Child tax credit

Introduction

Elements and maximum rate of child tax credit

Being 'responsible for' a child

What is a 'child or young person'?

When is a child 'disabled' or 'severely disabled'?

Introduction

You can claim child tax credit (CTC) if you are responsible for one or more children or qualifying young persons. It is immaterial whether you are in work. You can be a lone parent or part of a couple - married or unmarried including same sex couples. If you are part of a couple, it is unnecessary for both of you to be responsible for the child or young person, provided at least one of you is.

Child tax credit replaced payments for children through means tested benefits such as income support (IS) and income based job seekers allowance (IB-JSA). New claimants of these means tested benefits will be directed to claim CTC for their children.

However there are still a small number of existing benefit claimants who still receive payments for their children via DWP benefits rather than tax credits. Under the Labour administration it was the Government's intention to transfer these people on to child tax credit eventually. Although there is no absolute date set for the transfer, new regulations provide for the extension of the period during which the DWP can continue to pay child elements of IS and IB-JSA to 31 December 2012. It may be that the Coalition Government will leave the situation as it is until the Universal Credit is introduced. This is scheduled to happen in October 2013.

The terms in italics in the first paragraph above are defined very precisely as follows:

• In simple terms, a child is under the age of 16; between their 16th birthday and the following 31 August (or from 31 August if their 16th birthday falls on that date), they will be counted as a ‘qualifying young person’ without the need to be in full time education or training. To continue to be treated as a young person after this date, they must be under 20 and in full time education or training. See further below What is a 'child or young person'? .
• You are responsible for a child or young person if the child or young person normally lives with you. There are rules for interpreting the normally living with requirement, and for deciding between two or more individuals, couples, etc, when the child can be said to be normally living with more than one. For further information see Being 'responsible for' a child .

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Elements and maximum rate of child tax credit

There are two elements to child tax credit (CTC): the family element, and the individual element. The individual element is payable at different rates, depending on the numbers of children and whether they are disabled or severely disabled (again, as defined - see When is a child 'disabled' or 'severely disabled'?).

Element - Family

• Normal case
  2012/13 maximum annual rate £545

Element - Individual

• For each child or young person
  2012/13 maximum annual rate £2,690
• For each disabled child or young person
  2012/13 maximum annual rate an additional £2,950 (a total of £5,640)
• For each severely disabled child or young person
  2012/13 maximum annual rate an additional £1,190 (a total of £6,830)

The family element of £545 goes to every CTC recipient. Prior to 6 April 2011, a baby element was paid for a child in his or her first year which was an additional £545. The baby element was removed from 6 April 2011 for 2011/12 even if you had only received it for a short time in 2010/11.

For each child or young person in the family, a maximum of £2,690 is payable in addition to the family element. If the child is disabled, that maximum amount increases by £2,950 to £5,640. An additional £1,190 is payable on top of the £5,640 if the child is severely disabled.

Death of child

If your child dies, you will continue to be entitled to CTC for them for eight weeks after their death, or (if sooner) the date on which they would have reached the age of 19.

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Being 'responsible for' a child

You are 'responsible for' a child or young person in the following circumstances:

• the child or young person 'normally lives with you' (the 'normally living with' test - see below);
• if the child or young person normally lives both with you and with another person (for example their other parent from whom you are separated or divorced), you have 'main responsibility' for them ('the main responsibility test' - see below); and

the child or young person is not:

• being looked after by the local authority, or
• in custody, or
• receiving tax credits for a child of their own, or
• receiving incapacity benefit for himself or herself (see 'other rules about responsibility for a child' below) or receiving working tax credit in their own right.

The normally living with test

A child or young person normally lives with you if he or she 'regularly, usually, typically lives with' you, barring occasional or temporary absences.

The main responsibility test

This is the test applied when there are competing claims, and you and another person both have grounds for saying that the child or young person 'normally lives with' you. In such cases you should decide between you, and indicate on the claim form TC600, which of you has the main responsibility; but if you cannot agree, HMRC will make the decision.

When deciding on main responsibility, the factors HMRC take into account include the following:

• who the child normally lives with and where they keep the majority of their belongings such as clothes and toys;
• who is responsible for the day to day spending for the child such as buying clothes and food and providing pocket money;
• who is the main contact for the school, nursery or childcare provider;
• who is responsible for the health care and hygiene of the child such as making appointments with the doctor or dentist, or doing the child's laundry;
• what is the registered address for contact for the school, nursery or childcare provider, or for health care;
• who has legal custody of the child.

Example Max and Maxine are separated. Their son Midge lives with Maxine during the week and stays with Max at weekends. Which of the two can claim CTC? They are both eligible to claim CTC for Midge because the boy 'normally lives with' each of them at different times of the week. They cannot both claim the credit, but Max and Maxine can elect which of them should receive it. If Max and Maxine cannot agree between them, HMRC will apply the 'main responsibility test' - look at who takes main responsibility for Midge's welfare etc, applying the tests set out above - and decide accordingly.

