Hs anyone dealt with this situation?
Client on wtc, working 30 hrs, part employed and part self employed. Falls sick and gives up work (so no ongoing 30hr jobs). Later tells TCO no longer working (they don't mention the deeming rule) and claims IS and IB. IS awarded from claim date, IB not awarded because inadequte NINo record: however, NINO credits awarded and backdated to day after client stops work.
Client would therefore appear to qualify for 28 week ongoing WTC under Reg 6(1): Reg(2)suggests that it doesn't matter that the jobs have effectivey ended.
Am considering client now reviving WTC retrospectively with a view to getting a lump sum backdate: ongoing WTC then relevant income for ongoing benefits but he would appear to be marginally overall better off. Would the backdated lump sum be capital for IS or would there be an an IS overpayment, with the backdate being treated as income over the relevant period? Presumably it would nevertheless be capital for HB/CTB so ignored.
Have spoken to TCO who can understand the point (at least one of them can: the other just says the jobs have to be still open for him on return but that isn't what Reg6 seems to say) but have no idea how the full backdate could be achieved under their system (we are beyond the 3 months)as they say it would have to be a new claim in any event.
All help on this gratefully received.

Sue

Before you do anything you should read CH/1561/2005 posted on the commissioner's website today which decided, in that case, that arrears of working families tax credit were income for the period that they covered and thus generated a HB/CTB overpayment.

Regards
Paul

Thanks, Paul. Interesting, but this case seems to relate to WFTC : arrears of WFTC are not specifically treated uder the Regs as being capital (which was the why the claimant had the problem) whereas arrears of WTC are specifically expressed to be capital under HB Reg 40.

As capital therefore it seems to me that the arrears shouldn't be taken into account as income over the arrears period. See also HB Guide to the New Tax Credits, Amendment 8 para 429 re in year changes of circs(although this may have to be a new claim as exlained originally, but same principle).

Assuming therefor no HB problem my original question still holds.

Any further thoughts/experience of this?
Sue

Had a case just like this. Client qualified for WTC (working 16 hours per week and entitled to 50+ element). Client went off sick in January and was not entitled to SSP (due to previously having worked 10 hours per week and average earnings taken over 8 weeks). Client claimed IB - awarded credits only and IS. Client notifies TC helpline and claim is terminated and WTC is stopped, because client now in receipt of IS and not working 16 hours per week. Client is advised to make fresh claim when she returns to work. Client returned to work in March and made fresh claim. Client came to us at end of July because fresh claim still not in payment yet. As you have done, we felt client's claim should never have been ended becasue IB credits being paid and client given incorrect advice by helpline. A call to the helpline explaining that client was receiving IB credits while sick was enough to have claim reinstated within four weeks. Of course, this being tax credits other problems arose, such as the computer thinking there is an overpayment where there isn't one, and computer thinking that client is entitled to WTC until March 2006, when in fact it should end November 2005 (because of 50 plus element only payable for 12 months). And we are still waiting for these issues to be resolved, since August!!
As you can see, we were past the 3 month stage and it didn't seem to be an issue, because the claim had been closed due to HMRC error.

And if in receipt of IS HB would not be overpaid even if tax credits deemed to be income as for any period IS paid (or ib JSA) all income and capital disregarded under the HB regs - schedule 5.

Just on the income or capital issue lone.

Commissioner Jacobs in CH/1561/2005 makes the following comments. He states (at para’19) that the legislation appears to be contradictory on the appropriate classification of income and capital. The claimant in that case relied on para’8 of schedule 5 as the starting point whereas the LA emphasized reg’ 68. He then states that “ the confusion is only apparent on the assumption that the legislation determines the classification……what they (the regulations – my insert) do not do is to provide a definition of income or capital. The provisions operate at the stage after the money has been classified…..it is not possible to deduce the classification from the provisions of the legislation. Even the provisions that treat income as capital or vice versa assume an initial classification that is displaced”. He later states (at para’23) “it would be anomalous if money were treated differently according to whether it was paid timeously or in arrears”.

