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Income Tax (Earnings and Pensions) Act 2003

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

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