| Tax Credits: Tax Credits Act 2002 and Later |
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9.4A.2 Child Tax Credit |
This is paid to a person who has responsibility for the child; it is paid direct rather than through the wage packet. Responsibility: section 8 provides that a person may claim the credit if responsible for one or more children (ie below age 16) or qualifying young persons (ie under 19 if in full time secondary education)1 ; this is available whether or not the claimant is in work. (From here on the word ‘child’ will be used to cover this group ie a child or other qualifying young person) Entitlement runs until 30 September following the 16th birthday. The regulations supply rules for determining when a person has responsibility; these rules begin with a test based onto whom the child normally lives, provide for competing claims and for an election to choose which is the main carer-but not to split the sum. No entitlement can arise for a child in prison or certain types of care. Entitlement runs for 8 weeks after the death of a child. These rules are contained in The Child Tax Credit Regulations [2002] SI 2002/2007 which also include definitions for disability and severe disability. |
A person not responsible in this way can also claim a credit for a child or qualifying young person 8(2). |
The rates to be described are summarised in Table A.5 of the Budget Report HC 500 (p 188) section 9 contains rules for the maximum rate which is built up form various elements. So there is (1) a family element of £545 (or £10.48 a week), (2) an extra family element also of £545 for the year following the birth of a child; and (3) an individual element for each child £1,445 (£27.78 per week). This means that a family with three children can look at a child tax credit of £4,880 (£93.85 per week); this rises to £5,425 (£104.32 per week). if one child qualifies as a new arrival under (2). If the child is disabled the payments under (3) is £3,600 which is increased to £4,465 if the child is seriously disabled. |
Taper: While section 9 and its associated SI set out the maximum credit, sections 7(1) and 13(1) state that the full amount is only available where the person’s relevant income does not exceed a certain amount which SI 2002/2008 paragraph 3(3) sets at £13,230. Section 7 then provides that the credit is to be reduced as the relevant income rises; and section 13(2) contains the relevant regulation—making power. SI 2002/2008 contains the eleven steps by which this is done. Step 5 begins the process by which the credit is tapered away at 37%; this process is applied to all elements except the family element (ie 1 and 2 above). Step 8 starts the process by which the family element is reduced at the rate of 6.67% when the relevant income reaches £50,000). |
9.4A.3 The Working Tax Credit |
Entitlement: Section 10 provides that this credit arises is the claimant is in qualifying remunerative work. This is elaborately defined in SI 2002/2005, paragraph 4. The person must work for not less than 16 h a week age 16–24 or 30 h if 25 or older; further rules apply if the claimant is 50 or older, see reg 18 over 50. Special rules (paragraphs 5–8) are made for maternity leave, for sick pay periods, for seasonal workers, for workers or on strike or under suspension and for gaps between jobs; a person receiving sum in lieu of notice is not treated as being in employment for that period. |
The Act includes provision of a basic element and a disability element leaving it to Regulations to add other elements sections 11(5) and (6)—which they do. In calculating rate the maximum annual rate is made up as follows (Reg 20(1) and schedule 2): (1) Basic element £1,525; (2) Disability element £2,040; (3) 30 h element £620; (4) Second adult element £1,500; (5) Lone parent element £1,500; (6) Severe disability element £865; (7) 50 plus element qualifying remunerative work for at least 16 h but less than 30 h per week is £1,045 which rises to £1,565 when the work reaches 30 h per week. |