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Inheritance treated as income?
All advice appreciated….
Adult with a learning disability receives an inheritance from a relatives estate (just over £16K) and on their working tax credit renewal form the monies are declared as income although written verification is sent to HMRC that the money is an inheritance received in that tax year.
Are HMRC correct in treating the capital sum as income as it has created a significant over-payment which they are now trying to recover from the claimant and to date they have declined to provide a copy of the relevant guidance supporting their decision.
That’s bizarre.
clearly your client made a mistake filling the relevant form in, and you’d think that would be obvious to anyone looking at the paperwork!
it’s capital. the only income is interest earned on it whilst it’s in interest bearing account (assuming it is) or notional income.
HMRC are refusing to amend the decision despite multiple attempts by client’s family to get clarification as to the specific guidance they are relying on to justify their decision…...I agree it seems utterly bizarre!
tribunal, sounds like this needs!
I’ve been advised the following guidance would apply:
‘Eligibility - income (other than earnings): Income - property (Info)
Property income is income from
•rent or other receipts from
•estates
and
•a property business as defined in Part 3 of ITTOIA 2005
•income received under the Rent-a-room scheme by virtue of Chapter 1 of Part 7 of ITTOIA is disregarded
Note: From 06/04/17, for the purposes of tax credits, a person will still be able to deduct 100% of their finance costs when calculating their allowable expenses for property income. See TCTM04006’
https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0120160
Is it me as I still cannot see how the inheritance of a lump sum from a relative’s estate can be deemed ‘property income’??
I’m with Claire - MR/appeal - it’s clearly capital
Thank you both, I agree - to date no appeal rights even mentioned in any of the correspondence issued by HMRC so far!
They have been reminded client has a right to have a Mandatory Reconsideration of the decision made so we await their response….