This section deals with information which it is obligatory to tell HMRC, the dates by which the report should be made, and the penalties for failure to do so.

Changes of circumstances which it is obligatory to report

• While an award is calculated with reference to a claimant's income from tax year to tax year, it is based on the circumstances of the claimant for the current year. It is the claimant's circumstances that are reflected in the elements of each credit. Accordingly, HMRC make reporting of certain changes obligatory.




• It has always been obligatory to report the following changes of circumstances to HMRC:

  • any change in the composition of the adult members of the claimant household. That is: a single person starting to live with someone; a couple splitting up, or one member dying;
  • the claimant, or one member of a claimant couple, going abroad for more than 8 or 12 weeks;
  • childcare costs dropping by £10 a week or more on average for four weeks in a row, or ceasing altogether.

• From 01 November 2006 onwards, it is also obligatory to report to HMRC, in broad terms:
  
  
  • If you have been entitled to WTC because you or your partner work at least 16 hours a week, but your normal weekly working hours have now fallen below 16 hours a week;
  • If you have been entitled to WTC because you or your partner, or you and your partner between you, have been working at least 30 hours a week, but your normal working hours have now fallen below 30 hours a week;
  • If you have been entitled to the 30-hour element of WTC because you or your partner, or you and your partner between you, have been working at least 30 hours a week, but your normal working hours have now fallen below 30 hours a week;
  • If you or your partner ceases to be responsible for a child or qualifying young person so that your CTC entitlement in respect of them stops;
  • If you have reported to the Tax Credit Office that your child is entering further education or approved training, and claimed CTC for them beyond their 16th birthday on that basis, but plans have changed so that they are no longer going into further education or approved training;
  • Your child dies.


• Not notifying such changes within the time limit can give rise to a penalty of up to £300, though we understand that HMRC will not penalise failure to notify the death of a child. The time limit is one month from the date the change happened, or from when you first became aware that it had happened.



• How normal working hours are determined is a vexed question if you are an agency worker, or in any other situation where it is impossible to predict from week to week what your working hours will be. Hitherto HMRC have offered no guidance, and the helpline has been known to offer different advice to callers, sometimes telling them to compute their average working hours over four weeks, sometimes over a whole year. Consistent and coherent guidance and advice is called for.

Change in reporting time limit from 06 April 2007

As noted above the changes listed must be reported to HMRC within one month from the date the change happened, or if later, the date you became aware of the change.

Prior to 06 April 2007 the length of time allowed for claimants to report those obligatory changes of circumstances was three months. Guidance is awaited on the many difficulties of this change to the reporting time limit, in particular;

• household changes when it is sometimes not clear whether or precisely when a partner has left permanently - see Who can claim - joint claims,
• decreases in average childcare costs, when it is necessary to compute the average over four weeks - see WTC - childcare element, and
• going abroad, when it is not always clear at the outset whether the 8 or 12 week time limit will apply - see Who can claim - temporary absence from the UK.

If you do not find out about the change in circumstances until after it has happened, the one-month time limit starts from the point at which you first become aware of it.

Other changes which it is advisable to report

• It is advisable to report other changes which increase entitlement within three months in order to secure the higher credit, as increases in awards can only be backdated by up to three months in most cases. (The only exception to this is for the disability element. Have a look at Making a claim - backdating). There would be no other penalty if the change was notified more than three months later - there would just be the loss of credits that might have been due for the period before the three-month backdating time limit.



• Changes of circumstances which decrease entitlement are backdated to the date of change and will often result in an overpayment of tax credits.

When should I notify changes of income?

• There is no legal obligation to report changes in income when they happen, although they must be reported accurately on the annual declaration which is sent to claimants after the end of the tax year.




• In 2006/07 and later years, if your income goes up by no more than £25,000 over the level of your income for the previous tax year - there is no immediate effect on your tax credit entitlement. So if you have chosen not to tell the Tax Credit Office about your increase in income, it will not be reflected in the provisional award. The consequence could be an overpayment which you will have to repay later in the year when your renewal claim is processed. But two points should be borne in mind:

  1. The £25,000 disregard only operates during the tax year in which the increase in income happens; tax credits for the following year are based initially on the actual income of the year before; and
  2. The run-on payments made in the early part of a tax year before a claim is formally renewed for that year (known as 'provisional payments') are based upon the last known income and circumstances of the claimant. So if the claimant has chosen not to tell the Tax Credit Office about their increase in income, it will not be reflected in their provisional award. The consequence could be an overpayment which they will have to repay later in the year when their renewal claim is processed.

Reporting change of employer or childcare provider

• HMRC has the right to require information or evidence to substantiate a claim from a claimant's employer or childcare provider. For this reason any change of employer or childcare provider should always be reported to TCO (Tax Credit Office).

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