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Are you eligible to claim?
Joint claims
Being 'in the UK'
Right to reside
People subject to
immigration control
Are you eligible to claim?
- If you are 16 years of age or over, and in the UK
you are eligible to make
a claim to tax credits. If you are a single person or a lone parent, you must make a single
claim. If you are part of a couple, or a polygamous unit, you
must make a joint claim.
- Single people are not entitled to make joint claims, and couples or polygamous units are
not entitled to make single claims. If a single person becomes part of a couple or
polygamous unit, their award automatically ceases, and they must report their change of
status to HMRC within 1 month or face a penalty of up to £300. Similarly, if a couple or
polygamous unit ceases to be such (eg on separation or death), their award is automatically
brought to an end.
- An overpayment can accrue for each day that a single award continues to be paid when
the claimant has become part of a couple. For that reason it is very important to notify
HMRC promptly of any change of status.
- If you are a couple or a polygamous unit, both or all of you have to be in the
UK. A consequence of this is that if, for example, you are a couple, and one of you
goes abroad for longer than 8 or 12 weeks, you are deemed by tax credit law to have
separated, even if you have no intention of ending the relationship.
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Joint claims
- A joint claim for tax credits means that each of the claimants takes equal
responsibility for the accuracy of the information they give in support of the claim.
Similarly, if their award is overpaid, they are both equally liable to repay the
overpayment. This can sometimes have harsh results, as shown in the following
example.
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Example
David and Diana are a married couple with two children. David runs his
own business, and his affairs have just been investigated by HMRC. As a result of the
enquiry his business profits have been increased by 50%. He cannot afford to pay the revised
tax bill and becomes bankrupt.
Meanwhile Diana, who knows nothing of her husband's business affairs,
finds that their award of child tax credit is reduced significantly because the increase in
David's business profits for tax purposes is reflected in a corresponding increase in their
income for the purposes of their tax credit claim.
David, being bankrupt, cannot repay the ensuing tax credit overpayment,
so HMRC have the option to pursue Diana for the whole of the overpayment, even though it arose from
her husband's underdeclaration of his profits about which she knew nothing.
One piece of good news is that if HMRC imposes a penalty in respect of
the couple's underdeclaration of their tax credit income, Diana will not have to pay it as
she did not know, and could not reasonably be expected to have known, of her husband's
default. |
- Meaning of 'couple'
Until 5 December 2005, a 'couple' meant a married or unmarried couple. Since that date it now includes a same-sex couple. In turn, a same-sex couple includes two
people who are registered as civil partners of one another, or who are not civil partners
but are living together as if they were.
Members of a couple, whether married, unmarried or same-sex, are known in tax credits
parlance as 'partners'.
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Married couples
You are a married couple for tax credits purposes if you are:
- married to each other, AND
- neither separated under a court order, nor separated in circumstances in which the
separation is likely to be permanent.
Thus, a married couple who are judicially separated are treated as two single people for
tax credits. A married couple who are not judicially separated, but are in fact separated
and are unlikely to start living together again, are also treated as two single people for
tax credits.
Whether spouses are separated or not can give rise to difficult questions of
interpretation.
What if only one spouse wishes to separate?
The expression 'nor separated in circumstances where the separation is likely to be
permanent' comes from tax legislation, and can give rise to difficulties where one partner
wishes to separate and the other does not. The HMRC guidance holds that it is sufficient for
one member of the couple to intend to separate, even if he or she has not told the other
spouse about it. If HMRC is satisfied that 'there was at the time an intention on the part
of one or both of them to break the matrimonial ties by divorce or by remaining apart
permanently', that is generally enough to establish a separation.
What if the spouses are having to live apart, but there is no intention to end the
marriage?
HMRC will not regard separation because of illness, work, old age, immigration
difficulties or imprisonment as meaning that the couple are living apart for tax purposes
unless they intend to separate permanently. Where the parties are living apart because one
of them is in a hospital or a nursing home because of illness or old age, but there is no
intention to end the marriage, the Revenue will treat them as continuing to live together.
Particular rules apply where one of the spouses has
gone abroad temporarily .
What about short periods of separation?
Short periods of separation are generally ignored unless one or both of the parties
intended to live apart permanently at the time they separated.
