Tax Credits

Tax Credit Update
Following the 2005 budget announcement back in March, all payments of the Working Tax Credit (WTC) via the employer has now been phased out from November 2005 and replaced by direct payment from HMRC. As part of the Government's commitment to remove regulatory burdens on business, HM Revenue & Customs (HMRC) will now be paying all claimants directly from April.

HMRC has sent a letter to each employer during September 2005 explaining the process. Employers were required to write to their employees before 7 November 2005 with details of the phasing out process. This letter will reinforce a letter that HMRC will be sending to all affected employees. The penalty is £300 per letter that is not sent plus a £60 a day fine until the situation is remedied. 

Employers should have received a final 'stop notice' for each of their employees in receipt of Working Tax Credit. If they haven't, they should contact HMRC immediately to arrange a stop date. On no account should employers make Working Tax Credit payments to employees after 31 March 2006. If employers' payroll arrangements mean they would not normally pay Working Tax Credit for March until April, they can contact HMRC now to arrange an earlier stop date. Employers needing help or more information can telephone 08457 143 143.

If you are a registered client you can Visit our Tax Credit support page for the latest information. Non clients should visit this link>

Employees can apply for two tax credits, Child Tax Credit and Working Tax Credit - which are payable.  Working Tax Credit is designed for individuals who are employed or self-employed  who:-

• usually work 16 hours or more a week
• are paid for that work, and
• expect to work for at least 4 weeks

and who are

• aged 16 or over and responsible for at least one child, or
• aged 16 or over and disabled, or
• aged 25 or over and usually work at least 30 hours a week
• A citizen of another country in the European Economic Area (EEA) work in the United Kingdom,

Working Tax Credit is paid to the employee who is working 16 hours or more a week.

Couples, if both the employee and their partner are working 16 hours or more a week, then they decide which one of them will receive it.

Child Tax Credit is for people who are responsible for at least one child or qualifying young person. Child Tax Credit is paid direct to the person who is mainly responsible for caring for the child. If you or your employee is a lone parent the payment will be made.

Employees are not entitled to Working Tax Credit if they are unemployed. Employees may qualify for help towards the costs of childcare. The amount of tax credits payable will depend on your employees annual income which are checked every 6 months.  Currently, an earnings enquiry form is normally sent to us from the Tax credits department  requesting the employees salary and weekly contracted hours over the past 3 months.  Any adjustments on the tax credits is then made on the following TCO1 form.