Here's something that's been worrying me in the last few weeks of teaching a new "Tax Credits Complexities" course...
The received view is that IS entitlement passports you onto maximum TCs. Instead, it is more accurate to say that in a period when you receive IS you are not subject to the income test when claiming tax credits (see TCA s7(2)). That amounts to a passport if you're on IS all year.
But what if: you're on IS together with, say, part-time earnings, for part of the tax year, then go off IS for the rest of the tax year, eg into full-time work. Whilst on IS you get max CTC, all well and good. But come the end of the year, won't the IR assess your current year income by looking at all countable income? It seems to me they can, and will then include the part-time earnings you received whilst on IS. I can't see anything that excludes such income from the definition of current year income. And yet this undermines the s7(2) principle that IS recipients should get max TC. So, should those part-time earnings whilst on IS count as income or not? Is there something in s7 and/or the TC (DCI) Regs that I've missed?
A further issue which suggests those p/t earnings are ultimately counted is that a change from being on IS to not being on IS won't always trigger a fresh relevant period. Mostly it will, such as moving in and out of work. But a single parent, say, who goes off IS because of receiving an increased amount of maintenance, remains in the same relevant period. That makes it impossible to distinguish between the TC calculation made whilst on IS and that made whilst not on IS. Yet s7(2) appears to require different calculations in those 2 circs. So how can it be the case that whilst on IS someone is not subject to the income test?
Hope someone can help un-confuse me on this one!
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