid into the claimant’s bank or building society account, or an existing Post Office card account. Exceptionally, it may be paid by cheque.

To be eligible, the person must have been claiming one or more of the following benefits for 13 weeks or more:

● Incapacity benefit, including credits only.

● Income support on the grounds of incapacity.

● Severe disablement allowance.

● Statutory sick pay for 13 weeks or more and now claiming an incapacity benefit.

From October, presumably, it will also include those on the new employment and support allowance (ESA) which replaces incapacity benefit and income support for people incapable of work.

If that test is satisfied, they must also be starting a job or self-employment that is of 16 hours or more a week, and expected to last at least five weeks.

Their expected gross annual salary (or income from trading if self-employed) must not be more than £15,000. At that level, it is possible that working tax credit may also be payable, and people with children would receive child tax credit too. The RTWC is additional to these credits and, unlike CTC and WTC, the RTWC will not be treated as income for housing or council tax benefit purposes.

Applications must be made within five weeks of starting work. Claimants who are starting self-employment are also eligible to apply. However, the credit will not be available to people who have been claiming jobseekers allowance or income support on grounds other than being unfit for work. People receiving carers allowance are excluded. All of this could be significant, especially as the government makes it more difficult for people to receive, or remain on, incapacity benefit. Paradoxically, a claimant who is declared fit for work by a Department for Work and Pensions-funded doctor and is then switched from incapacity benefit to JSA could then lose their right to claim the RTWC, at the very time they are expected to seek and return to work.

Another part of the carrot to tempt people back to employment is a relaxation of the permitted work rules. People on incapacity benefit can now earn up to £88.50 a week from permitted work for up to a year but those on income support who are unfit for work can earn only £20 before that benefit is cut. From October, when ESA replaces both those benefits, the earnings limit will be fixed at whatever the higher level is at the time for those receiving ESA because of either contributions or through a means test. Those doing longer-term supported permitted work will also benefit from this relaxation.

Gary Vaux is head of money advice, Hertfordshire Council. If you have a question e-mail graham.hopkins@rbi.co.uk

This article appeared in the 21 February issue under the headline “Is this a carrot I see before me? Temptin claimants into work”