• Once you have made your claim (see Making your claim ), you do not have to keep filling in new claim forms each year.



• HMRC will automatically send you a set of renewal papers, and so long as you do what you are asked within the time limits requested, the legislation treats you as having claimed again for the new tax year. This section describes how the renewal process works.



• The process aims to do two things: to reconcile what you are entitled to for the year just gone (the current year) with what you have been paid; and to renew your tax credit claim for the coming year.

The renewal process

• Your claim for the current year was based initially on your circumstances for that year, and your income for the year before (the previous year). One of the functions of the renewal process is to establish your income for the current year, and to review any changes of personal circumstances during it, so that your final entitlement for that year can be ascertained.



• Having established your income for the current year, it is used, together with your latest set of personal circumstances, to set your initial award for the coming year.



• So we have a three-year rolling programme. The initial claim for 2007/08 was based on circumstances current in 2007/08 and income for 2006/07. The renewal process for 2007/08 compares the actual income of 2007/08 with that for 2006/07 to fix the final entitlement for 2007/08, and uses the income figure for 2007/08 to fix the initial award for 2008/09.




• The comparison works like this (concentrating only on income and leaving aside changes in entitlement which are due to changes in circumstances):

  • If 2007/08 income is less than 2006/07 income, the final award is based on 2007/08 income and there is likely to be an underpayment.
  
  
  
  • If 2007/08 income is equal to or greater than 2006/07 income by £25,000 or less, the final award like the initial award is based on 2006/07 income and there is likely to be no change in the finalised award.
  
  
  
  • If 2007/08 income is greater than 2006/07 income by more than £25,000 the final award is based on 2007/08 income less £25,000 and there is likely to be an overpayment.
  
  
  
• So a tax credit award is made on an initial basis in the year of payment, then revised at the end of the year to produce in many cases an underpayment or overpayment.



• To see how an underpayment is made good, or an overpayment collected, see Overpayments and Underpayments.



• The rolling programme will be repeated in the renewal process after the end of 2008/09 and the finally ascertained income figure for 2008/09 will be used as the figure on which to base initial awards for 2009/10. The only big difference is that if income in 2007/08 is greater than income in 2006/07 by more than £25,000, there will be no change in the final entitlement for the earlier year. Prior to 2006/07 this figure was £2,500. See Doing the sums for a fuller analysis of the consequences of this change from £2,500 to £25,000.

The renewal packs

Claimants receive renewal packs which consist of:

1. Form 603R (annual review) plus, in many cases,



2. Form 603D (annual declaration)

plus guidance notes.

• Auto-renewals

  If you are receiving the full CTC family element only, or if you have a nil award because your income is too high, HMRC will send you TC603R only. If your personal circumstances have not changed and your income is within a prescribed range so that your award will remain the same, you need do nothing further. You are one of what HMRC describe as auto-renewal cases.

  Of course if your income or circumstances have changed so as to bring you outside the prescribed range, or to change your entitlement, you must respond.




• Reply required

  If the above does not apply to you - ie if you are on maximum credits, or on the 39% fast taper , or the 6.67% slow taper - you will receive both forms. You must reply to the TC603R and complete and return TC603D with details of your income for the 'current year'.

  If you have made more than one claim during the current year, eg because you started the year as a single claimant then became a joint claimant with a new partner, you must complete a set of forms for each claim, even if they each show the same information.

  It is vital to complete and return renewal papers when required to do so. Dissatisfaction with the system has led some people to deliberately refrain from renewing, with the result that payments made to them from the start of the new tax year are treated as overpayments. See further below (payments following the end of the current year).




• Payments following the end of the 'current year'

  So long as renewal papers are returned by the deadlines shown below, claims are treated as made for the new tax year and are backdated to 6 April.

  While the renewal process is going on, you will continue to be paid on the basis of your last known income and circumstances in the current year (ie the tax year just gone). These run-on payments are known technically as provisional payments.

  So provisional payments for 2008/09 reflect the income and circumstances last reported in 2007/08. It is important to complete the renewal forms quickly so as to re-establish the award for 2008/09 on the basis of the latest information and to get the rates and thresholds for that year.

  When the renewal process is complete, provisional payments are replaced by payments under an initial award for the new tax year.

  The deadline for return of renewal papers for 2007/08 is 31 July 2008. In 2004/05 the deadline was 30 September following the end of the year; in 2005/06 it was brought forward to 31 August 2006; it was then brought forward a further month in 2006/07 to 31 July. As far as we are aware it will remain at 31 July for 2007/08. The bringing forward of the renewal deadline is part of a series of measures intended to reduce the volume of overpayment in the system.

  If you cannot supply firm details of your 2007/08 income by 31 July 2008, for example if you are self-employed and are still waiting for your accounts to be finalised, an estimate is acceptable.

  The important thing is to return an estimate by that date. If you give an estimate, you should confirm it, or supply actual figures, by 31 January 2009 (which is also the filing deadline for self-assessment).

• Missing the deadline

  If you do not renew (either by sending them to HMRC or renewing via the telephone) by 31st July 2008 then your award may be terminated.

  Failure to renew means that no new claim is made for 2008/09, consequently any provisional payments received from April 2008 will become overpaid and HMRC will seek to recover them via direct recovery.

  In addition any other overpayments that were being recovered from your ongoing award will switch to direct recovery when your award is terminated for non-renewal.

  If HMRC terminate your award for failing to renew (and consequently stop all payments) regulations allow the claim to be restored providing you do renew within 30 days from the date on the notice telling you your payments are to be stopped (technically called the Statement of Account).

  Outside of this 30 day period, the claim can only be restored if you had ?good cause? for failing to renew, so long as you do return your renewal papers by the later deadline of 31 January 2009.

  In both cases, restoration means that HMRC treat your claim as being made from April 6th 2008.

  If your claim cannot be restored, all provisional payments paid to you from April 6th 2008 will be treated as overpaid, and you will have to make a fresh claim which can only be backdated by three months.

  As mentioned above, it is vital to return renewal papers when required to do so. You should particularly beware of using non-renewal as a tool to pull out of the tax credits system. The consequence of doing so is that your entitlement will cease as from the start of the tax year 2008/09, and therefore any payments received in that year to date will become overpaid. In addition you will no longer be able to repay any overpayment by reduction of your ongoing award, as there will be no ongoing award to reduce. Instead recovery will be commenced directly.

  To summarise:

  • Provisional payments are made at the start of 2008/09 while renewal papers are being sent out and dealt with. These are based on last known income and circumstances.
  • When papers are returned, claimants get an initial award and payments are brought up to date.
  • Papers must be returned by 31 July 2008 with either a statement of actual income for 2007/08 or an estimate.
  • If an estimate is given, this must be confirmed - or actual figures returned - by 31 January 2009.

Penalties

• In addition to the claw back of all provisional payments made to date, there may be financial penalties for not responding to a renewal notice, or for giving the wrong information in response to it. These are described here.

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