Working Tax Credit Query

[Sparklingcider]

Hi all

Could anyone point me in the right direction with regards to a Working Tax Credits (WTC) query. I'm self employed and have been since May 2014. I fulfilled the criteria for receiving WTC (basic element, 30 hour element, low income). I have just recently renewed and this is where my query has arisen. I had been told, as well as reading on the internet on a number of forums about what is classed as an underpayment where if you earn less than had been estimated you then receive a lump sum payment to make up the difference.
I fell into this category of having made a loss and as I had all my paperwork/receipts, etc in order I had already submitted my SA tax return for the year and then simply had to do my WTC renewal before 31st July which I did. I have had my paperwork back from HMRC today and on there it states that what I have received to date is correct and that I won't be getting any additional payments.
What therefore is this extra underpayment money that many others have spoken about (and in most instances they are talking about payments in the thousands) and also what I have read on sites such as the money expert, citizen advice sites, etc? All have mentioned about the under and overpayments and about the disregard that applies and is taken into account when calculating your final entitlement. As I said any advice or pointing of in the right direction would be gratefully received and thanks in advance for any responses.

[Kati]

Re: Working Tax Credit Query

I think this might explain it better than I could - http://www.hmrc.gov.uk/manuals/tcmanual/tcm0232380.htm

An underpayment will occur where a tax credit entitlement increases from a date earlier than the processing date. An overpayment will occur where
tax credits entitlement decreases from a date earlier than the processing date
a debt is carried forward from a previous year.

Underpayments or overpayments are calculated in the following way

• all debits (contras, payments, overpayments from previous years) are totalled
• all credits entered on the recipient’s tax credit accounting record (previous awards of tax credits, underpayments from previous years) are totalled

the credits less the debits will give a current balance of the account (the net amount of payments made to date). Any difference between this and the balance of the current award that should have been paid to date is the amount of the

underpayment - or positive result
or
overpayment - or negative result.

If there’s a net underpayment of an award, the amount underpaid will be paid to the recipient as a one off payment for arrears.

The exception to this is if the underpayment has been caused by a reduction in the household income. In these circumstances, because the new award is based on an estimate of income for the current year, the potential entitlement will be retained until the award is finalised when the actual income is known. For further information, follow the guidance in TCM0234040.

then - http://www.hmrc.gov.uk/manuals/tcmanual/TCM0234040.htm

If a customer reports a decrease in in-year income (or when they renew their claim) their tax credit payments are adjusted to reflect their new income level.

From April 2007, any entitlement due from the date the customer reported the change to the date of the calculation will be paid to the customer.

We won’t make an extra payment at that stage for the period from 6 April up to the date the customer told us their income had gone down.

The potential entitlement will be offset against any in-year overpayment that may arise throughout the year. The amount of potential entitlement remaining to be paid after any in-year recovery amount has been offset is called ‘potential payment’. If there’s any potential payment remaining, it will be released automatically when the customer finalises their award.

The purpose of potential entitlement is to reduce the number and size of any overpayments. This will also help manage the concerns of customers regarding the potential reduction of future awards.

[Sparklingcider]

Re: Working Tax Credit Query

I think this might explain it better than I could - http://www.hmrc.gov.uk/manuals/tcmanual/tcm0232380.htm


then - http://www.hmrc.gov.uk/manuals/tcmanual/TCM0234040.htm

Hi and many thanks for the response. These are in fact two of the links that I have already seen and had a read through and from which I got the impression that I fall into the category of underpaid and being owed some further payments.
I have also just spoken to a member of staff at HMRC and she claimed never to have even heard people being paid more for under payments? Apparently you have to qualify for the elements I mentioned and the amount shown on the HMRC's Website for WTC is the maximum amount you receive - which I have done (around £2700 for the year).
She further stated that any drop in income (or as in my case a loss) makes no difference to the amount received and certainly wouldn't result in any additional payments being made - a total contradiction to what I have heard and read in links such as the above.
Surely though as a member of HMRC WTC staff she would know what she was talking about but then what about what I have read on the net? I am now even more confused as to what is true and where I stand? The funny thing is I am actually highly educated and am in fact currently in the middle of doing a PhD and hope I'm not the only one that feels as if anything tax related may as well be in a foreign language!!! Again any further advice would be greatly appreciated.