Paymaster General Dawn Primarolo published a Bill to simplify and streamline the current range of tax credits by replacing them with just two new tax credits, in the wake of chancellor Gordon Brown's pre-Budget report earlier in the week.
The Bill sets out the legislative framework for the Child Tax Credit, for families with children, and the Working Tax Credit for working households on low incomes, including those where a worker has a disability. The credits are to be introduced from 2003.
Support for childcare costs will form part of the Working Tax Credit. Although some respondents to a consultation held over the summer said it should link to the Child Tax Credit instead, most felt this element should retain the link to work, as its purpose was to remove barriers to employment.
A small number of respondents to the consultation wanted payment to be made directly to childcare providers. However, many thought that parents receiving help with childcare costs should pay a childcarer in the same way as other parents. The National Childminding Association had said that the childcare tax credit should be paid direct to the main carer, but recommended a more robust assessment and verification system for childcare costs.
The Government has decided that support for childcare costs should be paid directly to the main carer, usually the mother, whether weekly or every four weeks, alongside payments of the Child Tax Credit.
Most respondents to the consultation felt it was reasonable to expect parents to be responsible for notifying the Inland Revenue of changes in their childcare arrangements without routinely requiring confirmation from providers, subject to the Revenue's right to check details with the provider. Many expressed concerns about the inflexibility of the current system and the need for it to be more responsive to changes in parents' circumstances. The Tax Credits Bill provides for a flexible approach in responding to changes in income and the Government will discuss the details with interest groups as draft regulations are drawn up.
The new credits will replace Working Families and Disabled Person's Tax Credits, Children's Tax Credit, and the New Deal 50-plus Employment Credit. The new Child Tax Credit will build on the foundations of universal Child Benefit and will take in groups who are currently excluded from help other than Child Benefit, such as students and student nurses.
