Clause 4 - Claims: supplementary

Part of Tax Credits Bill – in a Public Bill Committee at 4:30 pm on 15th January 2002.

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Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury 4:30 pm, 15th January 2002

I join other members of the Committee in welcoming you to the Chair, Mr. O'Hara. It is always a pleasure—in this case, an unexpected one—to serve under you, and I am delighted to make my first appearance in Committee under your chairmanship.

The hon. Member for Arundel and South Downs (Mr. Flight) kindly made it clear that the amendments, which deal with the mechanics of making claims, are probing amendments. That is extremely helpful and I am happy to respond accordingly. Amendment No. 9—I appreciate that it is imperfectly drafted because it is a probing amendment—would restrict the time allowed for claims to a maximum of four weeks. I hope that the difference between the Government and the Opposition on this point is one of degree, rather than substance.

We want to stress that the essential point about tax credits is that they are designed to target support at the time that people need it. We want to encourage people to take up their entitlement in good time, so that they can get the support that they need when they need it. Having said that, we need to allow claimants reasonable time to identify that they are entitled to claim, and to claim. As the hon. Member for Northavon (Mr. Webb) suggested, it is important that the claims process be flexible and recognise the practicalities of people's lives. We must recognise that the times when one first qualifies for a working tax credit or a child tax credit—when one starts a job, or one has a new arrival in the household—are often particularly busy and stressful. We will therefore allow a period of three months in which claims can be made, rather than the four weeks proposed in the amendment.

There is a balance to be struck, and we must offer flexibility and recognise the everyday practicalities of real life. A time limit of three months will enable the rules governing child tax credit claims to be aligned with those governing child benefit claims on the birth of a child. That will allow new parents to claim the child tax credit and child benefit in tandem—a further part of the integration process. However, because the time limit is set out in regulations, we can keep it under review in the light of experience. I hope that that clarifies matters for the hon. Member for Arundel and South Downs, and that he finds that acceptable.

On amendment No. 10, even with a time limit of three months, there will inevitably be cases where a timely claim proves invalid for one technical reason or another. We do not want the entitlement of claimants who have done their best to comply with the rules to be curtailed through no fault of their own. To avoid such claimants losing out on a technicality, it would be appropriate to treat a claim as if it had been made earlier than it actually was. It is for such circumstances that the phrase ''earlier or'', in subsection (1)(b), is intended to cater. To avoid claimants losing out unfairly, it is right to allow some flexibility in respect of the effective date of claim. The current rules for working families tax credit and disabled person's tax credit allow some room for manoeuvre, and we intend to take a similar approach in the regulations dealing with claims for the new tax credits.

Amendment No. 11 would restrict the power, conferred in clause 4(1)(d), to make regulations. The power allows regulations to provide that an award of tax credits be subject to the condition that requirements for entitlement be satisfied at a prescribed time. If the amendment were accepted, the prescribed time would be within four weeks of the date on which the award becomes payable. I reassure Opposition Members on this point. The Government do not intend that tax credits be awarded to those who do not in any sense meet the qualifying conditions.

We will consider the main clauses dealing with entitlement—clauses 8 to 12—in due course, but the basic principle is that the qualifying conditions for eligibility for tax credits must be met. People cannot qualify for tax credits until they meet those conditions, and they will cease to qualify once they no longer meet them. Clause 4 (1)(d) is not intended to undermine that principle, and it is certainly not intended to allow the Inland Revenue to make payments—not even those limited to four weeks—to people who do not meet the qualifying conditions. It is simply a machinery provision. We are concerned with the mechanics of making claims, not the rules of entitlement.

Paragraphs (b) and (c) of clause 4 (1) allow that, in certain circumstances, claims may be made in advance of a person's becoming entitled to tax credits. We are still considering the circumstances in which that provision may apply. A possible example is the person who knows that they are about to start a new job. In such a circumstance, it may be right that the regulation allow them to submit a claim for a working tax credit shortly before they commence work, so that the Inland Revenue can ensure that the credit is available as soon as they qualify for it. As I have said, we must ensure that we deliver the payment when it can do most good and when it is most obviously needed.

However, it will be necessary to make it clear, as we shall in regulations, that a person who submits an advance claim is entitled to receive working tax credit only if they actually take up the job. The award needs to be made conditional on the requirements for entitlement being met at the date on which the award is set to begin. If the requirements are not met on that date, the reward will never become payable. Paragraph (d) is designed to enable us to impose that conditionality whenever an advance award is made. The requirements for entitlement will need to be met on the date on which the award is due to begin, not four weeks later, or even two weeks later. I hope that with that clarification the hon. Member for Arundel and South Downs will feel able to withdraw the amendment.