Separated couples still living in the same house
It sometimes happens that a couple who are in fact separated are still out of necessity
living under the same roof, even sleeping in the same bed (if somewhat frostily). In such
cases HMRC says it will look for 'the same degree of separation within the household as
there would be if one of them had left home'. Factors HMRC will look at include:
- how the accommodation has been divided between the parties;
- arrangements for sharing the kitchen, bathroom and similar facilities;
- what services the parties provide for each other: whether they share meals, do their own
laundry, cooking, shopping and cleaning;
- whether they have separated their financial affairs, maintaining their own bank
accounts, and what are the arrangements for meeting household expenses;
- whether there is any contact between the parties, or how they avoid contact;
- whether maintenance is paid;
- where the parties are divorced when HMRC becomes involved, whether the grounds for
divorce included separation, and if so whether for two or five years.
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Unmarried couples
- An unmarried couple for tax credits is two people of the opposite sex living
together as if they were husband and wife. HMRC are always on the look out for people making
single claims when in fact they are living with someone. Sometimes people are reluctant to
claim as a couple and forego the higher credits they would receive as a single claimant; at
other times the claimants simply do not see themselves as 'living together' in any sense.
This may be where the parties do not expect their relationship to last; or they may simply
be flat- or house-sharing.
HMRC will generally rely on social security law in deciding whether in its view an
unmarried couple are living together as husband and wife. There are six tests, none of which
is conclusive by itself:
- whether the parties live together in the same household;
- whether the parties have a sexual relationship;
- whether the relationship is a stable one;
- what are the financial arrangements between the partners;
- whether there are children living with the couple;
- how the members of the couple hold themselves out in public.
All of these tests must be taken as a whole in deciding whether the couple is
cohabiting; the presence or absence of one or other factor does not decide the issue by
itself. For example:
- Living together in the same household - a couple living together solely for
mutual support, care and companionship, such as two relatives living together or two friends
sharing a house or flat, are probably not cohabiting;
- unmarried couples who intend to separate, but are living together under the same roof in
separate households, are not necessarily cohabiting;
- Presence or absence of a sexual relationship - if the parties do not have a
sexual relationship, they may nevertheless be cohabiting; and the presence of a sexual
relationship does not necessarily mean that they are cohabiting. It is just one of many
factors to take into account;
- Financial arrangements between the parties - the relationship of landlord or
landlady and lodger is apt to attract attention, but where the commercial arrangements are
genuine and arm's length there is less chance that the two will be deemed to be cohabiting;
- if income and expenditure is pooled and freely shared, or one party supports the other
financially, that will strongly indicate cohabitation.
A couple who normally live together but who are temporarily separated, but have no
intention to separate, can sometimes not be treated as cohabiting while they are temporarily
apart.
Illustration
A couple, one of whom lived in London, the other in Manchester, planned to live together in
London as soon as a suitable house could be found for the Manchester dweller who was on
kidney dialysis. The Social Security Commissioners decided that they were not living
together while they were temporarily separated.
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Same-sex couples
- As from 5 December 2005, same-sex couples are able to register as civil partners of
each other under the Civil Partnership Act 2004. For tax and tax credit purposes, as
for other purposes, civil partnerships will very much reflect the rights and obligations of
marriage.
- Since that date, same-sex couples - whether registered as civil partners of each other or
simply living together as if they were civil partners - have been treated as couples for tax credits
purposes. The consequences of this change are described below.
- Until 5 December 2005, same-sex couples had to make single claims. On that date, existing same-sex couples became couples for tax credits purposes by operation of law, and were no longer entitled to make single claims.
- This meant that any extant single claims made by members of same-sex couples ceased automatically on 5 December 2005. However, those who wished to claim as a couple could then do so. (See
Are you eligible to claim? on the nature of single and joint claims.)
- Since 5 December 2005, all claims made by members of same-sex couples have had to be joint claims.
- The change in the law on 5 December 2005 brought about change of circumstances in the case of a
same-sex couple: whereas before the change they were two single people for tax credits
purposes, after the change they became a couple. Because the entry into force of the Civil Partnership Act
constituted a change of circumstances for them, they were obliged to report their new status
to HMRC. In practice, it was generally sufficient for them to declare their status in their renewal papers for 2006/07.
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Polygamous units
- Like married and unmarried couples, polygamous units must make joint claims for tax
credits. That means that all the members of a polygamous unit are equally responsible for
the claim and for the accuracy of the information they give in support of it.
- For there to be a valid claim by a polygamous unit, all its members must be aged 16 or over, and in the UK .
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Being in the UK
- Tax credits may be claimed by persons who are in the United Kingdom.
The United Kingdom is England, Scotland, Wales, Northern Ireland, and adjacent islands, but
does not include the Isle of Man or the Channel Islands.
- The basic rule is that in order to be in the UK you need to be physically present in
the UK and ordinarily resident here throughout the period of an award. Additionally from 1 May 2004 for Child Tax Credit you must also have a right to reside – see Right to reside section.
