A reminder about what needs to be done

The renewal deadline for tax credits (Working Tax Credit and Child Tax Credit) falls at the end of this month. HMRC has started its publicity campaign to remind claimants what they need to do.

For the benefit of claimants and their advisers, here is the Tax Faculty’s comprehensive guide to tax credits renewals and the important of the 31 July deadline.

The renewal process

The tax credits renewal process does two things – it finalises the award for 2008/09 based on final information about income and circumstances for that year, and renews the claim for 2009/10. 

All tax credit claimants should have been sent a renewal pack for 2009. This contains either one or two forms:

• Everyone receives the Annual Review form (TC603R) which is a statement of the 2008/09 award.
• Most people will also receive the Annual Declaration (TC603D).

Joint claimants get one renewal pack between them. A claimant who has been a party to more than one tax credit claim during 2008/09 will get a pack for each of them.

What has to be done by 31 July?

Those claimants who receive the Annual Declaration (known as ‘reply required’ cases) must complete and return it by 31 July 2009, or (if later) 30 days after the renewal papers are issued.

If the claimant does not have final income figures for 2008/09 he or she can use estimates to meet the deadline. This might apply, for example, to a self-employed person who did not yet have final accounts for the 2008/09 tax year. There is no need to explain why an estimate has been used. However, note that you should then supply final figures by 31 January 2010.

Some claimants are not sent the Annual Declaration (‘auto-renewal’ cases). This will apply to those receiving just the full family element of CTC and those on nil awards (ie their circumstances qualify them for tax credits but they do not get any money as their income is too high). All that these claimants have to do is check the details on the Annual Review. If these are correct, no further action is needed and the claim is automatically renewed. However, if the details on the Annual Review are wrong, the claimant must tell HMRC.

How to renew

Claimants who are ‘reply required’ cases can fill in the Annual Declaration and post it back to HMRC.

As an alternative to sending back the paper form, it is possible to renew tax credit claims by telephone on HMRC’s tax credits Helpline (0845 300 3900). In the case of a joint claim, one of the claimants can give renewal details for both of them when renewing over the telephone.

It used to be possible to renew claims online, but the tax credits online service has been closed since December 2005 due to the well-publicised problems of fraud and we have no idea when it might re-open.

What happens if you miss 31 July?

Where claimants return their information by 31 July 2009, their claims for 2009/10 are renewed with effect from 6 April 2009.

Where claimants do not meet this deadline, the 2009/10 award will not be renewed and their tax credits payments will stop.

However, payments will not stop immediately. If papers are not returned by 31 July, HMRC will first of all send out a ‘Statement of Account’, and if the claimant completes the renewal within 30 days of the date of the Statement, their claim can be restored from 6 April 2009.

Even if that opportunity is missed, all is not lost, as the claim can be restored if the claimant shows ‘good cause’ for missing the first deadline and renews by 31 January 20010 at the latest.

But if this second date is missed, or if HMRC does not accept that there was good cause for missing the first one, the claimant will drop out of the renewals process and will have to make a new claim for 2009/10 which can only be backdated by a maximum of three months. As a result, the claimant will have to repay some or all of the provisional payments they have received between 6 April 2009 and the date the old claim was cancelled.

Penalties

Beware that as well as losing out on tax credits, failing to deal with the renewal papers can attract a penalty.

HMRC can charge a penalty of up to £300 for failure to submit an Annual Declaration, plus up to £60 per day if the failure continues after the initial penalty is imposed. These are not automatic penalties, and will not be charged if the person had a reasonable excuse for the delay and did comply as soon as that became possible.

There is also a penalty of £3,000 maximum for fraudulently or negligently making an incorrect statement in response to an end of year notice. This can apply not just to an incorrect Annual Declaration but also to the failure of someone who is an auto-renewal claimant to provide correct information when their Annual Review details are wrong. 

HMRC website

There is further useful information on the renewals page of the HMRC website.