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Tax Credits / LHA scenario - help please
property.advert
Posts: 4,087 Forumite
Here's the scenario:
I take a job now in May 2010 which will pay £100 per week until after the end of the 2010/11 tax year and I claim working tax credits and LHA until April 2011 due to low income. Then in the new tax year 2011/12, I receive a £50,000 bonus and no longer claim tax credits or LHA, does the large increase in income in 2011/12 matter in respect of the tax year 2010/11 ?
Now I know this could be construed as a delayed payment for work done in 2010/11 but as the company who would be paying it has a year end after the beginning of the tax year 2011/12, the company will look upon it as payment made during the corporate tax year, say May 2011 to May 2012. The argument would be that until the end of the corporate year, the company would not know the level of any bonus which would be payable, if any.
It seems to my untrained eye that child tax credits go on your previous year's income (which was zero) and working tax credits go on the current tax year income. If that assumption is correct, then for 2010/11, all would seem fine, as income would be very low and the benefits received would be justified, based upon the income received.
I am fine with tax mitigation, which I think this is, as against tax avoidance, which I am thinking it is not, given that the payments are only received in the following tax year. Indeed, the bonus need not be paid as a bonus but as advance salary or a very large salary increase for the forthcoming year.
Comments appreciated.
I take a job now in May 2010 which will pay £100 per week until after the end of the 2010/11 tax year and I claim working tax credits and LHA until April 2011 due to low income. Then in the new tax year 2011/12, I receive a £50,000 bonus and no longer claim tax credits or LHA, does the large increase in income in 2011/12 matter in respect of the tax year 2010/11 ?
Now I know this could be construed as a delayed payment for work done in 2010/11 but as the company who would be paying it has a year end after the beginning of the tax year 2011/12, the company will look upon it as payment made during the corporate tax year, say May 2011 to May 2012. The argument would be that until the end of the corporate year, the company would not know the level of any bonus which would be payable, if any.
It seems to my untrained eye that child tax credits go on your previous year's income (which was zero) and working tax credits go on the current tax year income. If that assumption is correct, then for 2010/11, all would seem fine, as income would be very low and the benefits received would be justified, based upon the income received.
I am fine with tax mitigation, which I think this is, as against tax avoidance, which I am thinking it is not, given that the payments are only received in the following tax year. Indeed, the bonus need not be paid as a bonus but as advance salary or a very large salary increase for the forthcoming year.
Comments appreciated.
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