Commentary on Sections Section 2: Up-rating of tax credits for tax years 2014-15 and 2015-16
31.Section 2 introduces a duty on the Treasury to up-rate relevant amounts by 1 per cent, to take effect in the tax years 2014-15 and 2015-16; and introduces the Schedule, paragraph 2 of which defines the relevant amounts. It also makes provision for the event that the increase in prices is less than 1 per cent.
32.Subsection (1) sets out the new duty on the Treasury to make an order by statutory instrument increasing the relevant amounts by 1 per cent in each of the tax years ending with 5 April 2014 and 5 April 2015.
33.Subsection (2) specifies that the order made under subsection (1) must come into force for the tax year following that in which the order is made.
34.Subsection (3) allows for the rounding of sums after the 1 per cent has been applied. Generally, rounding is to the nearest £5 a year (up or down).
35.Under section 41 of the Tax Credits Act 2002, the Treasury is required to review the amounts of certain elements of tax credits each year to determine whether the elements have retained their value in relation to the general level of prices. Subsection (4) sets out that if, when conducting the review, the Treasury finds that prices have not increased, or have increased by less than 1%, for the period under review, new subsection (1) does not apply. In this circumstance, the Treasury will revert to exercising discretion in the up-rating of the relevant amounts for the tax year in question.
36.Subsection (5) requires that the Treasury does not exercise discretion to up-rate by any other amount the relevant amounts to be up-rated by 1 per cent under subsection (1).
37.The Schedule, paragraph 2 defines the relevant amounts for the purposes of section 2. These are:
	The basic element, the 30 hour element, the second adult element and the lone parent element of Working Tax Credit;
	The child element of Child Tax Credit (including qualifying young people).