Para’8 of schedule 5 of the HB regs was amended to allow arrears of WFTC, DPTC,WTC and CTC to be treated as capital and disregarded from the date of receipt. This aligns tax credits with SS benefits.

The reason for the provision is well known. If arrears are treated as income for the period they were paid in respect of then the above provision prevents them from being treated as income for the period in which they are paid and thus prevents double counting. It would seem rather strange for the legislation to allow the arrears to be not treated as income for any period at all, thus allowing a claimant to receive a benefit to which they would not have been entitled to had the arrears been paid timeously.

Now here is where I get confused. Does reg 40(9) disapply this and treat arrears of WTC/CTC as capital for all periods, thus allowing for the claimant to gain entitlement to a benefit to which s/he would not have been entitled to had the arrears been paid timeously, with the corresponding loss to the treasury? If so, is the treasury aware of this?

Paul, Read yours after responding to Ballymena CAB. Now even more confused!

In response to your final paragraph,I guess I am assuming Yes to the first question, Don't Know to the second.

What I am contemplating is simply maximising benefit for the client within the letter of the law: the purpose of my posted message is to try to be sure what the law is!! Am grateful for everyone's replies.

Sue

Very similar..with only difference perhaps that your client may have lodged new claim (March) within 3 months of work having ended (Jan)so that even if not sorted by the time he/she came to you in July the claim was logged, so that the 3 months backdate will link up with the old claim?? We are now past the 3 months since the WTC claim was ended. We would argue official error but in the meantime we have been told categorically that we need to make a new claim because "the system" won't accept anything else, and this will be the quickest way to get the ball rolling.

Have you yet had any interraction between HB/IS? I envisage, if we go ahead with our WTC backdate claim, that IS will say O/Payment because they will treat WTC as income over the relevant period, so that we retrospectively drop out of IS altogether over the relevant period (but we are happy with this)

In answer to Maihir's point I envisage that LA will then follow the lead of IS and say HB+CTB O/Payment..but we will go back to LA and say we qualify almost in full anyway on the basis of low income: AND such low income does not include WTC because under the Regs as backpayment of WTC is capital not income.

All very complicated but my client would definitely end up better off if he is willing to go through all the administrative hoops.

Sue

Re - income maximisation. I agree with you completely. Its just that if your view of reg 40 is correct then I'm just a little surprised that the governement is allowing such a loophole to exist!

Regards
Paul

Whilst this situation may produce IS overpayments they do not arise through failure to disclose or misrepresentation so should not be recoverable. I think Reg 40(9) does what it says: specifically prescribes that the arrears of TCs be treated as capital. That is not not taking them into account but taking them into account differently meaning that some people gain but also that others could lose out (such as people with no income but significant capital). I think it is done to make administration easier for HB/CTB depts.

What do people think about the continuing knock one effect though: claimant goes on the sick, gets IS therefore max WTC which could then mean his income is too much to qualify for IS, therefore should lose passported WTC, then qualifies for IS again and so on in circles?

IS surely doesn't mean "passported" WTC or have I missed something?

Whereas IS is based on actual weekly income, WTC is based on annual income...of the previous tax year, or more probably the estimated (and lower because of sickness) current year's income. It is right that WTC could take the claimant out of IS, but don't follow the circular argument: claimant won't lose WTC (through the deemed working period) only because the WTC inclusive income takes him off IS ???
Sue C

Don't think I was very clear. Entitlement to IS affects the ammount of WTC someone gets because for these periods the income test is disapplied (sec 7(2) of the Act). The relevant period calculations don't apply in these periods (reg 6) but the annual income, pro rata is used for those periods when not on IS, including any income whilst on IS.

The upshot of this is that entitlement to IS can increase entitlement to WTC and this increased entitlement could raise a claimants income above their applicable ammount. He then comes off IS and the income test applies for more of the year and therefore reduces his WTC entitlement (but he may still have some).

I sloppily used the term 'passported' to refer to the effect of IS dis-applying the income test.

Sorry to heve been so slow in reply.I take the point!

Haven't got any idea what happens in these circumstances although now have a client who potentially ends up in this circle at the end of her housing costs waiting period. Do you know what happens in practice??

Sue