Jobseeker’s allowance
Section 670: Child maintenance bonus
2658.This section sets out the first restriction to the charge to tax on jobseeker’s allowance. It derives from section 617(2)(ad) of ICTA.
2659.The section deals with the exemption from tax for a child maintenance bonus paid under the Child Support Act 1995. That Act provides that the bonus is to be treated as jobseeker’s allowance (or income support). So the exemption appears in this section. The corresponding exemption for a bonus treated as income support is in section 666 – see paragraph 2646.
Section 671: Amounts in excess of taxable maximum
2660.This section deals with the second restriction to the charge to tax on jobseeker’s allowance. It derives from section 151A of ICTA.
2661.Subsection (1)sets out the restriction. No more than the “taxable maximum” of the benefit is taxable. This term is used in section 151A(2) of ICTA. The section retains it as a useful and clear label for an amount that has to be calculated by applying the rules in sections 672 to 674.
2662.There are two types of jobseeker’s allowance: income-based and contribution-based. The amount of a contribution-based allowance is determined simply by the claimant’s age. But a couple may also qualify for an income-based addition to a contribution-based allowance, to bring the allowance up to the amount of income support.
2663.In the case of a couple, the taxable maximum is based on what would have been payable to the couple as an income-based allowance.
2664.The rules are complicated because they have to deal with:
the difference between an income-based allowance and a contribution-based allowance;
amounts of jobseeker’s allowance that are attributable to persons other than the claimant;
a person involved in a strike being prevented from claiming the allowance; and
an allowance payable for a period of less than a week.
Section 672: Taxable maximum: general
2665.This section sets out how to calculate the “taxable maximum”, for use in section 671. It derives from section 151A(3) of ICTA.
Section 673: Taxable maximum: income-based jobseeker’s allowance
2666.This section sets out how to calculate the “taxable maximum” for a week in the case of an income-based allowance. It derives from section 151A(4), (6) and (8) of ICTA.
2667.Subsection (2) sets out the rule for a single person. The taxable maximum is based on the amount of the contribution-based allowance which would have been payable to the person, excluding any amount of the allowance that is for other people such as children or adult dependants.
2668.Subsection (3) sets out the general rule for a member of a couple. The taxable maximum is the “applicable amount”, excluding any amount of the allowance that is for other people such as children or adult dependants.
2669.The charge on an income-based jobseeker’s allowance is in section 151A of ICTA rather than section 617 of ICTA. So the general exemption for an increase in benefit for a child in section 617(1)(b) does not apply. But the definition of “taxable maximum” in section 151A ensures that any such increase is never taxed.
2670.Jobseeker’s allowance is included in the table of taxable United Kingdom benefits (section 660). So the general exemption for any increase in the benefit for a child applies (section 676). The sections exempt this increase twice: once in subsection (3) of this section in calculating the “taxable maximum” for jobseeker’s allowance, and again (generally) in section 676. This double exemption does not present any difficulties.
2671.Subsection (4) sets out the special rule that applies if one member of a couple is involved in a strike. There is a similar rule for income support (see section 665).
Section 674: Taxable maximum: contribution-based jobseeker’s allowance
2672.This section sets out how to calculate the “taxable maximum” for a week in the case of a contribution-based allowance. It derives from section 151A(5) and (7) of ICTA.
2673.Subsection (2) sets out the rule for a single person. The taxable maximum is based on the amount of the “age-related amount” applicable to the person, excluding any amount of the allowance that relates to other people such as children or adult dependants.
2674.Subsection (3) sets out the general rule for a member of a couple. The taxable maximum is based on the amount of the income-based allowance which would have been payable to the person, excluding any amount of the allowance that relates to other people such as children or adult dependants.
2675.The charge on a contribution-based jobseeker’s allowance is in section 151A of ICTA rather than in section 617 of ICTA. So the general exemption for an increase in benefit for a child in section 617(1)(b) does not apply. But the definition of “taxable maximum” in section 151A ensures that any such increase is never taxed.
2676.Jobseeker’s allowance is included in the table of taxable United Kingdom benefits (section 660). So the general exemption for any increase in the benefit for a child applies (section 676). The sections exempt this increase twice: once in subsection (3) of this section in calculating the “taxable maximum” for jobseeker’s allowance, and again (generally) in section 676. This double exemption does not present any difficulties.
Section 675: Interpretation
2677.This section contains the meanings of the expressions used in the rules in sections 671 to 674.
The “applicable amount” is the “age-related amount”, less some earnings and pension receipts. It is usually the level to which income is made up by income support.
A “contribution-based jobseeker’s allowance” is one based on the claimant’s Class 1 contributions in the two years before the year of claim.
An “income-based jobseeker’s allowance” is one based on the claimant’s income.
“Married couple” means a man and woman who are married to each other and are members of the same household.
“Unmarried couple” means a man and woman who are not married to each other but are living together as husband and wife.
Section 676: Increases in respect of children
2678.This section exempts the part of a benefit that is for a child. It derives from section 617(1)(b) of ICTA.
Chapter 5: UK social security benefits wholly exempt from income tax
Overview
2679.This Chapter sets out the United Kingdom benefits that are not charged to tax.
2680.This Chapter deals with the benefits that are never taxable. Chapter 4 deals with the benefits that are sometimes taxable.
