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Statutory Instruments

2002 No. 2006

TAX CREDITS

The Tax Credits (Definition and Calculation of Income) Regulations 2002

Made

30th July 2002

Coming into force in accordance with regulation 1

M1 Whereas a draft of this instrument, which contains the first regulations made under section 7(8) and (9) of the Tax Credits Act 2002, has been laid before, and approved by resolution of, each House of Parliament:

Now, therefore, the Treasury, in exercise of the powers conferred upon them by sections 7(8) and (9), 65(1), (7) and (9) and 67 of the Tax Credits Act 2002M2, hereby make the following Regulations:

Modifications etc. (not altering text)

C2Regulations applied (with modifications) (13.10.2014) by S.I. 2014/1230 reg. 12A(2) Sch. paras. 12-23 (as inserted by The Universal Credit (Transitional Provisions) (Amendment) Regulations 2014 (S.I. 2014/1626), regs. 1(2), 4(1))

C3Regulations applied with modification(s) (coming into force in accordance with reg.1 of the amending Rule) by The Universal Credit (Transitional Provisions) Regulations (Northern Ireland) 2016 (S.R. 2016/226), Sch. paras. 11-23

Marginal Citations

M2Section 67 is cited because of the meaning ascribed to “prescribed”.

PART 1U.K. General Provisions

Citation, commencement and effectU.K.

1.  These Regulations may be cited as the Tax Credits (Definition and Calculation of Income) Regulations 2002 and shall come into force—

(a)for the purpose of enabling claims to be made, on 1st August 2002;

(b)for the purpose of enabling awards to be made, on 1st January 2003; and

(c)for all other purposes, on 6th April 2003;

and shall have effect for the tax year beginning on 6th April 2003 and subsequent tax years.

InterpretationU.K.

2.—(1) In these Regulations, unless the context otherwise requires—

(2) In these Regulations except where the context otherwise requires—

(3) For the purposes of these Regulations, whether a person is responsible for a child or a qualifying young person is determined in accordance with regulation 3 of the Child Tax Credit Regulations 2002.

(4) In these Regulations—

(a)a reference to a claimant’s partner is a reference to a claimant’s spouse [F28or civil partner] or a person with whom the claimant lives as a spouse [F28or civil partner]; and

(b)a reference to a claimant’s former partner is a reference to a claimant’s former spouse [F29or civil partner] or a person with whom the claimant has lived as a spouse [F29or civil partner]; and

(c)a reference in these Regulations to an Extra Statutory Concession is a reference to that Concession as published by the Inland Revenue on 1st July 2002 M10.

Textual Amendments

Modifications etc. (not altering text)

Marginal Citations

M10Copies of Inland Revenue Extra-Statutory Concessions may be obtained from the Inland Revenue Leaflets and booklets Orderline, PO Box 37, Saint Austell, Cornwall, PL25 5YN. They are also available on the Inland Revenue's website (http://www.inlandrevenue.gov.uk).

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

CHAPTER 1U.K.General

Calculation of income of claimantU.K.

3.—(1) The manner in which income of a claimant or, in the case of a joint claim, the aggregate income of the claimants, is to be calculated for a tax year for the purposes of Part 1 of the Act is as follows.

(2) Subject to the qualifications in the following paragraphs of this regulation, and the provisions of Part 3, the result of Step Four in paragraph (1) is the income of the claimant, or, in the case of a joint claim, of the claimants, for the purposes of the Act.

(3) Income which—

(a)arises in a territory outside the United Kingdom and

(b)is, for the time being, unremittable for the purposes of [F34Chapter 4 of Part 8 ofITTOIA,]

is disregarded in calculating the income of the claimant or, in the case of a joint claim, of the claimants.

(4) Paragraph (5) applies in the case of a claimant who is [F35, for income tax purposes]—

(a)resident [F36and domiciled F37... ] in the United Kingdom, F38...

(b)resident F39... but not domiciled in the United Kingdom. F40...

F40(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) In the case of a person to whom this paragraph applies—

[F41(a)any income arising outside the United Kingdom is to be taken into account, subject to any specific provision of these Regulations, regardless of the domicile or residence of the claimant; and]

(b)references to a sum being [F42taken into account] are to be construed as including a sum which would be taxable if he were residentF43... and domiciled in the United Kingdom.

[F44(5A) Any income is to be taken into account, subject to any specific provision of these Regulations, notwithstanding the provision of any Order in Council under section 788 of the Taxes Act (double taxation agreements).]

(6) In the case of a claimant who would be chargeable to income tax but for some special exemption or immunity from income tax, income shall be calculated on the basis of the amounts which would be so chargeable but for that exemption or immunity.

