Tax. Credits and trust fund

54druids

Last year my husband got some money from his trust fund which he ploughed into our now failed business. A chargeable event arose from this which was included in his tax return. However there is only a tax liability if you are a higher rate tax payer. Also I believe it is treated as capital not income. We didn't see a penny of this money personally and have been on a very low income for the last year. In September 2011 I claimed tax credits and got a lump sum plus about 600 a month since then. But now they are saying we had this massive income and they are withdrawing our payments. They will be reinstated next year but we will get nothing as it will be used to recover the debt. This is going to cripple us snd I think it is so unfair. Their opinion was that we chose to put it in the business rather than to live off: if we hadn't put it in the business it would have folded much earlier and 5 people would have been unemployed snd claiming tax credits. We can prove it went into the business, can anyone advise us if there is anything we can do

paddedjohn

You got the credits of £600 per month and invested it but now the credits are stopping you are pleading poverty? What do you need the credits for? you havnt needed the thus far.

pauletruth

if it was a lump sum then its not earnings and should have been ignored. if the payment is recuring then it may be classed as income. i hope you have appealed

Murgatroyd21

Have a look at the information at http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04000.htm and http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04800.htm

If you believe the money has been treated wrongly as income to create an overpayment then you should dispute the overpayment where you will be given opportunity to confirm why it shouldn't be counted as income.

In the meantime recovery may be suspended.

zagfles

You can deduct trading losses from your income, google TC825. Not sure it would apply in your case though...

54druids

thank you so much for your replies. (Padded John, I suggest you read over my post again as your rather hurtful comments are completely unfounded) Am away to look at it now. I called the CAB but unfortunately you guys were more help.

54druids

zagfles wrote: »

You can deduct trading losses from your income, google TC825. Not sure it would apply in your case though...

Is that only if you are a sole trader. We had a limited company.

Murgatroyd21

54druids wrote: »

Is that only if you are a sole trader. We had a limited company.

As said, use TC825 here http://www.hmrc.gov.uk/forms/tc825.pdf, print it off and fill it in with your details.

Losses can be carried forward. Read all the notes.