Supplementary memorandum submitted by
the Institute of Chartered Accountants in England and Wales
It is true enough of course that you have to
achieve a certain number of hours' work before being entitled
to tax credits. This is 16 hours (if you have a child, are disabled
or qualify for the 20-plus return-to-work element), or 30 hours
otherwise. The test is the number of hours normally worked over
the period of the award.
Wherever you have a threshold, there are bound
to be people who arrange their affairs so that they just meet
the criteria. I think this is inevitable unless you do away with
the threshold. However, I am not sure how many claimants will
be sophisticated enough to manipulate their hours too precisely
around this threshold, or will be able too.
I don't think the threshold encourages people
to operate with a mixture of different sorts of work, rather than
just one regular job. It is the total hours that counts. In fact
it would probably be easier to keep track of normal working hours
with just one regular job rather than a number of them. I am not
also not sure that people would be discouraged from finding a
better-paid job with more hours, in the way Ms Keeble suggests,
as although their tax credits would be tapered away, they would
presumably end up with more money overall from the better job.
Of course the effect would be cushioned to start with by the £25k
disregard for income increases.
Ms Keeble raises an interesting point to do
with re-training. One difficulty for single parents looking after
children who want to re-train, or who are just looking for work,
is that they will not be entitled to tax credits unless they do
16 hours work and so will not get the childcare support—but
if they are out and about trying to get interviews, or are studying,
this may be just when they could really do with help in looking
after the children. The Government's strategy for childcare does
not seem to me to be particularly joined up in this respect.
May 2006
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