[F45(6A) Income paid to a claimant in a currency other than sterling shall be converted into sterling at the average of the exchange rates applicable for the conversion of that currency into sterling in the period of 12 months [F46ending on 31st March] in the tax year in which the income arises.]

(7) In calculating income under this Part there shall be deducted F47...—

(a)[F48the amount of] any banking charge or commission payable in converting to sterling a payment of income which is made in a currency other than sterling;

(b)[F49the grossed-up amount of] any qualifying donation (within the meaning of [F50Chapter 2 of Part 8 of ITA (gift aid)]), made by the claimant or, in the case of a joint claim, by either or both of the claimants; F51... [F52and]

[F53(c)the amount of any contribution made by the claimant, or in the case of a joint claim, by either or both of the claimants to a registered pension scheme together with the amount of any tax relief due on those contributions.]

F54(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F55(8) If—

(a)a claimant has sustained a loss in relation to a [F56UK property business] or an overseas property business; and

(b)the relief to which he is entitled in accordance with [F57section 120 of ITA (deduction of property losses from general income)] exceeds the amount of his property income or foreign income for tax credits purposes, for the year in question;

the amount of his total income for tax credit purposes, computed in accordance with the preceding provisions of this regulation, shall be reduced by the amount of the excess.

[F58In this paragraph “UKproperty business” and “overseas property business” have the same meanings as they have in Chapter 2 of Part 3 ofITTOIA.]]

Textual Amendments

F40Reg. 3(4)(c) and preceding word omitted (6.4.2014) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/658), regs. 1, 4(3)

Modifications etc. (not altering text)

CHAPTER 2U.K. Employment Income

Employment incomeU.K.

4.—(1) In these regulations “employment income” means—

(a)any [F59earnings] from an office or employment received in the tax year;

(b)so much of any payment made to a claimant in that year in respect of expenses as is chargeable to income tax [F60by virtue of section 62 or section 72 of ITEPA;]

(c)[F61the cash equivalent of] any non-cash voucher received by the claimant in that year and chargeable to income tax under [F62section 87 of ITEPA [F63or, where there is an optional remuneration arrangement, the relevant amount,];]

(d)[F64the cash equivalent of] any credit-token received by the claimant in that year and chargeable to income tax under [F65section 94 of ITEPA [F66or, where such a credit-token is provided pursuant to an optional remuneration arrangement, the relevant amount];]

(e)[F67the cash equivalent of] any cash voucher received by the claimant in that year and chargeable to income tax under [F68section 81 of ITEPA [F69or, where there is an optional remuneration arrangement, the relevant amount,];]

[F70(f)any amount chargeable to tax under Chapter 3 of Part 6 of ITEPA;]

(g)so much of a payment of statutory sick pay, received by the claimant during the year, as is subject to income tax [F71by virtue of section 660 of ITEPA;]

[F72(h)the amount (if any) by which a payment of statutory maternity pay, statutory paternity pay, statutory shared parental pay [F73or statutory adoption pay] [F73, statutory parental bereavement pay or statutory adoption pay] exceeds £100 per week;]

(i)any amount charged to income tax for that year [F74under section 120 or section 149 of ITEPA;]

[F75(ia)the relevant amount in cases where a car is made available to the claimant or a member of the claimant’s family pursuant to an optional remuneration arrangement where the car’s CO2 emissions figure exceeds 75 grams per kilometre;]

[F76(j)any sum to which section 225 of ITEPA applies;]

(k)any amount paid in that year by way of strike pay to the claimant as a member of a trade union.

[F77(l)any amount charged to income tax for that year under Part 7 of ITEPA.]

[F78(m)any amount paid to a person serving a custodial sentence or remanded in custody awaiting trial or sentence, for work done while serving the sentence or remanded in custody.]

For the purposes of this paragraph, references to the receipt of a payment of any description are references to its receipt by or on behalf of the claimant, or in the case of a joint claim of either of the claimants, in any part of the world.

This paragraph is subject to the following qualifications.

(2) Employment income does not include pension income.

F79(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F79(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F80(3) This paragraph applies if (apart from section 64 of ITEPA) the same benefit would give rise to two amounts (“A” and “B”)—

(a)“A” being an amount of earnings from a claimant’s employment as defined in section 62 of ITEPA, and

(b)“B” being an amount to be treated as earnings under any provision of Chapter 10 of Part 3 of ITEPA.

(4) In calculating employment income, the payments and benefits listed in Table 1 shall be disregarded [F81except where the payment or benefit is provided pursuant to optional remuneration arrangements and is neither a special case benefit nor an excluded benefit].

Table 1
Payments [F82and benefits] disregarded in the calculation of employment income

1. Any payment in respect of qualifying removal expenses, or the provision of any qualifying removal benefit, within the meaning of [F83Chapter 7 of Part 4 of ITEPA].

