Explanatory Notes

Welfare Reform Act 2012

2012 CHAPTER 5

8 March 2012

Commentary on Sections

Part 5: Social security: General

Section 120: Loss of tax credits

615.Section 120 inserts various loss of tax credit provisions into the TCA 2002. The purpose of this section is to allow a more uniform imposition of penalties following convictions for benefits and tax credits fraud. The new provisions inserted into the TCA 2002 follow the loss of benefits regime under the SSFA 2001 (as amended by sections 117, 118, 119 and 121).

36A: Loss of working tax credit in case of conviction or penalty for benefit offence

616.The combined effect of subsections (1) and (4) is for payment of working tax credit to be withdrawn for the disqualification period where the offender has been convicted of one or more benefit offences in any proceedings, or accepted a penalty under section 115A SSAA 1992 (“an administrative penalty”) or a caution as an alternative to prosecution. In the case of a single claim, subsection (4) provides that the withdrawal will apply to the offender. In the case of a joint claim the withdrawal will apply to either member of the couple. Subsection (3) of new section 36A provides that where a person is convicted of one or more benefit offences, a sanction will not apply here if they are being sanctioned under new section 36C for repeated benefit fraud.

617.Subsection (5) allows HMRC to make regulations which prescribe how working tax payments to a couple may be reduced rather than withdrawn.

618.Subsection (6) of new section 36A defines the disqualification period for the purpose of this section. The disqualification period is the amount of time the benefit can be disqualified for and the length depends on the reason why the person was disqualified. The disqualification period begins at a prescribed time after conviction or the agreement of an administrative penalty or caution. The disqualification periods are set out in subsection (7). Subsection (7)(a) sets out the loss of benefit sanction for relevant offences defined in subsection (5) of section 118. This will result in a three year loss of benefit sanction, irrespective of whether it is a first, second or third offence. Subsection (7)(b) introduces a 13 week loss of benefit sanction for claimants who are convicted of a first benefit offence. Subsection (7)(c) introduces a four week loss of benefit sanction for claimants who accept the offer of an alternative penalty rather than prosecution.

619.Subsection (8) gives the Treasury the power to amend by order the periods of sanction that are in subsection (7)(a) to (c).

36B: Section 36A: supplementary

620.Section 36B provides for payments and adjustments to be made if necessary to take account of subsequent events such as when a conviction taken into account for the purposes of section 36A is later quashed or an agreement to pay a penalty under section 115A of the SSAA 1992 is similarly taken into account but is later withdrawn.

36C Loss of working tax credit for repeated benefit fraud

621.Subsection (1) of new section 36C lists conditions which must be satisfied for a loss of benefit sanction for repeated benefit fraud to apply. Where these are fulfilled, subsection (3) provides that other than for a relevant offence, working tax credit will not be paid during the disqualification period. In the case of a joint claim, this will apply to one or the other person.

622.The effect of subsection (2) is that persons convicted of a relevant offence defined in section 6B(14) of the Social Security Fraud Act 2001 (as inserted by subsection (5) of section 118) are subject to the three year loss of benefit sanction under section 36A, irrespective of the number of previous offences.

623.Subsection (4) allows HMRC to make regulations which prescribe how working tax payments to a couple may be reduced rather than withdrawn.

624.Subsection (5) of new section 36C defines the disqualification period for the purposes of this section. The disqualification period is the amount of time the benefit can be disqualified for and the length depends on the reason why the person was disqualified, and begins at a prescribed time (which will be defined in regulations). Subsection (6) of new section 36C defines what the relevant periods (time for which the benefit can be disqualified) are in relation to this. Subsection 6(a) of new section 36C introduces a three year loss of benefit sanction for claimants who are convicted of a benefit offence preceded by two previous offences (disqualifying events). It only applies where the earliest offence occurs within five years of the second offence (which must have occurred within five years of the current offence). Subsection 6(b) of new section 36C introduces a 26 week loss of benefit sanction for all other offence convictions.

625.Subsection (8) of new section 36C means that where a person is convicted of more than one offence in a set of proceedings, those offences are only counted once for the purposes of section 36C under the TCA 2002.

626.Subsections (9) and (10) of new section 36C give the Treasury the power to amend the period of sanction by order, and to specify different periods depending on previous disqualifying events.

36D Section 36C: Supplementary

627.Section 36D provides for payments and adjustments to be made if necessary to take account of subsequent events such as when a conviction taken into account for the purposes of section 36C is later quashed or an agreement to pay a penalty under section 115A of the SSAA 1992 is similarly taken into account but is later withdrawn.