UK Simplifies Tax Credit Payments For Employers

by Amanda Banks, Tax-News.com, London

09 November 2005

The UK tax authorities have announced a change to payment methods for the Working Tax Credit which will save UK businesses up to £115m a year in administration costs.

Says HMRC: 'From today (7 November), HM Revenue & Customs is phasing out the payment of Working Tax Credit by employers. All new claimants will have their Working Tax Credit paid direct into their bank, building society or Post Office card account, and existing claimants will be switched to this system of direct payment over the next five months.

'The change to direct payment of Working Tax Credit will substantially reduce the regulatory burden on businesses and save them between £110m and £115m every year from April 2006.

'The changes were made following extensive consultation with employers' representatives and are part of the Government's wider agenda to reduce red tape for businesses.'

Welcoming the changes, Paymaster General Dawn Primarolo said: "Payment of Working Tax Credit by employers has helped reinforce the message that work pays. However, the Government is committed to reducing regulatory burdens wherever possible, and following consultation with employers we are from today starting to replace payment of Working Tax Credit through employers with direct payment to claimants. This will save businesses up to £115m every year from next April.

"No-one will lose out. These changes will be made automatically and will not affect anyone's entitlement to Working Tax Credit. The switch to direct payment will mean recipients no longer have to involve their employer in their claim, improving confidentiality for claimants."

Under transitional arrangements put in place by HMRC, employers should have written to all staff currently receiving Working Tax Credit through their payroll by 7 November. HMRC will also be writing to all affected employees during November. Employees will continue to receive their Working Tax Credit as they do now, until direct payment starts.

Working Tax Credit was introduced in April 2003 as part of the Government's reforms to make work pay and end child poverty. The Chancellor announced in the 2005 Budget that paying Working Tax Credit via employers would be phased out between November 2005 and April 2006.

Recommended