[F842A. The payment or reimbursement of expenses incurred in the provision of transport to a disabled employee (as defined in section 246(4) of ITEPA) by his employer, if no liability to income tax arises in respect of that payment or reimbursement (as the case may be) by virtue of section 246 of ITEPA.

2B. The provision to a disabled employee (as defined in section 246(4) of ITEPA) by his employer of a car, the provision of fuel for the car, or the reimbursement of expenses incurred in connection with the car, if no liability to income tax arises in respect of that provision or reimbursement (as the case may be) by virtue of section 247 of ITEPA.

2C. The payment or reimbursement of expenses incurred on transport, if no liability to income tax arises in respect of that payment or reimbursement (as the case may be) by virtue of section 248 of ITEPA.]

3. Travel facilities provided for the claimant as a member of the naval, military or air forces of the Crown for the purpose of going on, or returning from, leave.

[F853A. The payment by the Secretary of State for Defence of an operational allowance to a member of Her Majesty’s forces in respect of service in an operational area specified [F86under a Royal Warrant made under section 333 of the Armed Forces Act 2006].]

[F873B. A payment designated by the Secretary of State for Defence as Council Tax Relief and made [F86under a Royal Warrant made under section 333 of the Armed Forces Act 2006] to a member of Her Majesty’s forces.]

[F883C.  The payment under a Royal Warrant made under section 333 of the Armed Forces Act 2006, of the Continuity of Education Allowance to or in respect of members of the armed forces of the Crown during their employment under the Crown or after their deaths.]

[F893D. Any accommodation allowance which is payable out of public revenue for, or towards, the costs of accommodation to, or in respect of, a member of the armed forces of the Crown, providing that the payment meets any conditions which have been specified in regulations made by the Treasury.]

4. Payment or reimbursement of expenses in connection with the provision for, or use by, the claimant as a person holding an office or employment of a car parking space at or near his place of work.

5. Any benefit or non-cash voucher provided to the claimant, or to any member of his family or household, [F90in respect of which no liability to income tax arises by virtue of Chapter 5 of Part 4 of ITEPA.]

6. Any payment of incidental overnight expenses [F91in respect of which no liability to income tax arises by virtue of section 240 of ITEPA.]

[F927. Food, drink and mess allowances for the armed forces and training allowances payable to members of the reserve forces in respect of which no liability to income tax arises by virtue of section 297 or 298 of ITEPA.]

8. The value of meal vouchers issued to the claimant as an employee, [F93if section 89 of ITEPA applies to the vouchers.]

9. Any cash payment received by the claimant as a miner in lieu of free coal, or the provision of the coal itself, [F94in respect of which no liability to income tax arises by virtue of section 306 of ITEPA.]

10. An award made to the claimant as a director or employee by way of a testimonial to mark long service, [F95if, or to the extent that, no liability to income tax arises in respect of it by virtue of section 323 of ITEPA.]

11. Payment of a daily subsistence allowance [F96in respect of which no liability to income tax arises by virtue of section 304 of ITEPA.]

[F9711A. The payment or reimbursement of reasonable expenses incurred by an employee who has a permanent workplace at an offshore installation, on transfer transport, related accommodation and subsistence or local transport, if no liability to income tax arises in respect of that payment or reimbursement (as the case may be) by virtue of section 305 of ITEPA.

For the purposes of this item, expressions which are defined in section 305 of ITEPA have the same meaning here as they do there.

11B. Payment of an allowance to a person in employment under the Crown in respect of which no liability to income tax arises by virtue of section 299 of ITEPA.

11C. The payment or reimbursement to an employee of any sum in connection with work-related training, or individual learning account training (as respectively defined in sections 251 and 256 of ITEPA) if no liability to income tax arises in respect of that payment or reimbursement (as the case may be) by virtue of any provision of Chapter 4 of Part 4 of ITEPA.

11D. The provision for an employee of a non-cash voucher or a credit-token, to the extent that liability to income tax does not arise in respect of that voucher or credit-token (as the case may be), under Chapter 4 of [F98Part 3 of ITEPA, by virtue of any provision of Chapter 6 of Part 4 of ITEPA].

11E. The provision for an employee of free or subsidised meal vouchers or tokens (within the meaning of section 317(5) of ITEPA), if no liability to income tax arises in respect of that provision by virtue of section 317 of ITEPA.]

[F9911F. The provision of one mobile telephone for an employee in respect of which no liability to income tax arises by virtue of section 319 of ITEPA.]

12. An award made to the claimant under a Staff Suggestion Scheme, if the conditions specified in [F100sections 321 and 322 of ITEPA [F101are satisfied].]