Section 677: UK social security benefits wholly exempt from tax: Table B
2681.This section introduces and sets out the table (“Table B”) of exempt benefits. It derives from section 617(1)(a) and (2) of ICTA.
2682.Subsection (1) introduces the second of the tables (“Table B”). This table lists the exempt United Kingdom benefits. The first table (“Table A”) is in section 660 – see paragraph 2609.
2683.In order to make the exemptions simple and consistent the phrase “no liability to income tax arises” is used throughout this Act to express exemption from tax. See Note 28 in Annex 2.
2684.Part 1 of the table identifies each benefit by the section of the social security Act under which it is paid. Part 2 of the table identifies the benefits that are paid under regulations. The table also identifies the corresponding Northern Ireland provisions.
2685.The table arranges the benefits in alphabetical order. This means that a particular benefit should be easy to find. And it should be easy to maintain the clarity of the table because it will be easy to insert any new benefit into the table in the right place.
2686.Disabled person’s tax credit and working families’ tax credit are abolished by section 1(3) of the Tax Credits Act 2002. They are not taxable. The exemption is preserved by paragraph 88 of Schedule 7 to this Act.
2687.Subsection (2) is a signpost to the special treatment of industrial death benefit. This benefit is part of industrial injuries benefit, which appears in Table B and is not generally taxable. But industrial death benefit is a pension and is charged to tax in the pension income Part.
Chapter 6: Taxable foreign benefits
Overview
2688.This Chapter sets out the rules for taxing foreign social security benefits.
2689.There is no explicit charge on foreign social security benefits in ICTA. But the benefits arise from rights under foreign social security law and those rights are “possessions out of the United Kingdom” (section 18(3) of ICTA). So the income is assessable under Schedule D Case V.
2690.This Act includes an explicit charge to tax on foreign social security benefits. See Change 145 in Annex 1.
Section 678: Taxable benefits: foreign benefits
2691.This section identifies the foreign benefits that are taxable. The section is new. The taxable foreign benefits are part of “taxable benefits” (section 657(3)).
2692.Subsection (1)(a) uses words similar to those used in section 318(2)(c) of ICTA (war pensions) to identify the foreign benefits that are taxable. Subsection (1)(b) reproduces the territorial restriction in paragraph (a)(i) of Schedule D (section 18(1) of ICTA). A foreign social security benefit is charged to tax only if it is payable to a United Kingdom resident.
2693.Subsection (2) is a boundary rule. It provides that a foreign social security benefit that is also a pension is taxed only once, in the pension income Part. United Kingdom benefits that are pensions are identified in the pension income Part and do not appear in Table A. So there is no overlap. But it is theoretically possible for a foreign benefit within this section to take the form of a pension. In that case, the boundary rule ensures that the benefit is charged as a pension and qualifies for the one-tenth deduction in section 65(2) of ICTA.
Section 679: Taxable social security income
2694.This section deals with the basis of assessment. It identifies the amount of taxable social security income, which feeds into the computation of net taxable social security income in section 658. The section invokes sections 65, 68, 584 and 585 of ICTA.
2695.In ICTA the basis of assessment for a foreign social security benefit is given by the rules of Schedule D Case V. The social security income Part does not repeat those rules but cross-refers the reader to them. The rules are in section 65 of ICTA and include the remittance basis. Section 65 is modified by the rules for Irish income in section 68 of ICTA. Sections 584 and 585 of ICTA are also relevant. Section 584 gives relief for income taxed on an arising basis if that income cannot be remitted to the United Kingdom. Section 585 gives relief for income taxed on a remittance basis if the remittances are delayed.
Section 680: Person liable for tax
2696.This section provides that the person chargeable is the person receiving or entitled to the income. It derives from section 59(1) of ICTA.
2697.Paragraph 2689 explains that the charge on foreign social security benefits in ICTA is under Schedule D. So section 59(1) of ICTA applies to charge the person receiving or entitled to the income.
Chapter 7: Taxable and other foreign benefits: exemptions
Overview
2698.This Chapter sets out the foreign benefits that are not charged to tax. It is new.
Section 681: Taxable and other foreign benefits: exemptions
2699.The section derives from ESC A24. This Act legislates the ESC that exempts certain foreign benefits from tax. In practice the ESC is applied not only to the benefits set out in the ESC but to all foreign benefits that correspond to exempt United Kingdom benefits. The section reflects this. See Change 146 in Annex 1.
2700.In order to make the exemptions simple and consistent the phrase “no liability to income tax arises” is used throughout this Act to express exemption from tax. See Note 28 in Annex 2.
2701.Subsection (1) deals with foreign benefits that correspond to the taxable UK benefits listed in Table A. It exempts the foreign benefits to the same extent that the United Kingdom benefits are exempt income because of one of the rules in Chapter 4. The definition of “exempt income” is in section 656(2).
2702.Subsection (2) deals with the foreign benefits that correspond to the exempt UK social security benefits listed in Table B (in Chapter 5). These foreign benefits are not substantially similar to the taxable UK benefits listed in Table A. So they are not covered by subsection (1). But they are wholly exempt from tax. The phrase “no liability to tax” removes not only a charge under this Part but any charge to income tax.