There are exceptions:
- if you are temporarily absent from the UK,
- if you are a Crown servant posted overseas, or
- if you are entitled to CTC as an EU national in which case your entitlement is governed
by the relevant EC legislation and not by UK domestic law.
Ordinarily resident in the UK
HMRC guidance says that:
'a person is ordinarily resident if they are normally residing in the United
Kingdom (apart from temporary or occasional absences), and their residence here has been
adopted voluntarily and for settled purposes as part of the regular order of their life for
the time being.' - Persons who are deported, expelled, or otherwise removed by compulsion of law from
another country to the UK are treated as ordinarily resident here. This rule enables, for
example, people who are living and working abroad and are deported because of a worsening
political situation to claim tax credits when they arrive back in the UK.
- Workers from other member states of the European Union who are exercising their right to
work or reside in the UK are treated as ordinarily resident here.
- People who were claiming income support (IS) or income-based jobseeker's allowance
(IBJSA) before they were migrated to child tax credit are not required to be ordinarily
resident if they were exempt from the residence test for IS or IBJSA. This relaxation will
last for three years from the time when they are first awarded CTC. It will apply to certain
refugees or persons with exceptional leave to remain in the UK.
Temporarily absent from the UK
- You are still treated as ordinarily resident in the UK even during certain periods
in which you are 'temporarily absent'.
- Temporary absence means, for tax credits, any period of absence from the
UK which at the start is not expected to last more than 52 weeks.
Some periods of temporary absence are ignored, so that you will still be treated as
ordinarily resident in the UK and will still be able to claim tax credits during them. They
are:
- any period of up to 8 weeks;
- periods of up to 12 weeks if you are abroad
- to receive medical treatment for yourself, for your partner or for a child or young
person for whom you or your partner are responsible; or
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because of the death of your partner, or a child or relative of yours or your
partner's.
- Relative means brother, sister, ancestor or lineal descendant.
Temporary absence and childcare - an anomaly
The temporary absence rules were framed in order to help claimants who had to go abroad
for relatively short periods, so that the requirement to be physically present in the UK did
not interrupt their tax credit awards.
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Example
Ahmed and Shahida are a married couple with three children. Ahmed has to
go to Bangladesh for 10 weeks to sort out family arrangements following his father's death.
Because Ahmed's absence does not exceed 12 weeks, he and Shahida can continue to claim tax
credits as a couple throughout his absence. |
But if the claimant stays abroad for longer than the permitted 8 or 12 weeks, their
award comes to an end because they are no longer 'in the UK'. If the claim is a joint one,
the partner who remains in the UK must make a single claim once the 8 or 12 week permitted
period has expired.
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Example 2
Say that Ahmed stays abroad in Bangladesh for 15 weeks, not 10. Because there has been a
death in his family, Ahmed is allowed to stay away for up to 12 weeks without the joint
claim being interrupted. But for the remaining 3 weeks, Shahida has to make a new claim as a
lone parent. |
- Shahida in Example 2 may in fact be in a better position after the 12 weeks are up,
because she will get more credit as a single claimant than she and Ahmed got as joint
claimants.
- However, there is nasty trap if both members of the couple were in work and claiming the
childcare element of working tax credit (WTC). Because both members of a
couple normally have to be in work for the childcare element to be payable, that part of
their award is jeopardised if one member of the couple gives up work on going abroad.
- For the first 8 or 12 weeks of his absence, the joint award will continue, and
because both members of the couple are not in work, the childcare element will fall. It will
revive, however, if the partner who is abroad stays away for longer than 8 or 12 weeks and
the partner who remains in the UK makes a single claim as a lone parent. But for the first 8
or 12 weeks this loophole in the law can result in serious financial difficulties for the
couple.
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Example 3
When Ahmed goes to Bangladesh he gives up work. This means that he and
Shahida can no longer claim childcare element. Without childcare Shahida can no longer go
out to work and therefore can no longer claim WTC. The family's income is reduced to income
support, child benefit and CTC for the three children. If Ahmed stays abroad for 15 weeks,
Shahida can make a single claim to tax credits after 12 weeks, can go back to work and can
claim both CTC and WTC including the childcare element. |
- This trap is apt to affect people who have to go abroad for family reasons. It is
clearly an anomaly as the temporary absence rules were intended to help, not hinder, people
in getting tax credits. But because of the interaction with the childcare rules, people can
be deprived of support when they most need it, ie when one partner is no longer available to
provide a second income and share the burden of childcare.
- See our article here for
more information on this area.
