Financial Matters

With David Frederick FCCA | Marcus Bishop Associates | marcus-bishop.com

21 June 2021: Summer solstice cheer or damp squib?

Across SE London and beyond many households are looking forward to the arrival of the final stage of the government’s lock down road map on 21 June 2021. However for tax credit customers, it may just be another summer solstice. It will neither mark the end nor signify a new beginning. The key date for tax credit customers is 4 June 2021. This is the date by which all 2.5 million tax credit customers should have received their annual renewal packs from HMRC. According to HMRC, “It is important that customers check the details contained in their annual renewal pack are correct, including income details. Renewing online is quick and easy.” Whilst renewals online may be quick and easy, many working tax credit customers are still coming to terms with the temporary rules introduced by HMRC at the start of the year. These rules were designed to help tax credit customers who suffered any reduction in their weekly working hours or were temporarily unable to work due to the coronavirus crisis. These temporary HMRC measures are applicable until the Job Retention Scheme (JRS) closes on 30 September 2021. The five changes of working hours; their impact on employees’ working tax credit; and the reporting requirement to HMRC, are discussed below.

Temporary Reduction In Working Hours

Where an employee’s working hours per week have been temporarily reduced due to the coronavirus crisis, HMRC will treat the employee as continuing to work their normal hours (those before the reduction) until 30 September 2021. There will be no change to the employee’s working tax credit entitlement during that period. The employee will not be required to advise HMRC about any temporary reduction because of the coronavirus crisis until 30 September 2021.

Permanent Reduction In Hours

Where an employee’s working hours per week have been permanently reduced due to the coronavirus crisis, the employee’s normal hours will change for tax credit. If the change is such that the employee no longer qualifies for working tax credit, they may receive a four-week run-on of working tax credit. Employees must notify HMRC as soon as their working hours per week is changed permanently. All changes can be notified to HMRC via their online service or the tax credits helpline.

Temporary Laid Off/Furloughed

Employees who are affected in this way will not experience any change in their working tax credit. HMRC will continue to regard the employee as continuing to work their normal hours until the end of the JRS. Employees are not required to inform HMRC of any temporary lay-off throughout the duration of the JRS. However, if the lay-off becomes permanent, HMRC should be notified as soon as possible.

Unpaid Leave

Where an employee has agreed unpaid leave with their employer for any reason due to the coronavirus crisis, HMRC will regard the employee as continuing to work their normal hours until the end of the JRS. However, the employee has an obligation to notify HMRC.

Redundancy

In the advent of an employee being made redundant due to the coronavirus crisis, they may or may not still qualify for working tax credit. If as a result of the redundancy an employee no longer qualifies for working tax credit, they may qualify for a four-week run-on of tax credits. HMRC should be notified of any redundancy as soon as possible. However, if an employee secures a new position within the 4-week runon period and the new employment satisfies the working tax credit hours then despite the gap between employments the employee should remain entitled to their working tax credit. As a reminder, tax credit customers should not forget the annual tax credit renewal deadline is 31 July.