What to do now – and what happens if you miss the deadline
The 31 July 2011 renewal deadline for tax credits is fast approaching. Most claimants who haven’t renewed yet will need to do something by the deadline, because missing it could result in tax credits payments being stopped.
The renewal process for tax credits (Working Tax Credit and Child Tax Credit) does two things – it finalises the award for 2010/11 based on final information about income and circumstances for that year, and renews the claim for 2011/12.
All tax credit claimants should have been sent a renewal pack for 2011. This contains either one or two forms. Everyone receives the Annual Review form (TC603R) which is a statement of the 2010/11 award. Most people will also receive the Annual Declaration (TC603D).
What has to be done by 31 July 2011?
Those claimants who receive the Annual Declaration (known as ‘reply required’ cases) must complete and return it by 31 July 2011, or (if later) 30 days after the renewal papers are issued.
If the claimant does not have final income figures for 2010/11 he or she can use estimates to meet the deadline. This might apply, for example, to a self-employed person who does not yet have final accounts. There is no need to explain why an estimate has been used. However, note that you should then supply final figures by 31 January 2012.
Some claimants are not sent the Annual Declaration (‘auto-renewal’ cases). This will apply to those receiving just the full family element of CTC and those on nil awards (ie their circumstances qualify them for tax credits but they do not get any money as their income is too high). All that these claimants have to do is check the details on the Annual Review. If these are correct, there is no need to tell HMRC – but you must contact HMRC if the details on the Annual Review are wrong.
Those claimants with nil awards may need to do a bit more in order to renew their claims for 2011/12. HMRC has been writing to claimants whose income is too high to get tax credit payments, saying they will be taken out of the system unless they tell HMRC they want to stay in.
How to renew
Claimants who are ‘reply required’ cases can fill in the Annual Declaration and post it back to HMRC.
As an alternative to sending back the paper form, it is possible to renew tax credit claims by telephone on HMRC’s tax credits Helpline (0845 300 3900). In the case of a joint claim, one of the claimants can give renewal details for both of them when renewing over the telephone.
What happens if you miss 31 July?
Where claimants return their information by 31 July 2011, their claims for 2011/12 are renewed with effect from 6 April 2011.
Where claimants do not meet this deadline, the 2011/12 award will not be renewed and their tax credits payments will stop.
However, payments will not stop immediately. If papers are not returned by 31 July, HMRC will first of all send out a ‘Statement of Account’, and if the claimant completes the renewal within 30 days of the date of the Statement, their claim can be restored from 6 April 2011.
Even if that opportunity is missed, all is not lost, as the claim can be restored if the claimant shows ‘good cause’ for missing the first deadline and renews by 31 January 2012 at the latest.
But if this second date is missed, or if HMRC does not accept that there was good cause for missing the first one, the claimant will drop out of the renewals process and will have to make a new claim for 2011/12 which can only be backdated by a maximum of three months. As a result, the claimant will have to repay some or all of the provisional payments they have received between 6 April 2011 and the date the old claim was cancelled.
Penalties
Beware that as well as losing out on tax credits, failing to deal with the renewal papers can attract a penalty.
HMRC can charge a penalty of up to £300 for failure to submit an Annual Declaration, plus up to £60 per day if the failure continues after the initial penalty is imposed. These are not automatic penalties, and will not be charged if the person had a reasonable excuse for the delay and did comply as soon as that became possible.
There is also a penalty of £3,000 maximum for fraudulently or negligently making an incorrect statement in response to an end of year notice. This can apply not just to an incorrect Annual Declaration but also to the failure of someone who is an auto-renewal claimant to provide correct information when their Annual Review details are wrong.
