The Low Incomes Tax Reform Group (LITRG) is reminding people who received tax credits during 2016/17, and who have received renewal forms from HMRC, to act by July 31 so that their payments do not stop.
Even if claimants, such as the self-employed, do not yet know their actual income for 2016/17 they must still submit an estimate by July 31. They have until January 31 2018 to either confirm or replace the estimate with the actual figures.
The renewals process does two things: it finalises the tax year that has just ended (2016/17) and it acts as a claim for the new tax year. Even if someone no longer wants to claim or thinks they are no longer entitled, if they claimed tax credits at all during the 2016/17 tax year, they will still receive papers and must follow HMRC’s instructions to complete and finalise their claim for 2016/17.
The only exception to this will be if a tax credit claimant moved to universal credit in 2016/17. In that case HMRC should have already finalised the 2016/17 claim and so no renewal pack will be issued.
Anne Fairpo, Chair of LITRG, said:
“Anyone who has not received their renewal pack by now should contact HMRC to chase it up.
“They must then carefully check the details on the renewal forms before making their declaration by July 31.
“If you miss the deadline, you could find yourself having to repay to HMRC all the tax credits you have received since the start of the tax year in April.”1
Some claimants will receive two forms (one with a red line across it) with accompanying guidance notes. These are known as ‘reply-required’ renewals because the claimant must respond to HMRC by July 31. Other claimants will receive just one form (with a black line across it) and these people (known as ‘auto-renewals’) will have their claim for 2016/17 automatically finalised and renewed for 2017/18 but they must still contact HMRC if something on the form is wrong or they have had a change of circumstances.
Anne Fairpo said:
“Whether you are required to reply or are an auto-renewal, it is important you take any necessary action as soon as possible so that HMRC know how much to pay you for the rest of the year. Even if you are no longer entitled to credits, you must still reply in order that HMRC can finalise your 2016/17 claim. If you have been paid too little for the previous tax year, the sooner you renew, the sooner you will receive that underpayment.”
Tax credits can be renewed online, via the HMRC App, by telephone or through the post. HMRC’s on-line service is found on the official GOV.UK website, either via their personal account (if they have set one up) or by going directly to the ‘Manage your tax credits’ service https://www.gov.uk/manage-your-tax-credits.2
Unfortunately, this time of the year sometimes sees an increase in fraudulent activity which often targets the most vulnerable taxpayers. Claimants should remember that tax credits can only be renewed using the official HMRC phone number, GOV.UK website, the HMRC app or by post to HMRC’s Tax Credit Office.
Anne Fairpo continued:
“It’s important to read the guidance notes carefully, particularly the parts that explain what counts as income for tax credits. Some of the renewal documents will show income figures that HMRC have obtained from their tax system but these may not include several deductions that are allowable for tax credit purposes3 and people should read the notes carefully to see if any of these deductions apply to them. If using the online system to renew, claimants should make sure they enter their income figure after any deductions and carefully follow the notes that come with the paper pack.”4
Notes for editors
1. Once the July 31 deadline passes, if a claimant has not renewed their claim, HMRC stop payments and issue a Statement of Account. If the claimant contacts HMRC within 30 days of the date on the Statement of Account, the renewal claim can be reinstated from April 6 2017. If they do not, then all payments made from April 6 will be owed back to HMRC and the claimant will need to make a new claim that can only be backdated up to one month. If the claimant has good cause for missing the July 31 deadline but replies by January 31 2018, then they may be able to have the claim reinstated from April 6.
2. Further information on renewing tax credits (including the requirements for doing so) and how the process for the renewal can be started can be found on GOV.UK. HMRC can be contacted either using the official HMRC online service via the GOV.UK website or the official phone number – 0345 300 3900. The HMRC App is free and can be downloaded from the App Store or Google Play store.
More information on the renewals process generally can be found on the LITRG website.
3. Employers and pension providers send data about earnings and pensions to HMRC for income tax and national insurance purposes throughout the year via the Real Time Information (RTI) system HMRC sometimes use this data in the tax credit renewals process. For those who receive auto-renewals, this data will be used to finalise the 2016/17 claim and renew the claim for 2017/18 unless the claimant tells HMRC that the figures are incorrect or that they have deductions to be made from those figures. For reply-required renewals, the data will be shown on the form as a guideline, but claimants should still check the figures carefully and, if they are incorrect or the claimant is entitled to make deductions from them, substitute the accurate 2016/17 information on the declaration form.
4. LITRG understands that the online system asks claimants to enter their earnings figure before anything is taken off – it does not explain that some deductions should be made from the figure on their P60. Claimants should therefore read the notes very carefully to ensure they are not missing out on extra tax credits. See here.
5. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)
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