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PART 2U.K. Income for the purposes of tax credits

CHAPTER 10U.K. Notional Income

IntroductionU.K.

13.  In these Regulations “notional income” means income which, by virtue of regulations 14 to 17 a claimant is treated as having, but which he does not in fact have.

Modifications etc. (not altering text)

Claimants treated for any purpose as having income by virtue of the Income Tax ActsU.K.

14.—(1) If an amount is treated for any purpose as the claimant’s income under any provision mentioned in paragraph (2), he is to be treated as having that amount of income [F1, but this is subject to paragraph (1A)].

[F2(1A) Where paragraph (2)(b)(x) or (2)(b)(xi) applies, the amount of income that the claimant is to be treated as having is:

where

  • “x” is the amount of income under section 652, 654 or 655 of ITTOIA, and

  • “y” is the amount that would, but for section 272A of that Act, be deductible in calculating the profits for income tax purposes of a property business for the profits year.

(1B) In paragraph (1A) “profits year” has the meaning given by section 274A of ITTOIA (reduction for individuals).]

(2) The provisions mentioned in paragraph (1) are—

(a)the following provisions of the Taxes Act—

F3(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(iv). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(v). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(vi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(vii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(viii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ix)section 714 (transfers of securities: treatment of deemed sums and reliefs) M1 or 716 (transfer of unrealised interest);

(x)section 730 (transfer of income arising from securities) M2;

F4(xi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F5(xii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6(xiii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(xiv)section 761 (charge to income tax of offshore income gain) M3; and

F7(xv). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F8(b)the following provisions of ITTOIA—

(i)sections 277 to 283 (amounts treated as receipts: leases);

(ii)Chapter 5 of Part 4 (stock dividends from UK resident companies);

(iii)Chapter 6 of Part 4 (release of loan to participator in close company);

(iv)section 427 (charge to tax on profits from deeply discounted securities);

(v)Chapter 11 of Part 4 (transactions in deposits);

(vi)sections 624 to 628 (income treated as income of settlor: retained interests);

(vii)sections 629 to 632 (income treated as income of settlor: unmarried children);

(viii)section 633 (capital sums paid to settlor by trustees of settlement);

(ix)section 641 (capital sums paid to settlor by body connected with settlement);

(x)section 652 (estate income: absolute interests in residue); and

(xi)sections 654 to 655 (estate income: interests in residue); and

[F9(ba)the following provisions of ITA—

(i)Chapter 5 of Part 11 (price differences under repos);

(ii)Chapter 2 of Part 13 (transfer of assets abroad); and

(iii)Chapter 3 of Part 13 (transactions in land).]

(c)section 84 and Schedule 15 to the Finance Act 2004 (charge to income tax by reference to enjoyment of property previously owned).]

Textual Amendments

F3Reg. 14(2)(a)(i)-(viii) omitted (6.4.2006) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 17(2)

F8Reg. 14(2)(b)(c) substituted for reg. 14(2)(b) (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 17(3)

Marginal Citations

M1Section 714 was amended by Part 5(3) of Schedule 41 to the Finance Act 1996.

M2Section 730 was amended by paragraph 23 of Schedule 7 to the Finance Act 1996.

M3Section 761 was amended by paragraph 11 of Schedule 14 to the Finance Act 1990 (c.29) and paragraph 14(47) of Schedule 10, and Schedule 12, to the Taxation of Chargeable Gains Act 1992.

Claimants depriving themselves of income in order to secure entitlementU.K.

15.  If a claimant has deprived himself of income for the purpose of securing entitlement to, or increasing the amount of, a tax credit, he is treated as having that income.

Claimants to whom income becomes available upon the making of a claimU.K.

16.—(1) If income would become available to a claimant upon the making of an application for that income he is treated as having that income.

This is subject to the following qualification.

(2) Paragraph (1) does not apply in relation to income—

(a)under a trust derived from a payment made in consequence of a personal injury;

(b)under a personal pension scheme or retirement annuity contract;

(c)consisting in a sum to which item 8 of Table 4 in regulation 10 refers (compensation for personal injuries which is administered by the Court); or

(d)consisting in a rehabilitation allowance made under section 2 of the Employment Act.

[F10(3) Paragraph (1) also does not apply to income by way of—

(a)a Category A or Category B retirement pension,

[F11(aa)a state pension under Part 1 of the Pensions Act 2014 or Part 1 of the Pensions Act (Northern Ireland) 2015,]

(b)a graduated retirement benefit, or

(c)a shared additional pension, payment of which has been deferred. Here—

“Category A retirement pension” means a pension to which a person is entitled by virtue of section 44 of the Contributions and Benefits Act or the Northern Ireland Contributions and Benefits Act;

“Category B retirement pension” means a pension to which a person is entitled by virtue of any of sections 48A to 48C of the Contributions and Benefits Act or sections 48A to 48C of the Northern Ireland Contributions and Benefits Act;

“graduated retirement benefit” means a pension payable under—

(a)

sections 36 and 37 of the National Insurance Act 1965; or

(b)

sections 35 and 36 of the National Insurance Act (Northern Ireland) 1966; and

“shared additional pension” means a pension to which a person is entitled by virtue of section 55A [F12or 55AA] of the Contributions and Benefits Act or section 55A [F12or 55AA] of the Northern Ireland Contributions and Benefits Act.]

Textual Amendments

F12Words in reg. 16(3)(c) inserted (coming into force in accordance with art. 1(2)(b) of the amending S.I.) by The Pensions Act 2014 (Consequential, Supplementary and Incidental Amendments) Order 2015 (S.I. 2015/1985), arts. 1(2)(b), 25(b)

Claimants providing services to other persons for less than full earningsU.K.

17.—(1) If a claimant provides a service for another person and—

(a)the other person makes no payment of earnings or pays less than those paid for a comparable employment (including self-employment) in the area; and

(b)the Board are satisfied that the means of the other person are sufficient for him to pay for, or to pay more for, the service,

the claimant is to be treated as having such an amount of employment income, or in the case of a service provided in the course of a trade or business, such an amount of trading income as is reasonable for the employment of the claimant to provide the service.

This is subject to the following qualification.

(2) Paragraph (1) does not apply where—

(a)the claimant is a volunteer or is engaged to provide the service by a charitable or voluntary organisation and the Board are satisfied that it is reasonable for the claimant to provide the service free of charge; or

(b)the service is provided in connection with the claimant’s participation in an employment or training programme—

[F13(i)in Great Britain, which is approved by the Secretary of State;]

(ii)in Northern Ireland in accordance with regulation 19(1)(p) of the Jobseeker’s Allowance Regulations (Northern Ireland) 1996 M4 other than where it is provided in connection with the claimant’s participation in the Preparation for Employment Programme specified in regulation 75(1)(a)(v) of those Regulations M5.

Textual Amendments

Marginal Citations

M5Regulation 75 was substituted by regulation 8 of S.R. 1997 No. 541 and paragraph (1)(a)(v) inserted by regulation 5(a) of S.R. 2001 No. 151.