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Income Tax (Earnings and Pensions) Act 2003

Income support
Section 665: Exempt unless payable to member of couple involved in trade dispute

2640.This section derives from section 151(1)(b) of ICTA.

2641.It contains the basic rule that income support is taxable only if it is payable to a member of a couple and the claimant but not the claimant’s partner is on strike. (Section 151 of ICTA refers to Part 5 of the Social Security Act 1986. In accordance with the Social Security (Consequential Amendments) Act 1992 that reference is to be read as being to section 126 of the Social Security Contributions and Benefits Act 1992. Some publishers have updated the text to help the reader). If both are on strike, there is no benefit “in respect of the relevant couple” (see paragraph 2651 and section 668) and nothing is taxable. There is a similar rule for jobseeker’s allowance in section 673 (see paragraph 2671).

2642.Sections 666 to 668 (see paragraphs 2645 to 2656) contain other limitations to the charge on income support.

2643.The section includes no reference to the rule in section 151(1)(a) of ICTA because, in the circumstances described in that paragraph (the application of the “available for work” test), income support is no longer payable. The claimant would now be entitled to jobseeker’s allowance instead.

2644.So this Act does not rewrite the rule in section 151(1)(a) of ICTA which is no longer needed.

Section 666: Child maintenance bonus

2645.This section sets out the first restriction to the charge on income support. It derives from section 617(2)(ad) of ICTA.

2646.It 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 income support (or jobseeker’s allowance). So the exemption appears in this section. The corresponding exemption for a bonus treated as jobseeker’s allowance is in section 670 – see paragraph 2659.

Section 667: Amounts in excess of taxable maximum

2647.This section deals with the second restriction to the charge on income support. It derives from section 151(3) of ICTA.

2648.Subsection (1) sets out the restriction. No more than the “taxable maximum” of the benefit is taxable. This term is used in section 151(3) of ICTA. The section retains it as a useful and clear label for the amount that has to be calculated by applying the rules in section 668.

Section 668: Taxable maximum

2649.This section sets out how to calculate the “taxable maximum”, which is used in applying the restriction in section 667(1). The section derives from section 151(5) and (7) of ICTA. Those subsections tax only the part of the benefit that is attributable to the person involved in the strike.

2650.The rules are complicated because they have to deal with:

  • amounts of income support that are attributable to persons other than the person involved in the strike; and

  • benefit payable for a period of less than a week.

2651.Subsections (1) and (2) set out how to calculate the “taxable maximum” for a week. Subsection (1) is the rule for the simple case where the amount of income support derives from the circumstances of the couple alone. Subsection (2) is the rule for the case where the benefit includes amounts for other people, such as children or adult dependants.

2652.In either case the section restricts the tax charge to one half of the amount of the benefit attributable to the couple.

2653.The charge on income support is in section 151 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 151 ensures that any such increase is never taxed.

2654.Income support 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 (2) of this section in calculating the “taxable maximum” for income support, and again (generally) in section 676. This double exemption does not present any difficulties.

2655.Subsection (3) gives the method for calculating the “taxable maximum” if the benefit is payable for a period of less than a week. The section uses a method statement and a formula to make the rule easier to understand.

2656.It is not clear why a fraction of one-sixth is used in section 151(5) of ICTA. It was probably carried forward from the days of supplementary and unemployment benefit. The section uses one-seventh as the fraction. This brings the section into line with both the relevant social security regulations: regulation 73 of  SI  1987 No 1967 (income support) and regulation 150 of  SI 1996 No 207 (jobseeker’s allowance). See Change 144 in Annex 1

Section 669: Interpretation

2657.This section contains the meanings of the expressions used in sections 667 and 668. It is new.

  • “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.

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