Help please

Tax Credits Bulletin 28 - Changes to provisional payments from April 2005 states that:

If a claimant reported a change in their expected income for 2004-5, their provisionaal payments will be based on their last reported income figure. This differs from 2004-5, when provisional payments were based on amended 2003-4 income less the £2,500 disregard (if that applied to the income change).

Does anyone else understand this as I don't?

Supposing someone lost their job early in the tax year 2004/5 (so had a change in circumstances), and now started a new job. If such a person claimed on the basis of last years taxable income, but similtaneously reported that they had started work, would they still benefit from the disregard on their increased earnings.

If the disregard is not included in the provisional award is it included in the end of year reconciliation? Perhaps it is a device to reduce overpayments by having more underpayments.

Hi Chris,

The changes to provisional payments in 2005/2006 seem to be two fold, although the IR explanation you quote is very opaque.

Firstly, the £2,500 buffer is removed from the calculation of the provisional payments. So if the award up to the end of March was based on £22,500 minus £2,500 giving £20,000pa, the provisional payments are based on income of £22,500 (so the provo payment goes down). The £2,500 buffer system carries on, but will not be calculated until reconciliation is complete.

Secondly, if a previous end of year overpayment is still in the process of being recovered at the end of March, then the recovery percentage also applies to the provisional payments.

Steve

Thank you Steve I thought it would be something like that but, unlike your explanation, the bulletin was indeed opaque.