Tax Credits Act 2002

Part 1 — Tax credits

General

Decisions on discovery

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• (1) This Act makes provision for—

• (a) a tax credit to be known as child tax credit, and

• (b) a tax credit to be known as working tax credit.

• (2) In this Act references to a tax credit are to either of those tax credits and references to tax credits are to both of them.

• (3) The following (which are superseded by tax credits) are abolished—

• (a) children’s tax credit under section 257AA of the Income and Corporation Taxes Act 1988 (c. 1),

• (b) working families’ tax credit,

• (c) disabled person’s tax credit,

• (d) the amounts which, in relation to income support and income-based jobseeker’s allowance, are prescribed as part of the applicable amount in respect of a child or young person, the family premium, the enhanced disability premium in respect of a child or young person and the disabled child premium,

• (e) increases in benefits in respect of children under sections 80 and 90 of the Social Security Contributions and Benefits Act 1992 (c. 4) and sections 80 and 90 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), and

• (f) the employment credit under the schemes under section 2(2) of the Employment and Training Act 1973 (c. 50) and section 1 of the Employment and Training Act (Northern Ireland) 1950 (c. 29 (N.I.)) known as “New Deal 50plus”.

Education Reform (Northern Ireland) Order 1989 (S.I. 1989/2406 (N.I. 20))

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The Commissioners for Her Majesty’s Revenue and Customs shall be responsible for the payment and management of tax credits.

Social Security Act 1998 (c. 14)

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• (1) Entitlement to a tax credit for the whole or part of a tax year is dependent on the making of a claim for it.

• (2) Where the Board—

• (a) decide under section 14 not to make an award of a tax credit on a claim, or

• (b) decide under section 16 to terminate an award of a tax credit made on a claim,

(subject to any appeal) any entitlement, or subsequent entitlement, to the tax credit for any part of the same tax year is dependent on the making of a new claim.

• (3) A claim for a tax credit may be made—

• (a) jointly by the members of a couple both of whom are aged at least sixteen and are in the United Kingdom, or

• (b) by a person who is aged at least sixteen and is in the United Kingdom but is not entitled to make a claim under paragraph (a) (jointly with another).

• (4) Entitlement to a tax credit pursuant to a claim ceases—

• (a) in the case of a joint claim, if the persons by whom it was made could no longer jointly make a joint claim, and

• (b) in the case of a single claim, if the person by whom it was made could no longer make a single claim.

• (5A) In this Part “ couple ” means—

• (a) two people who are married to, or civil partners of, each other and are neither—

• (i) separated under a court order, nor

• (ii) separated in circumstances in which the separation is likely to be permanent, or

• (b) two people who are not married to, or civil partners of, each other but are living together as if they were a married couple or civil partners.

• (7) Circumstances may be prescribed in which a person is to be treated for the purposes of this Part as being, or as not being, in the United Kingdom.

• (8) In this Part—

• “joint claim” means a claim under paragraph (a) of subsection (3), and

• “single claim” means a claim under paragraph (b) of that subsection.

Claims: supplementary

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• (1) Regulations may—

• (a) require a claim for a tax credit to be made in a prescribed manner and within a prescribed time,

• (b) provide for a claim for a tax credit made in prescribed circumstances to be treated as having been made on a prescribed date earlier or later than that on which it is made,

• (c) provide that, in prescribed circumstances, a claim for a tax credit may be made for a period wholly or partly after the date on which it is made,

• (d) provide that, in prescribed circumstances, an award on a claim for a tax credit may be made subject to the condition that the requirements for entitlement are satisfied at a prescribed time,

• (e) provide for a claim for a tax credit to be made or proceeded with in the name of a person who has died,

• (f) provide that, in prescribed circumstances, one person may act for another in making a claim for a tax credit,

• (g) provide that, in prescribed circumstances, a claim for a tax credit made by one member of a couple is to be treated as also made by the other member of the couple, and

• (h) provide that a claim for a tax credit is to be treated as made by a person or persons in such other circumstances as may be prescribed.

• (2) The Board may supply to a person who has made a claim for a tax credit (whether or not jointly with another)—

• (a) any information relating to the claim, to an award made on the claim or to any change of circumstances relevant to the claim or such an award,

• (b) any communication made or received relating to such an award or any such change of circumstances, and

• (c) any other information which is relevant to any entitlement to tax credits pursuant to the claim or any such change of circumstances or which appeared to be so relevant at the time the information was supplied.

Period of awards

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• (1) Where a tax credit is claimed for a tax year by making a claim before the tax year begins, any award of the tax credit on the claim is for the whole of the tax year.

