Major benefits changes and tax credits issues amid COVID-19

Recap of the major
benefits changes and
Coronavirus (COVID-19)
Wednesday 6 May
Policy in Practice
webinar

Housekeeping
www.policyinpractice.co.uk
● Audio check
● Please ask questions
● Poll and a survey
● Aim to finish by 11:30
● Slides and recording will follow

Today’s speakers
Zoe Charlesworth
Head of Policy
Policy in Practice
Victoria Todd
Head of LITRG
LITRG
Megan Mclean
Senior Policy and
Data Analyst
Policy in Practice
Peter Carter
Business Account
Manager
Policy in Practice

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Agenda
● Overview of the COVID-19 changes and a look at some key issues
● Recent developments and a focus on tax credits issues
● The main concerns of people
● How organisations are responding
● Questions and answers

666
Poll 1: What are you struggling most
with at the moment?

777
Over to Zoe
Overview of the COVID-19 changes
and a look at some key issues

www.policyinpractice.co.uk/coronavirus

Coronavirus Job Retention Scheme
● 4 months from 1 March 2020 to end June 2020
● Employed on 19 March, paid through PAYE and with a UK bank account
● Grant for 80% of the salary, or average of last year’s salary, or pay equal to
that in the same month in previous year, or pro-rata pay. Up to £2,500, plus
employer’s NI contribution and minimum pension contribution
● Can’t undertake work for that employer but you can work for others and
furlough must last at least 3 weeks
● Applies to all salaried staff (students, NRPF, apprentices, salaried directors)
● The employer has to apply for the job retention scheme, leaving some
employees feeling powerless or confused

Self-employed Income Support
● Open to those who have completed a self-employed tax return for 2018/19
and are currently self-employed
● Must have self-employed trading profits < £50,000 in 2018/19 and self-
employment is > 50% of taxable income
● Average of 80% of trading profit calculated over the last 3 tax years, up to
£2,500/month
● HMRC will invite claimants to apply. The grant will be paid as a lump sum and
count as business income for tax credit and UC purposes

Impact 1: Universal Credit claims
In the 6 weeks to 12 April 2020 DWP
received over 1.8 million
declarations to Universal Credit. This
is almost 5 times higher than
declarations received from people in
the same period last year.
On its first day, the Job Retention
Scheme received over 140,000
applications from companies paying
the wages of the equivalent of a
million workers
Traffic to our Benefit and Budgeting Calculator quadrupled and we answered
circa 1,000 questions on our website from people worried about their finances

Universal Credit changes
Data analysis on a representational dataset showed that as a result of the UC
measures:
● More households in receipt of Universal Credit will be able to meet their bills
(from 10% to 16%)
● The average increase in Universal Credit awards as a result of changes from
April 2020 is £98/month, an increase of 7.3%

Impact 2: Legacy vs Universal Credit

Impact 3: Tax Credits vs Universal
Credit
For those in receipt of WTC and awaiting a grant, the decision will rest on an
individual assessment and consideration of circumstances
● £16,000 savings?
● Better off in the long run?
● Self employed and re-introduction of minimum income floor after 1 year?
● 5-week wait vs lower ongoing support?
If claimants stay on Tax Credits, then inform HMRC of revised 2020/21 income

Impact 4: Benefit Cap
Outside London In London

Impact 4: Benefit Cap continued
Does the Benefit Cap now meet the initial objective?
● The justification for the benefit cap was fairness between those working and
those not working, does this still hold true given that furloughed claims are
also not working?
How much does the Government think is needed to support households?
● Treasury minimum of £2,500/month
● DWP maximum of £1,917/month (London) or £1,667/month outside London
Impact on local authorities
● DHPs - can LA support these additional claims?
● Welfare support for children
● Impact on homelessness - meeting the LHA is linked to homelessness

Impact 5: Two parallel welfare schemes
● Two parallel schemes create inequitable welfare support
● The new schemes are not targeted or means-tested. A couple both qualifying
for the new schemes can receive £60,000/annum. A similar couple on UC
could receive £7,128

Case study: Furlough vs redundancy
Jack
Lone parent with 2 children
Private rent at LHA
Earnings £30,000 / annum
Furloughed
£2,828
Jill
Lone parent with 2 children
Private rent at LHA
Earnings £30,000 / annum
Made redundant
£1,721

Case study: Jack and Jill’s income

Case study:

Impact 6: Differences in CT support
Inequitable Council Tax support
Local authorities with 100% CTRS and CT charge of £100/month
● Claimant pays no Council Tax
● LA retains the majority of the Government funding for discretionary welfare
Local authorities with 40% basic scheme and CT charge of £100/month
● Claimant still pays £27.50/month
● LA has little left for discretionary support although the claimants need the
most support
Welfare organisations need to understand the specific local situation

