Almost 1.4 million families will be helped by the Working Families’ Tax Credit (WFTC) and Disabled Person’s Tax Credit (DPTC) introduced on 5 October.

Regulations have now been laid before Parliament covering the scheme for the tax credits to be paid to employees through the payroll from April 2000.

The Paymaster General, Dawn Primarolo, said today:
`WFTC and DPTC are a major step forward in tackling the barriers many people face in moving into work – making work pay for low and middle income families with children and for people with disabilities. The tax credits were introduced on 5 October and are already providing much- needed help to eligible people.
`The regulations laid before Parliament today set out the rules for the payment of tax credits through the payroll from April We have from the outset regarded this method of payment as crucial in reinforcing the link between the tax credits and the rewards of work and the Inland Revenue has been consulting employer and payroll representatives since May 1998 with the aim of minimising any additional costs to employers. These regulations reflect many of the comments received from the representative bodies and others during the consultation period earlier this year.’

The Tax Credits (Payment by Employers) Regulations 1999 (S. I. 1999 3219) will shortly be available from The Stationery Office and on the Inland Revenue’s website

The Inland Revenue has also published today a Regulatory Impact Assessment (RIA) on the costs and benefits arising from the tax credits scheme. The RIA may be obtained from

Dr Phillip Rice
Inland Revenue
Somerset House
London WC2R 1LB

It will be on the Inland Revenue’s website from Monday, 6 December 1999


1. The Tax Credits (Payment by Employers) Regulations 1999 are made under the Tax Credits Act 1999. This introduced the new tax credits, which are administered by the Inland Revenue. They have replaced two former benefits, Family Credit (FC) and Disability Working Allowance (DWA).

2. From April 2000 employees will where appropriate receive their tax credits with pay through the payroll, rather than direct from the Inland Revenue. The Inland Revenue will continue to assess applications and award tax credits and, where the applicant is an employee, will tell the employer when to start paying tax credits through the payroll, when to stop and how much to pay.

3. Employers will offset the tax credits they have to pay against the PAYE tax, National Insurance contributions and student loan deductions they are due to pay to the Inland Revenue. If their liability in respect of PAYE tax, National Insurance contributions and student loan deductions is less than the tax credits payable, they will be able to apply to the Inland Revenue for advance funding.


1. The Chancellor announced in his Budget in March 1998 that the WFTC and DPTC would from October 1999 replace and build on FC and DWA respectively. The WFTC is designed to help low-paid families with children, while the DPTC will help lift the barrier denying disabled people the opportunity to work.

2. Both credits are more generous than their predecessors and paying them through the wage packet will help to reinforce the link between receipt of tax credits and the rewards of work.

3. The main features are:
a higher income threshold for withdrawal – so that couples with net income of 90 pounds per week or less will receive the full tax credit for which they qualify;
a lower taper for withdrawal – 55 pence (down from 70 pence) for each additional pound of net income over the threshold;
a childcare tax credit to help families with the cost of childcare – up to 70 per cent of eligible childcare costs up to costs of 100 pounds per week for one child and 150 pounds per week for two or more children.

4. Since August 1998 an RIA has been obligatory for all Government legislation that imposes costs on businesses, charities and voluntary bodies. It has replaced the previous Compliance Cost Assessment and Regulatory Appraisal system.

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