Advice on tax credits - would loan to relative count as her income?

Emanef

Hi guys

I have a friend who's looking to help his sister out for a while. He has a fair amount of savings doing nothing and she's really struggling financially (lone parent, two kids, a full and part time job) and wants to 'loan' her a couple of hundred pounds a month to help her pay the mortgage. It's a loan in that she'll pay it back if and when she sells her house, or when she can afford to pay it, interest free, so fairly loose, and it'll be as long as she needs it, or as long as he can afford to (ie how long he's in his current job, etc).

What they're worried about is if such a loan would be counted as part of her income and affect her tax credits. I know it would often be treated as income for Housing Benefit and Council Tax Benefit as I used to work in this area (hence them asking me to find out!) but it's been a good few years, and I don't really know much about current tax credits rules.

Also, could how it was paid affect it? ie if the £200 was paid directly to her mortgage still be treated the same way?

Many thanks in advance

Emanef

Ah, ok, so it definately is different to HB and CTB then? (ie HB reg 40 IIRC)

That's good. So I guess if it was questioned because it shows up on her bank statements they could easily prove it wasn't earnings by him doing a letter to explain the payments and their relationship and send a statement from his account showing it transferred out of his account?

Does Tax Credits look solely at actual earnings then? No other income (maintenance, voluntary support from family, etc)?

Emanef

Ah, thanks for that. Interesting that voluntary payments (regular or one off), payments from third parties, etc are not listed in either what is included or what isn't included as income.

I've just googled the Tax Credits regulations and found them here;
http://www.hmrc.gov.uk/manuals/tctmanual/Index.htm

Looking under the section for income there's nothing listed there either other than maintenance from a former partner, which also suggests that it's not included;
http://www.hmrc.gov.uk/manuals/tctmanual/TCTM04000.htm

I do recall having some training on Tax Credits when they first came in and we all noticed that there are a number of things not included in the Tax Credits regs, unlike the HB/CTB regs which cover all types of income and capital (and often catches people unaware when their parents are trying to do a good deed!), and the trainer basically said, "yep, if it ain't in there it's not included", so that must have been one of the things we picked up on at the time!