How to ensure tax credit applications are successful

As mentioned in an earlier column, HM Revenue and Customs (HMRC) is now taking a softer line on overpayment recovery, and it may now be time to remind your clients that tax credits, properly claimed and administered, can make a big difference to a family’s lifestyle.

Some families who have been receiving income support or income-based JSA since before April 2004 still receive ­benefit rather than child tax credit (CTC) for their children. We don’t know when, or if, the transfer to CTC will happen. The DWP is therefore planning to conduct a “gainers exercise” to identify claimants who could be better off by volunteering to switch now. This could include people in receipt of adoption and residence order allowances, for example (which count in part against income support but not against tax credit).

Under separate plans, from November 2008, lone parents on income support whose youngest child is aged 12 or over will begin to transfer from income support to jobseekers allowance. When they do, they will not have the option to continue receiving benefit for their children and will need to claim CTC instead.

Missing out

With child tax credits being available to people earning up to £66,000 a year if they have a child under one (and £58,000 in other circumstances), it’s possible that many readers of this column may themselves be missing out.

HMRC has kindly given me an insight into the top 10 reasons why tax credit claims fail:

1 Failure to sign and date the form.

2 Writing outside the boxes – the forms are scanned and read on screen. If it’s not inside the box it may not be picked up.

3 Spelling children’s names incorrectly or not using the same names that are on the birth certificate.

4 Giving incomplete bank details.

5 Using the form to report a change in circumstances – HMRC does not like this because it messes up the system. Changes of circumstances are processed in one way repeat claims in another.

6 Incorrectly claiming or not claiming the disability element – this isn’t surprising as the form simply asks if a person is disabled. It’s only in the guidance notes that the full criteria are spelt out. The qualifying conditions are that the person:

● Is working for 16 hours a week or more.

● Their disability disadvantages their employment.

● They are receiving a qualifying benefit or returning to work after sickness.

HMRC has produced a five-page disability help sheet (TC956), available on its website (http://www.hmrc.gov.uk).

7 Failing to provide the childcare providers’ registration number – this is essential if the claimant wants help with up to 80% of their childcare costs.

8 Claiming more than seven days before starting a job – relevant to working tax credit claims.

9 Failure to include the child benefit number.

10 Part 6 not being completed – very important. This is the bit that sets out how and when you should be paid.

● Gary Vaux is head of money advice, Hertfordshire Council. If you have a question for him please e-mail natalie.valios@rbi.co.uk