As an employer, you may wonder why you need to worry about tax credits. It is true that since March 2006 employers have not had any direct role to play in tax credits. Prior to that date, working tax credit was paid through wages by employers, however since then payment has been made directly to claimants.
However, tax credits are still very important for low income workers, particularly those with disabilities. As well as meaning employees can receive additional money, tax credits can help employees with disabilities to remain in work when they may otherwise have been forced to leave.
Tax credits are made up of working tax credit (WTC) and child tax credit (CTC). WTC is paid to workers whether or not they have children and CTC is paid to people who are responsible for a child.
We are producing a factsheet which explains the basics of working tax credit and another which explains how the disability element of tax credits works.
The following section answers some of the questions that employers may have about tax credits for disabled employees.
My employee wants to work a different number of hours because it will help with tax credits. Why are hours important?
Qualification for working tax credit is based on age and number of hours worked. The criteria is:
| If you have children, you must be at least 16 years of age, and you must normally work at least 16 hours a week. If you don't have children, you must be at least 25 years of age, and you must normally work at least 30 hours a week. If you have a disability that puts you at a disadvantage in getting work, and you receive (or have recently received) certain disability benefits, you can qualify if you are aged at least 16 and normally work at least 16 hours a week. If you are aged 50 or over, are returning to work for at least 16 hours a week after having been out of work and receiving certain benefits - you can also qualify for WTC. If you are aged 60 or over, you can qualify if you normally work at least 16 hours a week |
As you can see, if you qualify for the disability element of tax credits you can qualify by working at least 16 hours instead of the usual 30. A disabled employee working 15 hours per week cannot claim tax credits, whereas by working 16 hours they may qualify.
Similarly, once you qualify by meeting this basic criteria, you can get extra tax credits (called the 30 hour element) if you work at least 30 hours per week.
Will I have to be involved if my employee wants to claim tax credits?
No. Your employee makes the claim for tax credits by completing a TC600 claim form. They will have to provide details about their work on the form and their PAYE number.
At any time when tax credits are in payment, HM Revenue and Customs may check your employees tax credits award. They may ask for things like a P60, P45, P11D.
In addition, HMRC can ask employers to provide evidence in relation to a tax credit claim. If this happens, HMRC will write to you stating what documents they need to see in relation to the employees claim.
I think one of my employees may be entitled to tax credits, how do they claim?
To claim, employees must fill in a TC600 claim form. This is available by calling the tax credit helpline on 0845 300 3900 (Textphone 0845 300 3909).
Previously it was possible to make claims online, however this was stopped a few years ago and is unlikely to be available any time soon.
My business is struggling and I need to make changes to either hours or pay. Will this affect my employee’s tax credits?
Any changes to hours or pay can impact on tax credits. It is therefore important to tell your employees to seek advice from a local advice agency as to how any potential change may impact on their tax credits.
Directgov have produced some guidance for employees who are laid off either temporarily or indefinitely on their website.
More information
You can find more detailed information about tax credits in our adviser section.