Other rules about responsibility for a child

You cannot claim to be responsible for a child of yours who is:

1. in care; or
2. placed with others for fostering or adoption; or
3. serving a custodial sentence for life, for an unlimited time, or for a fixed term of longer than four months, or detained at Her Majesty's pleasure;
4. 16 or over and being awarded child tax credit for a child of his or her own; or
5. 16 or over and in receipt of incapacity benefit or contributory employment and support allowance for himself or herself.
6. 16 or over and awarded working tax credit in his or her own right.
7. The qualifying young person has a spouse or civil partner or lives with a partner, and that spouse/partner is not in full time education or approved training.
8. The responsible person is the spouse, civil partner or partner of a qualifying young person with whom they are living.

(Note: These latter two points do not apply to people in receipt of CTC for qualifying young people living with a partner prior to 1st September 2008.)

Care and adoption etc

The reasoning behind 1 and 2 above is that the child or young person is being 'looked after' by the local authority, or otherwise maintained out of public funds. It follows that carers and adopters of children who are not maintained wholly or partly out of local authority or other public funds can claim to be responsible for the child in their care.

If a child is living with you under the terms of a residence order, or special guardianship order, or you have adopted the child,or (in Scotland) you are a kinship carer, you are treated as responsible for the child, even if the local authority is making you a discretionary payment, because the child is no longer being 'looked after' by the local authority.

Where your child has a child of his/her own

You cannot claim to be responsible for a child of yours who has a child of their own and your child is already claiming CTC for their child. But if your child is not claiming CTC for their child, you will be treated as responsible for both of them, and therefore entitled to receive CTC for both.

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What is a 'child or young person'?

You can claim CTC for a young person for whom you are responsible from their 16th birthday until the following 31 August (or from 31 August if their 16th birthday falls on that date). During this period there is no requirement that the young person be in full time education or training. However, you will no longer be able to claim CTC during this time if the young person becomes engaged in remunerative work (having ceased full-time education or approved training) or claims income-based job seeker’s allowance, income-related employment and support allowance or income support in their own right.

From 1 September following the young person’s 16th birthday you can claim CTC for a young person for whom you are responsible and who is under 20 and in full time education or approved training.

The upper age limit was increased from 19 to 20 with effect from 6 April 2006 to enable a young person who has started a course before their 19th birthday to continue until they reach 20 without their parents or carers losing child tax credit. But young persons who attained the age of 19 before 6 April 2006 do not qualify.

To be in full-time education, the young person must be receiving full-time, non-advanced education. They must be studying at a school or college, or elsewhere providing they were studying there prior to their 16th birthday and it is approved by HMRC. The course of study must also not be one that the young person is pursuing because of his or her employment

Full-time study means on average not less than 12 hours a week spent during term-time in tuition, supervised study, exams and practical work. The 12 hours includes gaps between courses, but not meal breaks or periods of unsupervised study.

Non-advanced education includes an ordinary national diploma; a national diploma or national certificate of Edexcel; GCSEs; GCE advanced level (AS and A2 levels); Scottish national qualifications at advanced or higher level - any qualifications being above that level (eg degree) being designated 'advanced' education.

Approved training is defined by reference to various training programmes arranged by government. These are 'Entry to Employment' or 'Programme Led Apprenticeships' in England; 'Skillbuild', 'Skillbuild+' or 'Foundation Modern Apprenticeships' in Wales; 'Get Ready for Work', 'Skillseekers' or 'Modern Apprenticeships' in Scotland; or 'Access' or ’Training for Success: Professional and Technical Training’ in Northern Ireland.

If training is provided to the young person because of their employment, it cannot count as approved training.

A young person also qualifies if:

• they are under 18;
• they have left full-time education or approved training;
• they have notified HMRC within 3 months of the ‘relevant leaving date’ (the date the young person left full time education or approved training) that they have registered for work or training with the Careers Service, Connexions Service, Ministry of Defence, Department for Employment and Learning or any corresponding body in another Member State;
• no more than 20 weeks has passed since the relevant leaving date; and
• during that time they have not engaged in remunerative work or received income support or income-based jobseeker's allowance. Remunerative work in that context means at least 24 hours work a week done for or in expectation of payment; and does not include work done for a charity, as a carer, in pursuance of an Intensive Activity Programme or a sports award, or as a participant in an Employment Zone programme.

Finally, it doesn't matter if a young person's course of full-time education or approved training is interrupted for up to 6 months because of their illness or disability, to the extent that HMRC consider it reasonable, or for any other cause that HMRC consider to be reasonable.

Cases where you cannot continue to claim for a young person

If a young person leaves full-time education or enrols on a training course, then takes up paid work for 24 hours a week or more, you cannot normally continue to claim CTC for them for as long as they are engaged in that work. However, there are exceptions to this rule where the young person's work is:

• for a charity;
• as a carer;
• in pursuance of an Intensive Activity Programme or a sports award;
• as a participant in an Employment Zone programme.
  

Nor can you continue to claim for a young person who becomes entitled in their own right to income support or income-based jobseeker's allowance or income-related employment and support allowance. (As stated above, you are also no longer treated as responsible for a child or young person who claims contribution-based employment support allowance or incapacity benefit in their own right.)

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When is a child disabled or severely disabled?

A child or young person is disabled if:

• disability living allowance (DLA) is payable for them, or is normally payable but has ceased because they are a patient in hospital; or
• they are registered (or certified) as blind, or have come off the blind register in the last 28 weeks immediately preceding the date of claim.

They are severely disabled if the care component of DLA is payable for them at the highest rate, or is abated while they are in hospital.

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