Impact 7: Surplus earnings
Single person self-employed income is
now £0, receives £1,000 UC/month
Nil UC threshold = (£1,000*0.63) + WA
£0 + threshold £2,500 = £3130/month
From March – September this claimant
receives £12,103
Without the grant they would have
received £7,000. So the grant is worth
£5,103 (not £7,500)
There are implications for advisors due to the complexity, and implications for
the claimant as they need to know to reclaim

Finally: future provision?
What happens after the 3 month schemes run out?
● Extend grant schemes?
- retains duality of welfare provision (not promoting fairness)
- simple method to support millions of workers
- shares burden between DWP and HMRC
● End grant schemes?
- leave UC support as it is or increase it?
- could DWP cope with the influx of cases?
- implications for LAs plugging the gaps in support

242424
Over to Victoria
Recent developments and a focus on
tax credits issues

Tax credits
● Working tax credit entitlement is based on meeting certain working
hour thresholds (16, 24 or 30) depending on circumstances
● Number of hours you work is generally based on your ‘normal’ working
hours. No legislative definition to help
● Prior to COVID 19 situation – generally accepted by HMRC that a
disruption of up to 4 weeks, if temporary, would not impact normal
working hours
● Start of COVID 19, extended this to 8 weeks
● Announced this week that this relaxation now applies until Job
Retention Scheme closes – covers reduced hours, furloughed workers,
unpaid leave, temporary lay-off, self-employed. No need to report
change of hours
● Usual rules still apply if made redundant or permanent change of hours

Tax credits continued ...
● Even though there is no need to report temporary changes to working
hours, people can report estimated income figures for 2020-21. This is
not mandatory
● Must be careful not to overestimate falls in income - risk of
overpayment
● Permanent changes to work/working hours must be reported and will
may lead to tax credits stopping – four week run-on in some cases
● Things are changing rapidly – must keep checking current situation
● Remember that tax credits will be terminated if a claim for UC is made –
HMRC/DWP position is that most people cannot make brand new claims
for tax credits and other legacy benefits

Childcare
● The position for WTC childcare element is currently unclear
● Those who are continuing to work and sending children to their
childcare provider can continue claiming
● Not clear on position for those who are still working (or treated as
working) but who can’t use childcare but are still asked to pay or to pay
a retainer
● DWP have recently published updated information for Universal Credit
purposes – awaiting further information/clarification

Self-employment income support
scheme (SEISS)
● The scheme will allow you to claim a taxable grant of 80% of your average monthly
trading profits, paid out in a single instalment covering 3 months, and capped at
£7,500 altogether
● HMRC just launched an eligibility checker – but be aware it only checks against one
of the qualifying conditions
● May be able to claim if you’re self-employed or a member of a partnership and:
○ you traded in the tax year 2018 to 2019 and submitted your Self Assessment
tax return on
○ or before 23 April 2020 for that year
○ you traded in the tax year 2019 to 2020
○ you intend to continue to trade in the tax year 2020 to 2021
○ you carry on a trade which has been adversely affected by coronavirus
● In addition, trading profits no more than £50k and at least equal to non-trading
income. £50k test is either based on 18/19 profits or average over 16/17-18/19
● Online service available from 13 May – payment within 6 working days

Emerging issues related to SEISS
scheme
● It will count as income for Universal Credit in assessment period it is
received – may trigger surplus earnings
● It is taxable
● Those who changed from sole trader to limited company director in
2019/20 will not qualify
● Newly self-employed won’t qualify – Scottish scheme introduced to help
(although conditions are fairly restrictive)
● Claims need to be made online and need a Government Gateway
account – but we understand a telephone option will be made for those
who can’t transact digitally
● HMRC calculate the grant – there will be a dispute process if you
disagree with the amount

Emerging issues related to JR scheme
● Covers ‘furloughed’ workers – employer can claim up to 80% of regular
wages up to monthly cap of £2,500
● Furloughing is an employment law issue – not necessarily cost neutral
for employers
● Emerging issues:
○ Confusion about key aspects of scheme leading to employers
refusing to furlough
■ Not mandatory for employers to furlough staff
■ Wider than originally envisaged – can include people shielding
and those with caring responsibilities if employer agrees
■ Employees cannot do any work for that employer – but can
work for others if their contract allows it
■ Ability to take back people who had left (made redundant or
resigned) and put them on furlough and access the scheme
■ Confusion around extension of the scheme to 19 March
(previously 28 Feb)

