ESA backpayment - will it out me above CTC threshold?

nicdigby

Hello,

I have had some great news and it's thanks to you guys encouraging me to make a ESA backdating claim.

They have decided to award me the back payment from the original date I was first told by them (wrongly) that I was ineligible!!

I am so happy I will now be getting a lump sum back payment. I have just turned the central heating on to celebrate

However, it leaves me with a question. Will I have to declare the ESA back payment lump sum when I do the declaration for my child tax credits next year? It doesn't seem fair if I have to because the effect will be to increase my income falsely for this year and then the HMRC/CTC people will surely reduce my CTC levels next year.

Can anyone please help me with the rules for whether back payments (as a result of official error) are exempt from being income in this tax year? Can anyone point me in the correct direction for legislation relating to this please, because I'd like to read about it all.

Help! Many thanks

Alice_Holt

It is not treated as income, but rather a capital sum.

If over £5k it this sum is disregarded (for benefit purposes) for the period you are in receipt of the relevant benefit.
Other arrears payments of benefits are disregarded for 52 weeks.

However, TC's are only affected by any income received on savings, there is no capital limit.
Check with TC if income from disregarded capital sums need to be included on your TC annual return.

nicdigby

However, TC's are only affected by any income received on savings, there is no capital limit.
Check with TC if income from disregarded capital sums need to be included on your TC annual return.

I thought that taxable benefits such as ESA are included as income for Tax credits purposes? Therefore if I get a lump sum of ESA it would be income?
Having now been told three times the wrong information by benefits “helplines” I am trying to find the legislation myself before ringing them. I