Conflicts between council tax and tax credits

Published on 6 April 2006

The LITRG has called for the problematic interactions between Council Tax/Council Tax Benefit and Working Tax Credit to be given proper consideration. The Group has made this call in its responses to the Lyons Inquiry Interim Report and Consultation Paper issued in December 2005.

As part of its remit the Lyons Inquiry is looking at ways to reform Council Tax Benefit to improve the very poor take-up of the benefit and also to use it as a way of providing greater fairness within the Council Tax system.

This review and the anticipated reform of Council Tax Benefit provides an opportunity to deal with anomalies and inconsistencies with the tax credits system, many of which stem from including working tax credit as income in calculating Council Tax Benefit entitlement.

Highlighted in LITRG’s representations are examples of the disincentive to work for tax credit claimants who also receive Council Tax Benefit. Claimants can find themselves using their working tax credit to pay Council Tax that had previously been covered by Council Tax Benefit, or being unable to obtain additional Council Tax Benefit where their tax credits are subject to claw back.

The Lyons Inquiry is due to present its final report later this year.

You can access the submission here.

Contact Name: Robin Williamson/Jan Tish (Tel: 0844 579 6700, Fax: 0844 579 6701)