Tax Credits (Working) - the process involved

[JimmyR12]

Hello

 

I was wondering if anyone knows about the process by which HMRC ratify/evaluate tax credits claims.

 

It is clear I would be eligible for working tax credits as I do more than 35 hours work a week and my income/profit levels (I am self-employed) mean I would be eligible also.

 

I have looked in to it and it is clear they would make an award based on my current year's taxable profits (my income/profit level for last tax year was just over the limit for eligibility), and that I would be eligible for 3 months backdating for a claim also.

 

The points I am wondering about are simply to do with other aspects of the way the tax credits people would evaluate a claim from me.

 

Naturally, I would want to avoid receiving an enquiry or queries from the tax credits department - which like the HMRC's in general when they do this (ie when they do this on a tax return they have received), could be time-consuming and cause a lot of anxiety/stress (even if resolved ok in the end...). What makes me wonder about getting an enquiry/queries is to do with my not having claimed housing benefit or council tax benefit in the last two years (ie, the two years they would look at when validating my claim to tax credits; they would look at my position for the previous tax year and the current tax year...). I gather - someone told me - that if you claim tax credits this information gets put on the DWP's Customer Information System (CIS) database and so from looking at this (if that is what they do...) they would see this. I suppose, trying to look at things from their point of view at the moment, looking at new claims, my *not* having claimed housing benefit/council tax benefit might raise questions about how I was able to live in these two tax years – if my income level has been low (in the current tax year, making me eligible for tax credits…). I guess (again, trying to think of it from their point of view) they could see the lack of housing benefit/council tax benefit claim from me as signs of potentially ‘under-declaring’ my income for these two tax years (since they might think I would need to have more income to survive, if I wasn’t claiming housing benefit…). So, my lack of claiming these other benefits, at the least might seem ‘mysterious’ to them and raise these kinds of question.

 

That said, however, it’s important for me to add (obviously) that my income level is entirely and absolutely correct; the only reason I didn’t claim ‘other benefits’ to help with housing are that a) I was moving around a lot and living with friends at various points, and living as a lodger at some points also (where a council tax element was included in the rent); and b) I have a personal kind of attitude about claiming other benefits and was wanting to avoid this if at all possible.

 

So it would be ironic if my position did lead to an enquiry/queries, through not claiming anything else in he past two years and looking a bit ‘mysterious’ as a result…

 

So it all depends on how they actually assess/process a new tax credits claim. If it goes through automatically, I suppose I don’t need to think (and I am sure I may be overthinking this matter!) any more about all this. On the other hand, I guess the very fact of making a tax credits claim might act as a ‘flag’ for the way your tax return is looked at…ie a flag might come up on the system meaning your tax return is looked at when otherwise it wouldn’t be. In which case I might then get the enquiry/queries from the tax return people at HMRC rather than the tax credits people.

 

So: does anyone know – really know (any experts in this area on here?!) what just making a new tax credits claim would mean, in terms of whether it leads to a flag/means you get looked in to/makes you more liable for an enquiry/query? Or is the info they would see about my housing benefit/council tax benefit position on the DWP’s CIS something that would raise such an enquiry/queries?

 

I did claim housing benefit over two years ago so they would see it coming up for that period (on CIS).

 

Does anyone know how far back the tax credits people can legitimately look at/go in to your records also? The tax return people are obviously only allowed to query something on your current tax return – ie they have 12 months after it is submitted to consider it and it is only one year they can look at (unless they were able to prove that there was a case for starting to look at a previous year).

 

No doubt this may sound like overthinking it – or paranoia even! I am just wanting to keep my life simple – indeed this has been another reason for not claiming state benefits - too much paperwork/hassle and I just want to avoid all that, preferring to live off a bit less money and feel more ‘free’, in essence.e

 

Wd be most grateful for any responses here

 

Many thanks in advance, cag

 

Trevor

[ptol]

Hi Trevor,

 

I am a director of a one man limited company whilst claiming tax credits. I cannot tell you the back office stuff at the tax office, but I can tell you what my experiences have been so far with them, and what I have needed to do.

 

1. When you apply for tax credits, initially they make an initial award based on your previous years income. You can then choose to inform them of your estimate for this years income. When they receive this estimate, they then adjust your initial award to reflect these values. They will then pay this award over the tax year to you.

2. Just after the end of the tax year, they will then want to finalise your award and calculate the under/over payment that has been made to you. Because I operate as a limited company its quite easy for me to say I was paid X and received Y dividends so my information is readily available for their end of year assessment, and is an easy matter of fact to establish. If you are acting as a sole trader, your experience is likely to be different.

3. I use an accountant, who acts on my behalf for the limited company and my personal tax return. This has caused significant headaches in dealing with tax credits as they keep seeing the accountants address and insist that their records show that I live there, or have lived there. Because of this issue, my wife deals with tax credits, and not me.