• (2) An award on any other claim for a tax credit is for the period beginning with the date on which the claim is made and ending at the end of the tax year in which that date falls.

• (3) Subsections (1) and (2) are subject to any decision by the Board under section 16 to terminate an award.

Notifications of changes of circumstances

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• (1) Regulations may provide that any change of circumstances of a prescribed description which may increase the maximum rate at which a person or persons may be entitled to a tax credit is to do so only if notification of it has been given.

• (2) Regulations under subsection (1) may—

• (a) provide for notification of a change of circumstances given in prescribed circumstances to be treated as having been given on a prescribed date earlier or later than that on which it is given,

• (b) provide that, in prescribed circumstances, a notification of a change of circumstances may be given for a period wholly or partly after the date on which it is given, and

• (c) provide that, in prescribed circumstances, an amendment of an award of a tax credit in consequence of a notification of a change of circumstances may be made subject to the condition that the requirements for entitlement to the amended amount of the tax credit are satisfied at a prescribed time.

• (3) Regulations may require that, where a person has or persons have claimed a tax credit, notification is to be given if there is a change of circumstances of a prescribed description which may decrease the rate at which he is or they are entitled to the tax credit or mean that he ceases or they cease to be entitled to the tax credit.

• (4) Regulations under this section may—

• (a) require a notification to be given in a prescribed manner and within a prescribed time,

• (b) specify the person or persons by whom a notification may be, or is to be, given, and

• (c) provide that, in prescribed circumstances, one person may act for another in giving a notification.

Income test

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• (1) The entitlement of a person or persons of any description to a tax credit is dependent on the relevant income—

• (a) not exceeding the amount determined in the manner prescribed for the purposes of this paragraph in relation to the tax credit and a person or persons of that description (referred to in this Part as the income threshold), or

• (b) exceeding the income threshold by only so much that a determination in accordance with regulations under section 13(2) provides a rate of the tax credit in his or their case.

• (2) Subsection (1) does not apply in relation to the entitlement of a person or persons to a tax credit for so long as the person, or either of the persons, is entitled to any social security benefit prescribed for the purposes of this subsection in relation to the tax credit.

• (3) In this Part “the relevant income” means—

• (a) if an amount is prescribed for the purposes of this paragraph and the current year income exceeds the previous year income by not more than that amount, the previous year income,

• (b) if an amount is prescribed for the purposes of this paragraph and the current year income exceeds the previous year income by more than that amount, the current year income reduced by that amount,

• (c) if an amount is prescribed for the purposes of this paragraph and the previous year income exceeds the current year income by not more than that amount, the previous year income,

• (d) if an amount is prescribed for the purposes of this paragraph and the previous year income exceeds the current year income by more than that amount, the current year income increased by that amount, and

• (e) otherwise, the current year income.

• (4) In this Part “the current year income” means—

• (a) in relation to persons by whom a joint claim for a tax credit is made, the aggregate income of the persons for the tax year to which the claim relates, and

• (b) in relation to a person by whom a single claim for a tax credit is made, the income of the person for that tax year.

• (5) In this Part “the previous year income” means—

• (a) in relation to persons by whom a joint claim for a tax credit is made, the aggregate income of the persons for the tax year preceding that to which the claim relates, and

• (b) in relation to a person by whom a single claim for a tax credit is made, the income of the person for that preceding tax year.

• (6) Regulations may provide that, for the purposes of this Part, income of a prescribed description is to be treated as being, or as not being, income for a particular tax year.

• (7) In particular, regulations may provide that income of a prescribed description of a person for the tax year immediately before the preceding tax year referred to in subsection (5) is to be treated as being income of that preceding tax year (instead of any actual income of that description of the person for that preceding tax year).

• (8) Regulations may for the purposes of this Part make provision—

• (a) as to what is, or is not, income, and

• (b) as to the calculation of income.

• (9) Regulations may provide that, for the purposes of this Part, a person is to be treated—

• (a) as having income which he does not in fact have, or

• (b) as not having income which he does in fact have.

• (10) The Board may estimate the amount of the income of a person, or the aggregate income of persons, for any tax year for the purpose of making, amending or terminating an award of a tax credit; but such an estimate does not affect the rate at which he is, or they are, entitled to the tax credit for that or any other tax year.

Child tax credit

Entitlement

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• (1) The entitlement of the person or persons by whom a claim for child tax credit has been made is dependent on him, or either or both of them, being responsible for one or more children or qualifying young persons.

• (2) Regulations may make provision for the purposes of child tax credit as to the circumstances in which a person is or is not responsible for a child or qualifying young person.

