Immigration and Tax Credits

tax calculation

If a sponsor receives Tax Credits, will this adversely affect an immigration application by his/her spouse and, where relevant, children? This article considers the impact of Tax Credit claims on immigration applications and although the focus is on “On Entry” cases, the same principles apply to “After Entry” applications to the Home Office.

Paragraph 28(v) of the current Immigration Rules states that the parties to a marriage must be able to maintain themselves and any dependants adequately without recourse to public funds. The leading case is KA and Others (Adequacy of maintenance) Pakistan (2006) which emphasises the objective nature of adequacy. The Asylum & Immigration Tribunal ruled that, for policy reasons, the adequacy of maintenance must be measured by reference to the level set by the state i.e. the means-tested benefit level.

In the case of a spouse application, the KA approach means that the immigrant family’s net income (after paying any accommodation costs) must be at least equal to, if not better than, the public funds paid to the means-tested citizen family. Where children are involved, the benefit paid in respect of those dependants must also be placed in the equation.

Public Funds”
Under the Immigration Rules, the phrase “public funds” includes Child Tax Credit and Working Tax Credit. In fact, many other benefits are caught by the rules, such as Child Benefit, Housing Benefit and Council Tax Benefit. This article is limited to Tax Credits but the reader should be aware of the rules relating to Child Benefit and Housing Benefit, because these public funds have a significant impact on a family’s overall income level.

Tax Credits

Tax Credits can be sub-divided into Child Tax Credit (CTC) and Working Tax Credit (WTC).

CTC is paid in respect of a family with qualifying children and, since 2004, has replaced the Income Support amounts awarded in respect of children when calculating means-tested benefits. CTC is also paid to working parents (either couples or lone parents), but the amount awarded decreases as the claimant’s income increases.

WTC is intended to supplement low income. It may be awarded in addition CTC but it can also be paid to low income workers without children, who satisfy certain conditions.

The Tax Credit calculations are complex, but both regimes are based upon a range of “elements” (amounts) which are determined by the claimant’s circumstances. For example, with CTC, a element is awarded in respect of a couple or lone parent, and for each child. The WTC calculation begins with a “basic element”, which may be increased by, for example a “lone parent element”, or a “couple element”. With both CTC and WTC, there are many other “elements”, and these feed into the computation, as applicable

Under the Tax Credit system, in the case of a couple with a child, the income of a means-tested family would be a combination of Income Support , accommodation costs (either mortgage interest, or rent paid by Housing Benefit) and the appropriate CTC. Furthermore, Child Benefit is not treated as income. Thus, where there is a child, the means-tested calculation must include any Child Benefit payable.

The amount of both CTC and WTC is related to the income of the claimant(s). Where a claimant is in employment, the amount of Tax Credit paid tapers away as the income of the claimant increases. Nevertheless, a working family will usually be better off than the equivalent means-tested family. However, where children are involved, whether a sponsor is entitled to Tax Credits may be critical to the success of any immigration application or appeal. As indicated above, following KA, the family’s maintenance will only be adequate if, after paying accommodation costs, it is equal to, or exceeds, the means-tested family’s combination of Income support, CTC and Child Benefit.

Without Recourse to Public Funds”

The Immigration Rules require that the immigrant family be adequately maintained without recourse to public funds.

At first sight this looks like – and is sometimes treated by entry clearance officers, the Home Office and Immigration Judges as – a ban on the receipt of public funds by either the applicant or his sponsor.

In fact, paragraph 6A of the Rules states:
For the purpose of these Rules, a person is not to be regarded as having (or potentially having) recourse to public funds merely because he is (or will be) reliant in whole or in part on public funds provided to his sponsor, unless, as a result of his presence in the United Kingdom, the sponsor is (or would be) entitled to increased or additional public funds”

and paragraph 6B says:

A person shall not be regarded as having recourse to public funds if he is a person who is not excluded from specific benefits under section 115 of the Immigration and Asylum Act 1999 by virtue of regulations made under sub-sections (3) and (4) of that section or Section 42 of the Tax Credits Act 2002.”

The immigration problem posed by Tax Credits arises in two alternative scenarios, where, in both scenarios, the sponsor is a British citizen or has indefinite leave to remain. It should be noted that a person with indefinite leave to remain is not treated as a “person subject to immigration control” and furthermore Regulation 3(2) of the Tax Credits (Immigration) Regulations 2003 states that:

Where one member of a couple is a person subject to immigration control, and the other is not …….

a) the calculation of the amount of tax credit under the Act, the Child Tax Credit Regulations and the Working Tax Credit Regulations (including any second adult element or other element in respect of, or determined by reference to, that person)

shall …… be determined in the same way as if that person were not subject to such control.”

Scenario One – any children are British Citizens or have Indefinite Leave to Remain

Considering the first scenario, eligibility for Tax Credits may be affected by the immigrant spouse’s arrival in the United Kingdom.

i) the working sponsor

If the sponsor is employed, the arrival of the immigrant spouse is unlikely to result in an increase in the Tax Credits paid. This is because, at the time of writing (January 2008), the “elements” on which both CTC and WTC are based make no distinction between a lone parent (i.e. the sponsor without her immigrant spouse) and a couple. Consequently, even if the immigrant spouse does not work in the United Kingdom, there will be no increase in the Tax Credits paid.

If the immigrant spouse does work, both CTC and WTC will decrease in accordance with the taper, and so the arrival of the spouse will probably lead to a net reduction in public funds paid to the immigrant family.

