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UK Tax Credits

HMRC Heterosexism

How the Civil Partnership Act (2004) impacts on tax credits for claimants in same-sex relationships.

Before 5th December 2005, same-sex couples were not recognised under the tax credit (or benefit) system, which only recognised opposite sex couples who were married or living together. Prior to this, members of a same-sex couple were treated as individuals for benefit purposes.

From 5th December 2005 (when the Civil Partnership Act 2004 came into force) the tax credits & benefits system changed so that civil partners or those living together as civil partners were recognised as a couple for benefit purposes. As with opposite-sex couples who's Tax Credits are based on combined income, same sex-couples were from this date expected to make joint claims. Those who were civil partners or living together were obliged to inform HM Revenue and Customs (HMRC) of their circumstances, and make a joint claim, based on their combined income.

The change in legal status of civil partnerships and cohabiting same-sex couples is treated as a change of circumstances for tax credits, despite there being no actual change in the couple's living arrangements. This presumed change of circumstances must be reported to HMRC within three months, and as a 'notifiable change', there may be a penalty of up to 300 pounds if it is not reported. (As is often the case, HMRC have taken a much stricter line than the DWP, insisting that  couples who were previously claiming as single claimants but living with a same sex partner must notify 'a change of circumstances' within 3 months of the 5th December 2005, or risk financial penalties.)

Because previously partners in a same-sex couple were assessed separately, the income of a same-sex partner was not taken into account when working out benefit and tax credit entitlement, but now it is. The choice for same-sex couples is therefore to disclose the fact that they are partners/cohabiting as a couple, or to review their living arrangements so that they are not treated as a cohabiting couple. Declaring themselves as a couple often results in a sudden reduction in tax credits paid, to which the couple will need to adjust. This is without taking into account any possible penalty fees nor, as some or commentators note (nusonline), the likelihood that a claimant in this situation may receive an overpayment which HMRC will seek to recover.

As has previously been the case for unrelated people of the opposite sex living together, the onus may be on people who share their homes with someone of the same sex to prove that they are not cohabiting as partners. The Civil Partnership Act could well mean that a review of policy is needed to help the resulting fraught judgements about who is and who is not living as part of a couple. 

Another problem with the changes (lawcentre) is that each change made in the year generates a separate set of forms, with the potential for confusion and overpayments.  Although this would still be the case for opposite-sex couples who divorce or separate, and single people becoming part of a couple, the fact remains that the changes arise from a change in law rather than in circumstances.

On the first anniversary of civil partnerships, OutRage!, the gay human rights group, urged Gordon Brown to provide transitional relief for innumerable same-sex couples who had suffered severe financial hardship from the overnight changes to social security regulations which were suddenly applied. Peter Tatchell (see The Guardian) notes that:

These changes have reclassified all cohabiting same-sex lovers as the equivalent of civil partners, including couples who are not civil partners and who do not want to be civil partners.  Whilst being lumbered with the financial responsibilities that go with civil partnership, they get none of the rights and advantages.  (It is also argued that people who are openly in civil partnerships still do not get all the same rights as married couples, yet are burdened with the same responsibilities.)

Because same-sex couples are now jointly assessed, the partner claiming social security loses most or all of their means-tested benefits, and this loss has pushed some people into debt and bankruptcy, causing huge worry and financial strains.  This has hit hard and put relationships under strain.  This is without any overpayments arising from re-calculation of tax credits and discovery of system-created miscalculations, which compounds these financial problems.

Whilst these changes bring cohabiting same-sex couples into line with pre-existing benefit rules relating to cohabiting opposite-sex couples, there has been no phasing-in, and nor has this been properly publicized in advance.

The benefit change was by the government, with no parliamentary debate or vote, and with a minimal awareness campaign to alert same-sex cohabitees to the changes.  Lack of publicity means that many cohabiting same-sex couples have been taken unawares and, when discovered by the benefits agency or HMRC, will have to pay back all benefits or tax credits received, often with a non-notification penalty.

In the past, changes to benefit regulations have been met with a decision to apply the rules only to new claimants, with existing claimants allowed to continue receiving benefits under the old rules.  The same transitional protection should have been available for cohabiting same-sex partners who claimed benefits/tax credits before 5th December 2005, assessing them under the old rules (or at least allowing them a transition period of claiming under the old rules) and subsequent claimants under the new.

