HMRC Tax Rebate on Universal Credit

Jimok

Good Day,

I am hoping for some advice about this, if you receive or apply for a tax rebate while on universal credit does any award from HMRC affect the amount of benefits you are entitled to, only asking because when i phoned UC this morning and told them i overpaid tax last year i was informed that any amount of tax rebate above the minimum threshold would mean a reduction in the benefit amount paid the following month.

Mersey_2

I don't think that's right - although the UC national contact centres aren't staffed by DWP employees trained in areas other than their 'script.' As a self-employed person you have to report earnings from work to UC contact centres for each monthly reporting period.


If an employee, the employer will report your earnings to HMRC.


If unemployed as long as you satisfy the gateway conditions for UC, you are entitled to the monthly UC payment.


Of course if the rebate - or any large lump sums for that matter - took you over the maximum threshold for means-tested benefit, you would have to withdraw your claim for UC as your capital would exceed the limit and that is one of the gateway conditions.


The person you spoke to probably didn't know the difference between capital and income etc.

Jimok

They told me that any tax rebate is classed as work related income and as such would reduce any future payments, with the monthly payment reducing once over the minimum threshold of £111?

Sorry, not up to speed on tax affairs, is a tax rebate classed as capital or income?

Mersey_2

I suppose you could argue it's work-related but obviously from a previous tax year, not the current one!


It isn't £ earned from your work in the past month (which is what you have to declare).


But if its eg £20k it would mean you no longer satisfy the gateway conditions for UC - in the same way if you won £20k on the Lottery on Saturday.

Icequeen99

If you are employed - they are correct if the refund is for a tax year in which you were in paid work. The regulations say:

'A repayment of income tax or national insurance contributions received by
a person from HMRC in respect of a tax year in which the person was in paid work is
to be treated as employed earnings unless it is taken into account as self-employed
earnings under regulation 57(4)'

There is a similar provision for the self-employed.

So yes, it is earned income and not capital.

I don't agree about the affect on gateway conditions - once you are in UC the gateway conditions are not really relevant.

IQ

Jimok

I am currently unemployed, does that mean if the rebate is from earnings relating to a previous financial year it cannot be taken into account as earnings for the current month / year?

I checked last week on the rebate checker and it told me i was due £1100+, which i havn't applied for yet as HMRC devolve all my earnings to UC, just trying to find out if UC will count this as earnings for the month in which i receive the rebate?

If that is the case would they not be in general saying that because i worked six months in a previous financial year in which the money was earned i am not entitled to a months UC benefit this year?

Mersey_2

IQ - that's untrue re UC gateway conditions.


If a UC claimant receives a large lump sum they then no longer satisfy the gateway conditions and have to withdraw their claim.


This happened to claimant in my area 3 months ago.


There are also 8 other changes of circumstances which have the same effect.


The rightsnet site forums have more info on this (escaping the UC 'lobster pot' - although that's largely UC claimants who want to revert to legacy benefits such as WTCs.)


IQ - incidentally, you're right re HMRC regs; but that's not how the DWP and Tribunals have viewed tax rebates for JSA/UC claimants.


It can be confusing for those claimants reporting earnings to UC contact centres though, as the DWP - and local councils for LHA/HB -uses a different basis than HMRC does for reporting earnings via self-assessment etc.

Mersey_2

Although not the same, there was a Tribunal ruling re a claimant who received a large bank refund (packaged account reclaim plus bank charges plus 8% pa interest and so on).


From memory they received just over £8k and had to report this change as it took their capital over the threshold. It wasn't counted as earned income though and they retained their entitlement to income-based JSA.


There are lots of circumstances where the DWP don't appear to have thought of re UC yet and new regs and guidance are being published each month.


OP - The rightsnet forums tend to be the most up-to-date and there's welfare law experts on there who are in touch with DWP teams tackling problems which arise such as this, ie where a ref or condition existed under JSA but appears not to under UC. There's also transitional protection for JSA and WTC claimants moving over to UC - but again all of this isn't clear or published in full yet.

Icequeen99

Mersey wrote: »

IQ - that's untrue re UC gateway conditions.


If a UC claimant receives a large lump sum they then no longer satisfy the gateway conditions and have to withdraw their claim.