These outcomes are covered by both paragraph 6A and paragraph 6B of the Immigration Rules, and therefore a working sponsor is entitled to continue with his/her claim for both CTC and WTC.

ii) the non-working sponsor

Where the Immigrant spouse is, potentially, the only worker (e.g. has a credible job offer) the situation is less clear. In practice, this problem is more likely to arise in after entry cases where, for example, by the time an application for indefinite leave to remain is made, the sponsor has stopped work (e.g. in order to care for children) and the immigrant spouse is the only bread winner. However, the legal problem is the same.

In such a case, in the absence of the working immigrant spouse, the non-working sponsor would be entitled to the usual means-tested benefits (i.e. Income Support, accommodation costs (either mortgage interest or Housing Benefit), CTC and, of course, Child Benefit. On his arrival in the United Kingdom, assuming that the immigrant spouse works 24 hours or more, the sponsor would cease to be entitled to Income Support. However, unless the immigrant spouse’s income is high, the family would continue to be entitled to some level of CTC. Furthermore, immigration issues aside, the couple would now qualify for WTC.

As the family would lose the sponsor’s Income Support, the immigrant spouse is unlikely to pass the KA “adequacy” test without the assistance of both CTC and WTC – particularly as the payment of any mortgage interest would have ceased with the loss of Income Support (but note here, the problem of Housing Benefit, which is available to a rent paying worker on low income)

Nevertheless, it is probable, though not inevitable, that, even with the payment of CTC and WTC, the overall amount of public funds paid to the couple would be less than the benefit previously received by the sponsor alone. This is because, as a lone parent, the sponsor would have been in receipt of the maximum CTC. Thus, following the arrival of the working immigrant spouse, the amount of CTC would probably decrease and any WTC now paid as a result of his arrival is likely to be less than the total Income Support lost by the sponsor. The sponsor would not only lose her Income Support “lone parent” amount, she would also lose any mortgage interest payments (or suffer a reduction in Housing Benefit). However, whether or not the arrival of the immigrant spouse does result in additional recourse to public funds will be a matter of fact, necessitating a fairly complex calculation.

Notwithstanding the probable decrease in public funds paid, the problem is complicated by the fact any WTC claim would depend upon the immigrant spouse’s employment. The WTC claim could not be made at all if the immigrant spouse did not come to the United Kingdom and furthermore, the immigrant spouse, clearly, would be subject to immigration control.

Regulation 3(1) of the Tax Credits (Immigration) Regulations 2003 appears to prohibit the payment of Tax Credits to a person subject to immigration control and regulation 3(2) does assist because it merely states that the calculation of Tax Credit ignores the fact that the immigrant spouse is subject to immigration control.

So, although a non-working sponsor can continue to receive CTC, any claim for WTC by the working immigrant spouse may cause immigration problems.

However, it should be noted that the Home Office’s own policy instructions are unclear and state:

Claims for child and working tax credits must be made jointly in the case of a couple. If only one member of a couple is subject to immigration, then for tax credits purposes neither are treated as being subject to immigration control. (This is unlike other benefits such as child benefit, which are assessed and paid individually).”

This seems to confuse the question of entitlement (regulation 3(1)) with the issue of calculation (regulation of 3(2)), but may indicate how the Secretary of State in fact intends to resolve this problem.

Scenario Two – any children are subject to immigration control

The second scenario – where both the immigrant spouse and the immigrant child are subject to immigration control – raises a significant problem for the low paid sponsor because the entitlement to CTC and, to some extent, WTC, is predicated upon the arrival of the spouse and child in the United Kingdom.

i) the working sponsor

If the sponsor is already entitled to Working Tax Credits as a single person (i.e. prior the arrival of her family in this country), she could only have made such a claim as a consequence of her low income. In these circumstances, her net income as a single person is unlikely to be greater than the total income of a similar sized means-tested family. Moreover, to make matters worse, she is not permitted by the Tax Credit rules to continue with her claim for WTC as a single person. She must either make a fresh joint claim with her husband or give up her WTC altogether. Furthermore, any joint application would attract the additional “couple element”.

Thus, assuming that the sponsor is employed, unless her earnings are high, and she has low accommodation costs, the immigrant family may struggle to equal the means-tested family’s income level without the assistance of CTC and WTC.

If the sponsor is employed, then, in respect of WTC, there appears to be no good reason for denying her the benefit of Regulation 3(2) and Paragraph 6B, despite the fact that the presence of the immigrant spouse in the United Kingdom would almost certainly result in additional recourse to public funds.

Moreover, there is nothing in the Tax Credit legislation to prevent the sponsor claiming CTC for her children. The entitlement to CTC depends upon the status of the parent(s), not the children, but, of course, there is here a potential conflict between the Tax Credit legislation and the administrative Immigration Rule (paragraph 6A) because the arrival of the children would clearly result in additional recourse to public funds.

So, although a working sponsor should be able to claim both WTC and CTC , it has to be said that, in the absence of any judicial decisions on this point, there is an element of risk attached to this strategy.

ii) the non-working sponsor

As far as WTC is concerned, where the sponsor is not employed, and the immigrant spouse is, potentially, the only worker, the situation mirrors the problem of the non-working sponsor identified in the first scenario. However, in this case, both the immigrant spouse and child are subject to immigration control and, again, any claim for WTC by the new arrival is likely to cause immigration problems. Nevertheless, as above, it is arguable that the sponsor is entitled, under Tax Credit legislation, to claim CTC in respect of the immigrant child, even though this would conflict with the Immigration Rules.


There seems to be little doubt that a working sponsor, with children who are not subject to immigration control, can continue to claim CTC and WTC without adversely affecting her spouse’s immigration application. In the case of a non-working sponsor, or where the children of the family are subject to immigration control, the position is much less clear and, unfortunately, there are, at present, no judicial decisions on this subject.

David Marrington
Immigration Adviser
Alam Ahmed