Error in tax credit renewal packs
22 June: HMRC is writing to one million tax credit claimants whose renewal packs omitted some information, as ICAEW urges self-employed claimants to check whether they need to contact HMRC by 31 July.
As ICAEW’s Tax Faculty previously reported, this year HMRC is automatically renewing all tax credit claims other than those identified as high risk.
HMRC has confirmed that around one million tax credits renewal packs (TC603R) did not include some, or all, of the income information that had been used to calculate the awards.
HMRC is now writing to these claimants with the full details of the award. This affects the renewals process for tax credits claimants with self-employed income, income from taxable social security benefits or other income (for instance, income from shares and dividends).
Self-employed tax credit claimants who have not yet finalised their income figures for the relevant tax year have always had the option to renew their tax credit award by 31 July following the end of the tax year. They do this by providing a provisional figure for their income from self-employment and have until the following 31 January to provide the final figure to the Tax Credit Office (TCO).
The automatic renewal of awards does not help self-employed claimants as they still need to provide final figures for their income from self-employment to TCO. The official information from HMRC indicates that self-employed taxpayers who have not filed their 2019/20 tax return must estimate their profit or loss and report this to HMRC by 31 July 2020. Otherwise, HMRC will finalise the award using the information it holds, and it will not be possible to change it at a later date.
The Tax Faculty understands that some advisers on the TCO helpline are advising that awards are being automatically renewed on the basis that the self-employment income figures are provisional, which would mean that the claimant has until 31January 2021 to provide final figures. However, until this is confirmed by HMRC the Faculty advises that all self-employed claimants contact TCO by 31 July to provide final income figures for 2019/20 or to ensure that the income from self-employment is noted as being provisional.
The Tax Faculty advises that all tax credit claimants check their renewal packs carefully and contact HMRC by 31 July if any changes are needed.