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Tax Credits - New arrangements (updated January 2004)
In March 2003 we produced a note about tax credits. Since then, there have been some minor changes to the Regulations. In addition, we have been in discussion with HM Revenue & Customs about the precise way in which clergy income should be calculated for tax credit purposes. We are pleased to say the Revenue has now agreed that clergy's employment income for tax credit purposes can be regarded as the same as their employment income for tax purposes. This is more generous than the original interpretation because, for example, it makes allowances for HLC and unreimbursed expenses.
We understand that the Revenue will be writing to all existing claimants early this year and that you will have until 30 September in which to reply. In order to take advantage of the additional concessions, you will need to have completed your tax return for 2003/04 before you submit a tax credit claim.
SOME QUESTIONS ABOUT WORKING TAX CREDIT AND CHILD TAX CREDIT (June 2003)
This note has been prepared by the staff of the Deployment, Remuneration and Conditions of Service section of the Ministry Division of the Archbishops' Council after consultation with the Tax Credits section of HM Revenue & Customs.
1 What are Working Tax Credit and Child Tax Credit?
Under the new arrangements for Working Tax Credit and Child Tax Credit, the Government is providing support in the form of tax credits to all families on low and middle incomes. As a result, many clergy with children are likely to be eligible for tax credits.
Assessment for the tax credits is broadly based on income for income tax purposes rather than disposable income. The income (if any) from capital resources will be treated in the assessment in the same way as other taxable income. Working Tax Credit will generally be paid through the payroll (like Working Families' Tax Credit), but Child Tax Credit will be paid to the main carer of the child or children.
2 Are they likely to benefit clergy?
Anyone with children and with a total annual family income less than £58,000 p.a. (£66,000 p.a. for those families with a child under one year of age) is likely to receive at least part of the 'family' element of Child Tax Credit (See Section 4 for more details). A claimant, working at least 30 hours a week, claiming with a partner but without children would be likely to receive Working Tax Credit if the total annual family income is less than £14,800 p.a. (Those working part-time may qualify: they are advised to check their eligibility). A lone claimant without children, working at least 30 hours per week would be likely to receive Working Tax Credit if the total annual income is less than £10,700 p.a.
If a claimant incurs childcare costs with a registered childminder or approved provider, he/she may also be eligible for some assistance with these through the childcare element. This is paid directly to the carer alongside the Child Tax Credit. (See Section 4 for more details).
3 What about the value of provided accommodation?
We have been advised by the Revenue that where, for the better performance of clergy's duties, accommodation is provided free, or at a reduced rate, nothing will be taken into account for this in the calculation of income for tax credit purposes.
4 How are the credits calculated?
Working Tax Credit
- A basic element £1,525.00 per year
- A second adult and lone parent element £1,500.00 per year
- A 30-hour element £620.00 per year
- A childcare element (up to 70% of eligible weekly childcare costs up to a maximum cost of £135 for one child and £200 for two or more children).
Child Tax Credit
- A 'family' element £545.00 per year
- A child element £1,445.00 per year
(These are the usual elements. There are others which may apply in specific cases, for example if a child is disabled or severely disabled.)
The amount of credits for which any family qualifies is calculated by adding together the appropriate tax credits for the family, depending on their circumstances. The amount of tax credits payable generally depends upon the family's total gross taxable income. If a family's income is above a threshold (currently £5,060.00 per year), the maximum tax credit payable is reduced by 37p for every pound of income above the threshold. However, families with children with a total family income below £50,000 p.a. will receive the 'family' element of Child Tax Credit in full even if they are not entitled to any other credit. The 'family' element will normally be progressively reduced for families with total income between £50,000 and £58,000 p.a.
N.B. Child Benefit should not be included in the calculation of income because it is not a taxable social security benefit.
5 HOW DO I CLAIM?
By ringing 0845-300-3900 and requesting a Tax Credits claim form, or by collecting one from a Revenue Enquiry Centre, a Job Centre, Benefit Offices or some Citizens' Advice Bureaux.
The completed forms should be returned in the pre-paid envelope supplied with the claim form.
Applications can also be made on line at www.hmrc.gov.uk/taxcredits.
For general advice relating to eligibility or to request a claim form please telephone
0800 500 222.
For general tax credits help please telephone 0845 300 3900.
6 HOW DO I ANSWER CERTAIN QUESTIONS ON THE CLAIM FORM?
Produced by:
The Ministry Division, Archbishops' Council, Great Smith Street, LONDON. SW1P 3AZ
mailto:jim.smith@c-of-e.org.uk
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