This happened to claimant in my area 3 months ago.


There are also 8 other changes of circumstances which have the same effect.


The rightsnet site forums have more info on this (escaping the UC 'lobster pot' - although that's largely UC claimants who want to revert to legacy benefits such as WTCs.)


IQ - incidentally, you're right re HMRC regs; but that's not how the DWP and Tribunals have viewed tax rebates for JSA/UC claimants.


It can be confusing for those claimants reporting earnings to UC contact centres though, as the DWP - and local councils for LHA/HB -uses a different basis than HMRC does for reporting earnings via self-assessment etc.

Yes, i'm aware of the Rightsnet forums. But I still don't agree.

A large lump sum, say 20k, would knock you out of UC because you would no longer meet the main entitlement conditions of UC. Nothing to do with the gateway conditions.

The difference is explained quite well in this article by CPAG. http://www.cpag.org.uk/content/out-lobster-pot-universal-credit-%E2%80%98gateway%E2%80%99-and-young-people-non-advanced-education You can get knocked out of UC because you no longer meet the main entitlement conditions - but not because you don't meet the gateway conditions. Once in, you stay in.

The discussions on Rightsnet are about whether you can escape from this rule that once in you stay in.

What I quoted above was not HMRC regs - that is taken from the Universal Credit Regulations 2013 (As amended) - it is defined very clearly as earned income.

IQ

Mersey_2

We'll have to agree to disagree.


UC claimants can withdraw from UC and successfully claim legacy benefits in many cases.


"Once in, you stay in [UC]" is simply not true in reality.


Although I realise many DWP staff were wrongly trained to believe this. Indeed it may have been the intention; but, change of circumstances such as pregnancy, a £ windfall - and 7 others - negate the UC claim.


I know of 3 claimants personally who were claiming UC and are now successfully claiming legacy benefits (one is claiming income-based JSA and two are claiming Working Tax Credits, even though both are in a UC 'live' area of Merseyside.)


"No longer meeting the gateway conditions" is the precise wording one of these claimants successfully used [upon advice from counsel acting pro bono pending an Upper Tribunal appeal.]. The Appeal was not needed as the DWP eventually conceded that this was the correct position and their guidance and parctice thus far (as at Nov 2015) had been incorrect.


[Of course, the DWP may seek to retrospectively introduce new regs and guidance; although a new approach has been promised by the new Secretary of State]

Icequeen99

Mersey wrote: »

We'll have to agree to disagree.


UC claimants can withdraw from UC and successfully claim legacy benefits in many cases.


"Once in, you stay in [UC]" is simply not true in reality.


Although I realise many DWP staff were wrongly trained to believe this. Indeed it may have been the intention; but, change of circumstances such as pregnancy, a £ windfall - and 7 others - negate the UC claim.



I know of 3 claimants personally who were claiming UC and are now successfully claiming legacy benefits (one is claiming income-based JSA and two are claiming Working Tax Credits, even though both are in a UC 'live' area of Merseyside.)


"No longer meeting the gateway conditions" is the precise wording one of these claimants successfully used [upon advice from counsel acting pro bono pending an Upper Tribunal appeal.]. The Appeal was not needed as the DWP eventually conceded that this was the correct position and their guidance and parctice thus far (as at Nov 2015) had been incorrect.


[Of course, the DWP may seek to retrospectively introduce new regs and guidance; although a new approach has been promised by the new Secretary of State]

I don't want to drag this thread away from the OPs query (which i have answered with a quote from the UC regs) but you are now talking about an entirely different scenario to what you said above.

I agree with what you have just posted. If you no longer meet the gateway conditions you can escape from UC back to legacy benefits.

But what you said above was 'If a UC claimant receives a large lump sum they then no longer satisfy the gateway conditions and have to withdraw their claim.'

That is what is incorrect. Firstly, the capital example is a bad one because as I said your claim will be stopped because you no longer meet the entitlement conditions.

However you suggested that if you no longer satisfy the gateway conditions you must withdraw your claim and that is what I was saying was incorrect. Please point me to anything anywhere that says if you fail to meet the gateway conditions you must withdraw your UC claim? Rightsnet forum doesn't say that - it says you could get back into the legacy system by choice not that DWP would kick you off UC.

IQ