WTC/CTC clarification

irs101

Not entirely sure on this one - would be a good question to ask HMRC! It might be the product of the TC income rules replicating the income tax rules. So the maintenance payment is taxed in the hands of the person who earns the money, who then passes it on tax-free to the caring parent.

Similarly for tax credits the income is counted for the earners claim so reduces their tax credits. It would be wrong for it to be passed to the caring parent and for it to reduce their tax credits as well.

It's bound to be some point of principle like that.

irs

jellyhead

is the earner in receipt of tax credits though? i suppose they might be on working tax credit if they're on a low income ... hmmm ... my sis gets 3 thousand a year off her ex though, that's a hefty chunk of disregarded income. it would be more cost effective for the tax credits system to pay her 3 thousand less, then disregard that 3 thousand in the event of the ex husband making a claim for tax credits (he won't, he earns around 30).

irs101

I don't think receipt is the issue though, it's eligibility that's important in HMRC's eyes. Almost by definition the ex-partner is eligible for WTC - but chances are they aren't entitled. i.e. I'm a childless worker, so I'm eligible, but I earn too much to be entitled to anything - if I applied I would get an award of zero! So the earner's income is taken into account, but it has no material effect.

I agree that it gives an apparently unfair result in many cases, but until you get someone other than a tax inspector writing the rules, the system won't be sullied in the way you suggest (with apologies to any readers who are tax inspectors). But bear in mind.....I am just guessing as to the reasons.

irs

Spendless

Oh well thanks for trying to answer irs101. Was something I'd always wondered.

Perhaps I'll write a letter complaining about it to the Daily Mail and let them found out the reason for me (just kidding-lol)