The Department of Work and Pensions has turned down requests for transitional protection for same-sex partners, but admits transitional protection has been allowed on "numerous occasions" in the past following a change in benefit rules. The singling out of sex partners in granting transitional relief smacks therefore of homophobic discrimination.

Personal experience shows that advising HMRC that you are cohabiting as though you were civil partners means closing your sole claim and reapplying as a joint applicant.  At the very best there will be a payment delay whilst one claim closes and the other starts. When I called the Tax Credit Helpline just before the law came into effect, I was advised that I could not give details there and then, but needed to call back on 5^th December 2005, which I duly did. I was then sent a fresh claim pack which I had to complete with details for myself and my partner. I was told my current payments would cease until the joint claim had been processed. For families dependent on this income, a break in payments will cause unnecessary hardship.

Subsequent events suggest that, when a sole claim terminates, a recalculation is made of the tax credit award made for that current year. Any overpayment there may be up to that point on the sole claim, which up until closure of the claim will have been carried forward into the ongoing award and deducted (with or without the claimant's knowledge and agreement) from the ongoing tax credit entitlement, will be flagged up as a debt payable by the claimant. I have been told that, even if I had wanted to make repayments towards an overpayment incurred on my sole claim using my ongoing joint award, this is not possible, even if my partner gave her authority to do this. Therefore, even though our living circumstances have not changed, and my name still appears on the new, joint award, the old and new awards are treated as entirely different entities, and there is no possibility of using the new to pay off an overpayment on the old.

With an overpayment coming to light on the sole award, not only have I lost the tax credit income I would have had as a sole claimant, which I had come to depend upon for our living expenses, but I am experiencing 'double jeopardy':  the closure of my sole claim has been the catalyst for HMRC to demand thousands of pounds from me, completely out of the blue, and I am losing out twice. Couple that with the fact that, at the same time as HMRC are demanding repayment, I am also faced with a fresh set of paperwork relating to our joint claim, and a rising anxiety that HMRC will mess up on that, too. I have the dilemma of wondering whether I should ask them to stop the joint award, thereby freeing me from any risk that they will make further errors of which I might be unaware until such time as they demand repayment from me, or accept the money to offset my now-precarious financial situation. I choose the latter, because I have a mortgage to pay and a home to run. The inevitable then happened, and I am now faced with a smaller overpayment (about 700 pounds) on my joint award, which HMRC choose to reclaim by stopping the ongoing award. Whilst this goes against their professed policy of allowing a pause for appeal between identification of the alleged overpayment and recovery, I am by this time so confused by the situation that I let it go. At no time am I told how I go about challenging two separate tax credit overpayments, and I am left totally in the dark as to whether they are investigated separately or together. I consider this highly discriminatory.

This is without the heterosexist practices and assumptions within HMRC, in which it is automatically presumed that, if I have a partner, my partner is male because I am female. Thus, having submitted a Data Protection request for all information held on me by HMRC, I see written entries on screen referring to my partner as 'he' or 'him', long after I had disclosed (because I legally had to, not because I wanted to share this information with them by choice, it being my policy generally to only to so with people I feel safe with and in situations where the risk of homophobia is minimal or subject to sanctions) that I am a lesbian. Making this assumption in the absence of knowledge to the contrary can be seen as a thoughtless (if hurtful) presumption, but when I have fully disclosed my sexuality I do not expect to have my feelings bruised in this way, and to be continually reminded that I am apparently a second-class citizen who deviates from the 'norm' of the person making that recording. 

The Tax Credit system in general is hugely flawed, and there was a time when I ignored and denied to myself the homophobia and heterosexism rife within its system, for it seemed to plunge claimants into sudden poverty regardless of sexuality or any other human difference. Yet, as is seemingly proving to be the case with claimants from Black and ethnic minorities, and people with disabilities, I see a double discrimination going on, albeit with the same origins in the impersonal, hard-line approach adopted by HMRC officials, which pays minimal attention to personal circumstances and the needs and understanding of the individual. This needs to be urgently addressed as it places undue financial and emotional distress on people who are already disadvantaged by homophobia and heterosexism.

 REFERENCES:

To view the references, please click here to open the original MS Word document.

Alison Myers-Ward, 22/3/07

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