• (3) For the purposes of this Part a person is a child if he has not attained the age of sixteen; but regulations may make provision for a person who has attained that age to remain a child for the purposes of this Part after attaining that age for a prescribed period or until a prescribed date.

• (4) In this Part “qualifying young person” means a person, other than a child, who—

• (a) has not attained such age (greater than sixteen) as is prescribed, and

• (b) satisfies prescribed conditions.

• (5) Circumstances may be prescribed in which a person is to be entitled to child tax credit for a prescribed period in respect of a child or qualifying young person who has died.

Maximum rate

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• (1) The maximum rate at which a person or persons may be entitled to child tax credit is to be determined in the prescribed manner.

• (2) The prescribed manner of determination must involve the inclusion of—

• (a) an element which is to be included in the case of every person or persons entitled to child tax credit who is, or either or both of whom is or are, responsible for a child or qualifying young person who was born before 6 April 2017,

• (b) an element in respect of each child or qualifying young person for whom the person is, or either or both of them is or are, responsible. , and

• (c) an element which is to be included in the case of a child or qualifying young person who is disabled or severely disabled.

• (3) The element specified in paragraph (a) of subsection (2) is to be known as the family element of child tax credit and that specified in paragraph (b) of that subsection is to be known as the individual element of child tax credit and that specified in paragraph (c) of that subsection is to be known as the disability element of child tax credit .

• (3A) Subsection (3B) applies in the case of a person or persons entitled to child tax credit where the person is, or either or both of them is or are, responsible for a child or qualifying young person born on or after 6 April 2017.

• (3B) The prescribed manner of determination in relation to the person or persons must not include an individual element of child tax credit in respect of the child or qualifying young person unless—

• (a) he is (or they are) claiming the individual element of child tax credit for no more than one other child or qualifying young person, or

• (b) a prescribed exception applies.

• (4) The prescribed manner of determination may involve the inclusion of such other elements as may be prescribed.

• (5) The prescribed manner of determination—

• (a) may include provision for the amount of the family element of child tax credit to vary according to the age of any of the children or qualifying young persons or according to any such other factors as may be prescribed,

• (b) may include provision for the amount of the individual element of child tax credit to vary according to the age of the child or qualifying young person or according to any such other factors as may be prescribed, and

• (c) may include provision for the amount of the disability element of child tax credit to vary according to whether the child or qualifying young person is disabled or severely disabled.

• (6) A child or qualifying young person is disabled, or severely disabled, for the purposes of this section only if—

• (a) he satisfies prescribed conditions, or

• (b) prescribed conditions exist in relation to him.

• (7) If, in accordance with regulations under section 8(2), more than one claimant may be entitled to child tax credit in respect of the same child or qualifying young person, the prescribed manner of determination may include provision for the amount of any element of child tax credit included in the case of any one or more of them to be less than it would be if only one claimant were so entitled.

• (8) “Claimant” means—

• (a) in the case of a single claim, the person who makes the claim, and

• (b) in the case of a joint claim, the persons who make the claim.

Working tax credit

Entitlement

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• (1) The entitlement of the person or persons by whom a claim for working tax credit has been made is dependent on him, or either or both of them, being engaged in qualifying remunerative work.

• (2) Regulations may for the purposes of this Part make provision—

• (a) as to what is, or is not, qualifying remunerative work, and

• (b) as to the circumstances in which a person is, or is not, engaged in it.

• (3) The circumstances prescribed under subsection (2)(b) may differ by reference to—

• (a) the age of the person or either of the persons,

• (b) whether the person, or either of the persons, is disabled,

• (c) whether the person, or either of the persons, is responsible for one or more children or qualifying young persons, or

• (d) any other factors.

• (4) Regulations may make provision for the purposes of working tax credit as to the circumstances in which a person is or is not responsible for a child or qualifying young person.

Maximum rate

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• (1) The maximum rate at which a person or persons may be entitled to working tax credit is to be determined in the prescribed manner.

• (2) The prescribed manner of determination must involve the inclusion of an element which is to be included in the case of all persons entitled to working tax credit.

• (3) The prescribed manner of determination must also involve the inclusion of an element in respect of the person, or either or both of the persons, engaged in qualifying remunerative work—

• (a) having a physical or mental disability which puts him at a disadvantage in getting a job, and

• (b) satisfying such other conditions as may be prescribed.

• (4) The element specified in subsection (2) is to be known as the basic element of working tax credit and the element specified in subsection (3) is to be known as the disability element of working tax credit.

• (5) The prescribed manner of determination may involve the inclusion of such other elements as may be prescribed.

• (6) The other elements may (in particular) include—