Tax credit claimants working reduced hours urged to check if they need to notify HMRC

The Low Incomes Tax Reform Group (LITRG) is urging working tax credit claimants to check their position carefully after the ending of certain coronavirus tax credit easements. These special rules ended from 1 October for some people.

LITRG is urging HMRC to confirm they will not charge penalties and will write off any overpayments that result from the incomplete guidance.

In response to the coronavirus pandemic, HMRC introduced easements for tax credit claimants. This included special rules for working tax credit claimants who could not work their normal hours because of the impacts of the pandemic – essentially allowing their tax credits to continue uninterrupted by treating them as working the same hours as they were before the pandemic.

For people in this situation, the new rules mean that the point at which a claimant needs to notify HMRC about their situation depends on whether they expect their hours to return to the level needed to claim working tax credit by 25 November 2021.

If they do expect to reach the required level by 25 November, they do not need to do anything immediately, and only need to tell HMRC on 25 November if their hours do not return to the required level.

However, at any point from 1 October 2021, if they do not expect their hours to reach the required level by 25 November 2021, even if the situation is temporary, they must inform HMRC immediately as HMRC is treating that as a permanent change. Their working tax credits will then continue for a further four weeks before ending.

“The tax credits easements introduced due to the pandemic were welcome for claimants. It is unfortunate but not unexpected that the rules for the ending of the working hours easement are so complex: HMRC are attempting to provide a series of run-ons to avoid a ‘cliff-edge’ end to entitlement for those still struggling to resume their normal hours,” Victoria Todd, head of LITRG, said.

“We are urging claimants to check LITRG’s website guidance to understand the full rules and check whether they need to report any changes to HMRC before November 25.”