Crown servants posted overseas and their partners
- If you are a Crown servant posted overseas, or the partner of one, you are treated
as being 'in the UK' while you are in your overseas post, so long as you were ordinarily resident in the UK before you
went overseas.
- This means that you can also be
temporarily absent from your overseas post on the same terms as a UK resident is able
to be temporarily absent from the UK.
Seafarers and offshore workers
- If you are a seafarer or offshore worker, you may still claim tax credits for
periods when you are absent from the UK, provided that they do not exceed 8 weeks taken
consecutively.
- The UK extends to the limits of its territorial waters, and you are 'in the UK' for as
long as you are working within those limits. Once you go outside those limits, however, your
8 weeks of permitted absence begins. The continental shelf is outside UK territorial waters.
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Example
Jake, who is married with children, works on an oil rig on the continental shelf. His
working pattern is six weeks on, six weeks off. Because his periods of absence do not exceed
six weeks consecutively, he is well within the 8 weeks of permitted absence and he and his
wife can continue to claim tax credits throughout. |
Of course, the childcare trap highlighted
above does not apply to the families of seafarers and offshore workers who are working while
they are absent from the UK.
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Right to reside test for child tax credit
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People subject to immigration control
- If you are a 'person subject to immigration control' the general rule is that you
are not entitled to claim tax credits.
To the general rule there are five exceptions, so that you can nevertheless claim tax
credits in the following circumstances:
- You were given leave to enter or remain in the UK on condition that someone else
undertook to be responsible for your maintenance and accommodation, and you have been in the
UK for at least five years.
- You were given leave to enter or remain in the UK on condition that someone else
undertook to be responsible for your maintenance and accommodation, and that person has
died.
- You have limited leave to enter or remain in the UK on condition that you do not have
recourse to public funds, and you have supported yourself throughout your period of limited
leave, but you are now temporarily without funds because your supply of funds from abroad
has been disrupted, and there is a reasonable expectation that it will be resumed. This
exception can only apply for a total of 42 days during any one period of limited leave,
including any extensions to that period.
- You are claiming working tax credit, you are a national of an EEA state or Croatia
or Turkey, and you are lawfully present in the UK.
- You are claiming
child tax credit, you are a national of an EU member state or Algeria, Morocco, Tunisia
or Turkey, and you are lawfully working in the UK. For this purpose you are treated as
lawfully working in the UK even if you have retired on reaching pension age, or have given
up work to look after children or because of pregnancy, widowhood, sickness or invalidity,
and accident at work or an industrial disease.
- EEA states are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania,
Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
and United Kingdom.
Couples
If you are part of a couple only one of whom is subject to immigration control, you can
still make a joint claim and you will be treated as though neither of you were so subject.
Accordingly, the second adult element in WTC will be available to the
couple.
This includes the case where one of you is subject to immigration control, and the other
- the one making the claim - is within one of the five exceptions listed above.
- But if the one making the claim is within exception 4 above, they can only claim WTC;
and similarly if they are within exception 5 they can only claim CTC. But since for the most
part the same states are listed under both exceptions, you are only restricted if you are
from Croatia - in which case you can only claim WTC, or from Algeria, Morocco or Tunisia -
in which case you can only claim CTC.
Polygamous units
Similarly, where one member of a polygamous unit is subject to immigration control and any
other member is not, or is within one of the exceptions, a joint claim can still be made by
the unit.
Children's tax credit
Even though as a person subject to immigration control you cannot claim tax credits, you
can still claim the children's tax credit for the tax year, if you were UK-resident and had a child or children in that year.
While the current tax credits are treated as public funds to which recourse may not be
had by people subject to immigration control, children's tax credit - an income tax
reduction - was an integral part of the tax system and claimable by anyone liable to pay
tax. That is the difference.
If you find yourself in this position, you should claim if you were
eligible for that year. You could be entitled to an amount of up to £10 a week. For 2002-03, you can also
claim up to an additional £10 a week 'baby rate' if your child was born in that year.
You can claim for 5 years and 10 months following the end of the tax year to which your claim relates. The claim window for 2001-2002 expired on 31 January 2008, however you can claim children's tax credit for 2002-03 until 31 January 2009.
Have a look here for more details of this tax allowance.
Asylum seekers
- If you are claiming asylum as a refugee, you are initially a person subject to immigration control
and therefore not entitled to tax credits.
- But if your claim for asylum is accepted and you are granted refugee status, providing you claim tax credits within three months of that date, it should automatically be backdated to the date on which you first claimed asylum. Any support you received from the Government during that time is deducted from your award. You can see some examples of backdating here .
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