When someone makes a claim for Universal Credit, their Tax Credit award will be brought to an end and finalised.
If they then go on to receive a qualifying disability benefit^, and the award of that benefit covers a period when they were on Tax Credits, and they should have received an extra element ie Disabled Child Element, Severely Disabled Child Element, Disabled Worker Element or Severe Disability Element, and they report the award of that benefit to HMRC within a calendar month of the DWP/HB Office's decision, then they can now receive a backdated Tax Credit payment.
As this is in respect of a Tax Credit award for the period before they went onto UC it should not be taken as income for the UC award but as savings and disregarded as such for 12 months.
Regulations give HMRC limited powers to re-assess a Tax Credit award where a change in circumstances occurs after that award has been finalised.
On 14th January 2021 the Tax Credit Regulations were amended to include an extra situation where HMRC could do this - where a claimant is awarded a qualifying disability benefit^ (as long as they notify HMRC of the award within one month of the decision by the DWP/HB Office).
This power is effective from 6th April 2020.
Tax Credit awards are finalised:
- At the end of the tax year - claimants will need to confirm certain details via their 'renewal pack', or
- If they have not completed the renewal process by 31st July, or
- If the claimant is no longer entitled.
^A qualifying benefit for these purposes is: Armed Forces Independence Payment, Attendance Allowance, Disability Living Allowance, Personal Independence Payment, Employment and Support Allowance, Statutory Sick Pay, Housing Benefit where a disability premium is included, Income Support where a pensioner or a disability premium is included, Jobseeker’s Allowance where a pensioner or a disability premium is included; limited capability for work credit, a mobility supplement or a constant attendance allowance where the supplement or benefit is paid in conjunction with a war pension or industrial injuries disablement benefit.