Confused with Tax Credits

System

compoff wrote: »

I am a compliance officer with tax credits, trust me, our manual clearly states that medical expenses are disregarded when calculating income for tax credits purposes.

But it's not medical expenses, it's the employer providing medical insurance/benefits free for the employee. That is seen by HMRC as equivalent to extra earnings and it is entered on the P11D, just like a company car would. HMRC then put a deduction in the employees tax code based on the P11d so that the employee pays tax on this "extra" income.

From the TC Manual -

TCTM04108 - Income: Employment income rules

The cash equivalent of any non-cash voucher received by the claimant chargeable to income tax under section 87 of ITEPA 2003

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 4(1)(c)

These are vouchers, which can be exchanged for money, goods or services.

The general rule is that income must include an amount equal to the additional expense incurred by the employer or third party specifically for the purpose of providing:

• The voucher itself and
• The money, goods or services for which the voucher can be exchanged less
• Any part of the expense made good to the provider by the employee.

The full rules can be found via the first three rows in the table in the Employment Income Manual EIM16140

System

Just found this too on the instruction booklet claimants are provided with when they apply.

http://www.hmrc.gov.uk/forms/tc600-notes.pdf

Page 8 states clearly that in box 5.4 of the claim form the claimant has to include the cash equivalent of any benefit in kind they receive from their employer. It also tells them the details can be found on the P11D their employer gave them.

newyorknewyork33

Income from private medical treatment or insurance does not need to be included. below is the path to the guidance, but sorry i cannot post as direct link as i am a newbie. (need to delete the space ive added after hmrc)

hmrc .gov.uk/manuals/ntcmanual/eligibility_estincome/ntc0310030.htm


It basically stated that you should only add cash equivelents from the P11D from the following sections
Section A
Assets transferred (cars, property, goods or other assets)
Section B
Payments made on behalf of employee
Section C
Vouchers or credit cards
Section E
Mileage allowance
Section F
Cars and car fuel
Section J
Qualifying relocation expenses payments and benefits
Section N
Other items (including subscriptions and professional fees)(however check the website as not all of these should be included, some are ignored.)
Section O
Expenses payments made to, or on behalf of, the employee (again check the website as not all of these should be included, some are ignored.)


Thanks

Spendless

Buttonmoons wrote: »

Okay thanks, guess he better go ask them for a P11 D then. It won't affect our tax credits at all, as we only get the bare minimum, but I'm worried as I don't think I put that information in last years box? Jesus I don't want another overpayment thing, I already had to pay back 2k for THEIR error.

Sometimes I think it's better just not to claim, and that way you don't have to report to them every little change of circumstance.

I'm worried now.

The guy on the phone said that sometimes the health insurance could be included in your overall pay, and deducted from your tax free allowance - is that right? So then that wouldn't make the income any higher? Or am I way off base here?

By the bare minimum are you talking about the 'family element' of CTC, roughly £10 a week. It can most certainly be affected as once you hit £50K (salary + benefits). this £10 starts to go down. A combination of £10K worth of benefits in kind (company car, fuel, BUPA) and a one off bonus payment earlier this year of £3k (before being taxed at 40%!) has made it that we've reduced down to about £5 a week.

It won't make a difference if you're not near this point though.

[Deleted User]

We recently had confirmation in our office that medical benefits provided by the employer do not need to be declared. I raised the issue after finding guidance similar to that posted by newyorknewyork33 and had it confirmed by the TCO central team.

I forgot to come back and correct my posts.

Thanks NYNY33, I will post your link.

http://www.hmrc.gov.uk/manuals/ntcmanual/eligibility_estincome/ntc0310030.htm

Buttonmoons

Unfort, we aren't near that level of income Spendless!

Well I did give them the info they needed and it HAS been added to our award, so I'm not sure why they would add it on if didn't need to be declared?

baddecision

I had this same problem, tax credits chased me(us) after 3 years as I hadnt added medical insurance amount to renewal notice, now i have a 3 year overpayment when it first came to light they cut my child tax in half causing major problems... employer also managed not to inform the tax office and hubby had never ever received a PD11, so hubby also owes 3 years of tax for it amounting to nearly £500!!!!....needless to say we no longer have the med ins

System

subsoniccoyote wrote: »

We recently had confirmation in our office that medical benefits provided by the employer do not need to be declared. I raised the issue after finding guidance similar to that posted by newyorknewyork33 and had it confirmed by the TCO central team.

I forgot to come back and correct my posts.

Thanks NYNY33, I will post your link.

http://www.hmrc.gov.uk/manuals/ntcmanual/eligibility_estincome/ntc0310030.htm

Thanks subsoniccoyote for chasing this up for us.