Tax credits come in a variety of forms. Some are true tax credits – that is to say they may only be used to reduce an amount of tax that is due. If no tax is due, they are lost. The relief under the Enterprise Investment Scheme falls into this category (subject to a limited carry-back facility – see ¶8245). The tax credits brought in to replace certain social security benefit payments – working tax credit and child tax credit – are different in character. They are ‘payable’ tax credits, and do not have to be covered by a comparable tax liability. Indeed, they are not actually set against an income tax liability, but are paid out directly by HMRC.

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