Help!

I have a client at the moment who has been receiving WTC and CTC based on her earnings. She changed employer, but worked the same number of hours, and earned pretty much the same amount of money. On completing her review form, HMRC have picked up on the fact that she has changed employer and decided that she should have told them earlier, and as such , for some reason, only allowed her claim for a three month period, thus creating a massive overpayment.

Surely this is not correct! My understanding was that there are certain things that you HAVE to tell the HMRC and others that you MAY choose to tell them within what was three months (now one month) but you could wait until your review claim. I thought this was one of the ones that you could wait for?

So 2 questions really - should my client have told the HMRC earlier, and should there be an overpayment?

Off the top of my head there is no legal requirement to notify changes in income or notify changes of employer in the advance notification rules.

Of course you have to report your income for the last year accurately on renewal. It is also helpful, generally, to advise significant changes in income.

It is also good practice to report changes of employer as it allows HMRC to verify issues with said employer if they need to.

Everything legal on the working front is geared to hours worked and the 16 and 30 hours thresholds.

So my view would be that your claimant has done nothing wrong and if an overpayment arose due to the HMRC misinterpretaion it should be removed pronto.

Ask HMRC to justify their position by reference to the law and appeal.

While we are on the subject of notifying changes I might add that I have formally requested that HMRC do not attempt to penalise anyone (either by way of penalty or by trying to collect an overpayment) solely because the claimant did not notify an appropriate change within one month.

The reason for this being that you can find the reference to three months in numerous places on the HMRC website and indeed when you ask at an enquiry centre you get literature which is out of date and shows 3 months.

When I get an answer I will post it on this forum.

I agree with the first response, changeing your employer is not one of the changes that must be reported within one month. HMRC appear to have it wrong in this case, but I wonder if there may have been a break in entitlement because the claimant left one job and didn't start their next job straight away (I think you are allowed a gap of up to 4 weeks between jobs). See below for the list of changes that must be reported within a month:

TCTM05100 - Changes in circumstances
Changes in circumstances that must be notified
The Tax Credits (Claims and Notifications) Regulations 2002, Reg 21 and the Tax Credit Act 2002, Section 32
There are prescribed time limits attached to the notification of a change of circumstances.

If the change results in the tax credit being reduced or stopping because:

Changes in the adults heading a household, for example, if a couple breaks up or when people begin living together as a couple;
The claimant (or in a joint claim, either claimant) loses their right to reside in the UK or is no longer classed as being in the UK. This includes claimants who have been temporarily out of the UK for more than 8 weeks, or 12 weeks if its because of their illness or the illness or death of a partner or relative;
An award of WTC contains a child care element and the claimant stops paying for childcare for at least 4 weeks in a row;
The award of WTC contains a child care element and the average weekly child care cost goes down by at least £10 a week, for at least 4 weeks in a row;
A claimant, or their partner no longer works the required 16 or 30 hours a week;
Couples with children change their combined working hours to below 30 hours a week;
A claimant, or their partner stops working or has been on strike for more than 10 days;
A child or qualifying young person leaves the family and moves to live with someone else. This includes children who have been taken into care, or fostered to another family. It also includes children who have been found guilty by a court and sentenced to custody or detention for a period of more than 4 months;
A child or qualifying young person that the claimant is responsible for leaves full time education, or approved training before they reach 20 or stops being registered with a careers service, Connexions Service or equivalent;
A claimant has given notification that a child is expected to undertake full time non- advanced education or approved training after the 31 August following the date they attain the age of 16, but that child does not go on to undertake full time, non- advanced education or approved training;
A child dies.
The change must be notified within 1 month of the date the change occurred, or if later from the date the claimant realised there had been a change, unless advance notification had already been given.

Prior to 6 April 2007 the change must have been notified within 3 months of the date the change occurred, or if later from the date the claimant realised there had been a change, unless advance notification had already been given.

There is a risk of being overpaid tax credit if HMRC are not told of these changes.

Penalties of up to £300 may also be levied.