Child tax credits not counted in IPA's / IPO's

debt_doctor · 6 December 2007 at 3:12PM

Hi ALL,

For some time I have been saying that child tax credit does NOT count as income for an IPA / IPO, and similar, and more widely understood, child benefit.

I have heard on our forum that CTC has been counted in a br's income for an IPA.

To clarify I contacted the insolvency service by e-mail and received the following reply from the individual who wrote that particular section of the technical manual

The reply, and my question is below;

Dear MrXXXXXX

My colleague XXXXX XXXXXX has forwarded your request (below) to me as I was responsible for drafting this chapter of the Technical Manual.

With regard to your query, the Technical Manual guidance at this paragraph is based on the High Court decision to exclude child benefit and similar benefits from any income payments calculation. The reasoning behind this decision is that, whilst the money is paid to the parent, it is designed to be expended on and for the direct benefit of the child. Child tax credits are treated in the same way as child benefit, as they are for the direct benefit of the child.

I hope this helps .

Yours sincerely

XXXXX XXXXX

Original Message

From: XXXXXXXXXXXXXXXXXXXXXXXXXX
Sent: xxxxxxxxxxxxxxxxx 2007 11:35
To: XXXXXXXXXXXXXXXXXXXXXXXXXXXX
Subject: IPA's and IPO's
Hi XXXX,

Upon reading the technical manual I wonder if you could clarify the point made in 31.7.9 State benefits

This does not mean that the official receiver must exclude all benefit payments received by the bankrupt when calculating available income for an IPA. Theperson making the calculation (usually the examiner) should first consider whether there is income paid to the bankrupt not comprising state benefit . If this is the case, an IPA may be a possibility, and any calculation of income should include all available income, including state benefits which are paid to an individual for the general benefit of that individual and their family. The notable exceptions to this rule when dealing with state benefits is child benefit. The High Court has stated as a matter of public policy that child benefit and similar benefits should not be included in the statement of income when applying for an IPO and there is no reason why this point should not be extended to cover IPAs. Whilst it is acknowledged that in the figures for expenditure there may be outgoings for the benefit of the children, at least to the value of the child benefit received, to ensure that there is no risk of them being deprived of it, child benefit should not be included in IPA assessments.

Does the reference to " and similar benefits" refer to child tax credit as it is the only similar benefit that springs to mind
Many thanks for your time.

Best

XXX XXXXXX

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Best

DD

fermi · 6 December 2007 at 3:23PM

Very useful DD

:T

That's been bugging me for a while too.

The only reason, apart from laziness, that I haven't queried that more strongly myself was that all the disclaimers contained in the TM's that it is for "guidance" only and doesn't represent policy.:rolleyes::rolleyes:

In hindsight I should have been a bit more pro-active.

I must try and find the text of the Hight Court ruling, as I would like to see exactly what they wrote when it was made.

debt_doctor · 6 December 2007 at 3:56PM

Hi

Worth looking in to full stop I think !

Or's should be challenged, perhaps any one who has had CTC taken in to account could print my post and show to OR ?

Then if cant get agreement then refuse IPA and let the court decide via IPO .

My local OR never takes CTC in to account and quotes that section of technical manual as his reason.

Best

DD

tigerfeet2006 · 6 December 2007 at 4:32PM

Thanks for getting clarifycation (sp?) That's going to be so useful to be able to say to people with certainty.

It would be interesting to know if there are any people on here who have had an IPA with CTC included.

fermi · 6 December 2007 at 4:38PM

Hi again DD.

There was a consultation earlier in the year regarding whether people thought their OR had dealt with them fairly when setting up/assessing IPA's.

Unfortunately the original post in the forum that mentioned it has long since been un-stickied and I think deleted.

Shame really, because I can't remember who was pushing it and if any results/conclusions would be made public.

(not sure, but I vaguely remember it was something to do with R3

)

Scarlett.1974 · 6 December 2007 at 5:53PM

Oooooh, very interesting

I receive CTC as well as WTC so would it be advisable to put them in my I&E as 2 seperate amounts, even though I do actually receive them as one amount?

Many thanks

fermi · 6 December 2007 at 5:57PM

Scarlett.1974 wrote: »

Oooooh, very interesting I receive CTC as well as WTC so would it be advisable to put them in my I&E as 2 seperate amounts, even though I do actually receive them as one amount?

Many thanks

Yes. It's best to itemise all benefits with regard to name/purpose/source rather than lump them together.

That way you stand the best chance of it being taken into account, and if you should need to challenge anything you have provided the fullest info from the start.

Scarlett.1974 · 6 December 2007 at 6:00PM

I've just checked my award notice and my tax credits are made up as the following:

Working tax credit: £51.90 4 weekly.
Child tax credit: £496.08.

:eek: <

not sure if that's the right one but couldn't see anything else that came close!

So...... am I right to say that £496 of my income will NOT be counted then when calculating a possible IPA?

Wow.

What would I do on the I&E form then? Something like:

Incomings: £496.08 - CTC

Expenditure: £496.08 - child expenses (?)

???

Sorry for all the questions, but this has totally stunned me

debt_doctor · 6 December 2007 at 6:37PM

Hi,

There is no clear defined way to fill out your I/E, I would just list all your allowable expenses holidays, haircuts, etc. It is for the OR to exclude your chilt tax credit and child benefit.

Keep an eye on the OR's decision, and if the OR has included CTC or CB as income then refuse to agree the IPA. OR will then have to go to court and this, I beleive, would be where the BR would be supported by the judge.

Best

DD

Scarlett.1974 · 6 December 2007 at 6:59PM

Thank you debt doctor

I'm sure when I do start filling in the forms I'll be on here [STRIKE]every day[/STRIKE] now and again with er.... a question or 2

debt_doctor · 6 December 2007 at 7:07PM

:rotfl: :rotfl: :rotfl: :rotfl:

Child tax credits not counted in IPA's / IPO's

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