Emerging issues related to JR scheme
continued ...
○ Particular problems for those working for umbrella companies
■ Discretionary part of their pay
■ Holiday pay
○ Calculations are complex – currently no facility to make
amendments once a claim is submitted and only 1 claim per pay
period
○ Earnings are reported by employers to HMRC as usual under real
time earnings rules – but seeing some changes to dates of payrolls
which can impact Universal Credit payments
○ Directors of Limited companies – claims restricted to their salary
(doesn’t include dividends) and those who run annual schemes may
miss out

323232
Over to Megan
The main concerns of people

Q: I’m shielding for at least 12 weeks due to an underlying health condition,
what am I eligible for?
Statutory Sick Pay has been extended to those who are shielding due to high risk
of Covid-19. You must be shielding for at least four days, though SSP will be paid
from day one.
Individuals who are shielding are also eligible for the Job Retention scheme if their
employer agrees to place them on furlough.
If this is not possible, check eligibility for UC, CTS and free school meals.
I’m shielding, what support can I claim?

I’m receiving Working Tax Credits, will I
be moved onto Universal Credit?
Q: I’m receiving WTC and my hours have dropped, will I be moved onto UC?
If this is a temporary change due to Coronavirus, HMRC will ignore this change in
working hours during the Covid-19 crisis. If you are self-employed and have
temporarily reduced your hours/ stopped trading, this will also be ignored. Tax
credits will continue to be paid based on your old working hours. If this a
permanent change, you’ll need to inform HMRC and move to UC (if eligible).
Consider making a claim for CTS - this won’t trigger a move to UC.
Some households may be better off choosing to move to UC - but each household
should do a benefit check before claiming. Bear in mind the five week wait, future
MIF for self-employed households, etc.

I don’t qualify for the self-employment
scheme
Q: I don’t qualify for the self-employment scheme, what support can I claim?
People who don’t qualify include: those whose self-employed income makes up
less than half of their taxable income, have profits over £50,000, weren’t self-
employed in the 2018-19 tax year.
Self-employed people aren’t usually eligible for New Style JSA. This requires you
to have paid Class 1 National Insurance contributions over the past two to three
years.
Check eligibility for UC and CTS if savings are under £16,000. Other support
mentioned earlier, e.g. business interruption loan.

I don’t qualify for any support
Q: I’ve got no recourse to public funds and don’t qualify for Universal Credit.
What can I claim?
Some people won’t be eligible for most support - the two groups we’re hearing
from most are students and those with no recourse to public funds.
Both of these groups are eligible for the Job Retention Scheme/ Self-employment
Income Support Scheme and New Style JSA/ESA.
Students may be eligible for UC if their partner is eligible. People with no recourse
to public funds may be eligible for UC if their partner may be eligible for UC (but
only a single person allowance). They can get medical care if ill with COVID-19.
As of April 2020, EEA nationals will need at least pre-settled status to claim CTS.
Local authorities may be able to help - people with no recourse to public funds can
now get LA homelessness support. LAs may also be able to signpost to local
charities and mutual aid groups.

373737
Over to Peter
How organisations are responding

Who are your vulnerable groups?

Identify Engage Track
People who need your
support the most
Your residents with
targeted support
The impact of policy
and effectiveness of
interventions

LIFT summary

Focus on one cohort

Identify to street level

Identify to household level

Download data for further analysis

Track outcomes over time

Track cohorts over time

Understand a household’s journey

Show the situation in the calculator

Should I move to Universal Credit?

Further guidance

Self-serve Benefits and Budgeting
Calculator to triage customer support

545454
Questions and answers

● For up to date information on the welfare support available see
www.policyinpractice.co.uk/your-income-and-coronavirus-covid-19/
● Our basic Benefits Calculator is listed on Gov.uk and is free. Whilst it doesn't
have the built-in features to help all frontline advisors give the best support
they can, it is as accurate and simple to use. Access the free Benefits
Calculator
● Self-serve calculator to triage customer support
● Follow up email with webinar recording and slides, with links
● Short survey to follow
● Next webinar: Coronavirus: stories from the frontline with Ellie Kershaw,
LB Tower Hamlets and Grant Bailey, Cheltenham Borough Homes, on Wed
20 May at 10:30
Practical tools that can help

565656
Thank you
Victoria Todd, Low Incomes Tax Reform Group (LITRG)
www.litrg.org.uk
Zoe Charlesworth
Megan Mclean
Peter Carter
Policy in Practice
hello@policyinpractice.co.uk
0330 088 9242

Major benefits changes and tax credits issues amid COVID-19

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