The Tax Credits (Income Thresholds and Determination of Rates) Regulations 2002

Determination of rate of working tax credit U.K.

7.—(1) In relation to a person or persons entitled to working tax credit, the rate shall be determined by finding the rate for each relevant period and, where necessary, adding together those rates.

(2) “Relevant period” means any part of the period of award throughout which—

(a) the elements of working tax credit (other than the child care element) to which the person or persons may be entitled, remain the same; and

(b) there is no relevant change of circumstances for the purposes of the child care element of working tax credit, within the meaning of regulation 16(1) of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 (change of circumstances for the purposes of child care element).

(3) The rate for each relevant period shall be found in accordance with the following steps—

• Step 1 — finding the daily maximum rate for each element other than the child care element

  For each element of the tax credit (other than the child care element) to be included in the case of the person or persons entitled to the tax credit, find the daily maximum rate using the following formula—

  

  where— “MR” is the maximum rate in relation to that element for the tax year to which the claim for the tax credit relates;

  “N1” is the number of days in that tax year.

• Step 2 — finding the maximum rate for the relevant period for each element other than the child care element

  For each element of the tax credit to be so included, find the amount produced by multiplying the daily maximum rate (found under Step 1 and rounded up to the nearest penny) by the number of days in the relevant period.

• Step 3 — finding the income for the relevant period

  Find the income for the relevant period by using the following formula—

  

  where— “I” is the relevant income for the tax year to which the claim for the tax credit relates;

  “N1” is the number of days in that tax year;

  “N2” is the number of days in the relevant period.

• Step 4 — finding the threshold for the relevant period

  F1 F2 Find the threshold for the relevant period using the following formula—

  

  where— “N1” is the number of days in that tax year;

  “N2” is the number of days in the relevant period.

• Step 5 — finding the amount of the reduction

  Find the amount which is [F3 41%] of the amount by which the income for the relevant period (found under Step 3 and rounded down to the nearest penny) exceeds the threshold for the relevant period (found under Step 4 and rounded up to the nearest penny).

• Step 6 — reducing the elements of the tax credit (other than any child care element)

  If the amount found under Step 5 (rounded down to the nearest penny) is less than or equal to the total of the amounts found under Step 2 for the elements of the tax credit, deduct the amount found under Step 5 (rounded down to the nearest penny) from the total of those amounts found under Step 2.

• Step 7 — finding the actual weekly child care costs for the relevant period

  Find the relevant child care charges for the relevant period in accordance with regulation 15 of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002.

• Step 8 — finding the actual child care costs for the relevant period

  

  Here N1 and N2 have the same meanings as in Step 3.

  The result of this step is the amount of actual child care costs for the relevant period.

• Step 9 — finding the prescribed maximum child care costs for the relevant period

  Divide whichever of the maxima in regulation 20(3) of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 is applicable by 7, round the result up to the nearest penny and multiply the resulting figure by the number of days in the relevant period.

  The result of this is the prescribed maximum child care costs for the relevant period.

• Step 10 — finding the child care element for the period

  Take the lesser of the results of Steps 8 and 9.

  Multiply that figure by [F4 70%] and round the result up to the nearest penny.

  The result of this step is the maximum rate of the child care element for the relevant period.

• Step 11 — reducing the elements of the tax credit (including any child care element)

  If the amount found under Step 5 (rounded down to the nearest penny) exceeds the total of the amounts found under Step 2 for the elements of the tax credit—

  (a)

  deduct the excess from the amount found under Step 10 for any child care element; and

  (b)

  reduce the total of the amounts found under Step 2 for the other elements of the tax credit to nil.)

• Step 12 — finding the rate for the relevant period

  Add together—

  (a)

  the total of the amounts found under Step 2 for the elements of the tax credit (other than any child care element) after reduction in accordance with Step 6 or Step 11; and

  (b)

  the amount found under Step 10 for any child care element after any reduction in accordance with Step 11.

  This is the rate for the relevant period.

(4) “Child care element” has the meaning given by section 12(2) of the Act.

Textual Amendments

F1 Reg. 7(3): Sum “£5,220” substituted for "£5,060" (with effect in accordance with reg. 1(3) of the amending S.I.) by The Tax Credits Up-rating Regulations 2005 (S.I. 2005/681), regs. 1(1), 4(3)

F2 Reg. 7(3): Sum “£6,420” substituted for “£5,220” (6.4.2008) by The Tax Credits Up-rating Regulations 2008 (S.I. 2008/796), regs. 1(1), 4(4)(a)

F3 Word in reg. 7(3) substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits Up-rating Regulations 2012 (S.I. 2012/849), regs. 1(1), 4(4)

F4 Word in reg. 7(3) substituted (6.4.2011) by The Tax Credits Up-rating Regulations 2011 (S.I. 2011/1035), regs. 1, 4(4)

Modifications etc. (not altering text)

C1 Reg. 7(3) Step 5 modified (8.3.2012) by Welfare Reform Act 2012 (c. 5), ss. 76(1), 150(1)(a) (with s. 76(2)(3))

Commencement Information

I1 Reg. 7 in force (1.8.2002) for specified purpose and in force (1.1.2003) for further specified purpose, otherwise (6.4.2003) for all other purposes.