| Tax Credits: Tax Credits Act 2002 and Later |
5 |
from betting (Table 4, paragraph 4). Paragraph 11—Property Income—means income from land in the UK. Paragraph 12 sets out the detailed rules for foreign income. Paragraphs 13–17 (Notional Income) list certain situations in which a person is treated as having income eg under the settlement rules in TA 1988, sections 660A or 660B. Apart from various anti-avoidance rules the list also includes the premium rules for sch A, sections 56 and 56A (deposits) section 249 (stock dividends) and section 421 (loans to participators by close company) paragraph 18 brings in sch D, case VI under the appropriate title of ‘notional income’ paragraph 19 provides for further disregard rules including a payment made under a scheme to assist persons to visit others in prison. |
Thirdly, the SI ends with some very interesting anti-avoidance rules. Paragraph 15 directs that where a claimant has deprived himself of income for the purpose of securing entitlement to or increasing the amount of a tax credit he is to be treated as having that income. Paragraph 17 provides that where a claimant provides services to others for less than full earnings he is treated as having a reasonable amount of income—if the other person has the means of paying. Here there are exceptions for voluntary work. Paragraph 16 is wider than just anti-avoidance and applies where the claimant can apply for income. If that income would become available upon making that application he is generally treated as if he had got that income. There are exceptions for certain types of trust arrangements, eg pensions. |
9.4A.6 Administration |
Payments are made by the Board under Tax Credits (Payments by the Board) Regulations [2002] SI 2002/2173 or by employers under the Tax Credits (Payments by the Employer) Regulations [2002] SI 2002/2172. Under these rules payment of CTC and the child care element of WTC are paid direct to the carer. |
The credits must be claimed, a process which involve completing a complicated form and then waiting for the Revenue to determine how much one should get. The Tax Credits (Claims and Notifications) Regulations [2002] SI 2002/2014. |
Claims made before the start of the year take effect for the year; claims made during the year apply for that year and the next one. (Act section 5). The previous year’s income is taken as a starting point. Increases in the current year only become relevant if they exceed £2,500 a year. |
9A.4.7 Issues: A Reform as Controversial
as This Raises Policy Problems. The Governemt Case is Out at pp 104–112
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Taper: The effect of the tapers can be seen in the following figures. If the person is not yet paying income tax or NICs, the taper begins at 37%. This rises to 58% if the tax person is paying income tax at 10% and NICs at 11%; this rises to 70% as the income tax rises from 10% to 22%. More severe rates of taper will apply if the person is also receiving housing benefit or council tax benefit of both and those benefits are also being tapered off. Viewing these rates as compared with the pre 1998 situation in the text one will find that while many families face severe rates of taper. The numbers who used to face rates between 70% and 90% have now been moved down to 60–70%. Treasury figures (Budget Report 2003, Table 4.2, p 91, which take account not just of tax credits but also by Housing Benefit and Council Tax Benefit, figures suggest that before the 1998 budget, 5,000 families faced rates over 100%; after 6 April 2003 there should be none. The comparative figures for 90% are 130,000 vs 30,000; for 80% are 300,000 vs 135,000; for 70% are 740,000 and 185,000 while for 60% the figures are 760,000 vs 1,490,000. Thus the marginal rates have been shifted downwards for many families. |
Cost: The Treasury Document on the Budget 2003 (HC 500) estimates the costs of children’s tax credit as £2,300 m and WFTC £6,300 m in 2002—03 (p 206). The same document p 20 suggests that a further 2,5000 n is being made availabe to fund the new system. |