13. Travelling and subsistence allowances paid to or on behalf of the claimant by his employer [F102in respect of which no liability to income tax arises by virtue of section 245 of ITEPA.]

14. Any gift consisting of goods, or a voucher or token to obtain goods, [F103in respect of which no liability to income tax arises by virtue of section 270 or 324 of ITEPA.]

[F10414A. Any payment or reimbursement of expenses incurred in connection with an employment-related asset transfer (as defined in section 326(2) of ITEPA), if no liability to income tax arises in respect of that payment or reimbursement (as the case may be) by virtue of section 326 of ITEPA.

14B. Any payment of expenses incurred by an employee in connection with a taxable car if no liability to income tax arises in respect of the payment by virtue of section 239(2) of ITEPA.]

[F10514C.The discharge of any liability of an employee in connection with a taxable car if no liability to income tax arises by virtue of section 239(1) of ITEPA.

14D.A benefit connected with a taxable car if no liability to income tax arises by virtue of section 239(4) of ITEPA.]

15. A cash voucher, non-cash voucher or credit-token to the extent that it is used by the recipient for the provision of child care, the costs of which if borne by the recipient would be relevant child care charges within the meaning of regulation 14 of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 M11.

[F10616. A payment made by the Department for Work and Pensions under section 2 of the Employment Act—

(a)

by way of In-Work Credit [F107, Better Off In-Work Credit], Job Grant or Return to Work Credit, F108...

(b)

under the Employment Retention and Advancement Scheme or the Working Neighbourhoods Pilot]

(c)

[F109under the City Strategy Pathfinder Pilots,

(d)

by way of an In-Work Emergency Discretion Fund payment pursuant to arrangements made by the Secretary of State, F110...

(e)

by way of an Up-front Childcare Fund payment pursuant to arrangements made by the Secretary of State.][F111, or

(f)

under the Future Capital pilot scheme.]

F112...

F112...

[F11317.The payment or reimbursement of reasonable additional household expenses incurred by an employee who works from home, within the meaning of section 316A of ITEPA.

18.The payment or reimbursement of retraining course expenses within the meaning of section 311 of ITEPA.]

[F11419. Provision of computer equipment in respect of which no liability to income tax arises by virtue of section 320 of ITEPA.]

[F11520. Pay As You Earn (PAYE) settlement agreements made under Part 6 of the Income Tax (PAYE) Regulations (“the PAYE Regulations”) 2003.

For the purposes of this item the special arrangements under regulation 141 of the PAYE Regulations also apply.]

[F11621.  The payment or reimbursement of a fee within section 326A(1) of ITEPA (fees relating to vulnerable persons’ monitoring schemes).]

[F11722. The payment of a qualifying bonus within section 312A of ITEPA (limited exemption for qualifying bonus payments).]

(5) From the amount of employment income, calculated in accordance with the preceding provisions of this regulation, there shall be deducted the amount of any deduction permitted in [F118calculating earnings by virtue of any provision of sections [F119231 to 232,] 336 to 344, or section 346, 347, 351, 352, 362, 363, 367, 368, 370, 371, 373, 374, 376, 377 or 713 of ITEPA].

[F120(6) For the purposes of this regulation, a benefit is provided pursuant to optional remuneration arrangements if it is provided under either—

(a)arrangements under which, in return for the benefit, the claimant gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3 of ITEPA (“Type A arrangements”), or

(b)arrangements (other than Type A arrangements) under which the claimant agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3 of ITEPA.

(7) The relevant amount, in relation to a benefit provided pursuant to an optional remuneration arrangement, means the amount treated for income tax purposes as earnings from employment for the tax year by reason of the benefit being provided pursuant to optional remuneration arrangements.

(8) A benefit is a special case benefit if it is exempted from a charge to income tax by any of the following provisions in ITEPA—

(a)section 289A (exemption for paid or reimbursed expenses),

(b)section 289D (exemption for other benefits),

(c)section 308B (independent advice in respect of conversions and transfers of pension scheme benefits),

(d)section 312A (limited exemption for qualifying bonus payments),

(e)section 317 (subsidised meals),

(f)section 320C (recommended medical treatment), and

(g)section 323A (trivial benefits provided by employers).

(9) A benefit is an excluded benefit if—

(a)it is exempted from a charge to income tax by any of the following provisions in ITEPA—

(i)section 239 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles),

(ii)section 244 (cycles and cyclist’s safety equipment),

(iii)section 266(2)(c) (non-cash voucher regarding entitlement to exemption under section 244),

(iv)section 270A (limited exemption for qualifying childcare vouchers),

(v)section 308 (exemption of contribution to registered pension scheme),

(vi)section 308A (exemption of contribution to overseas pension scheme),

(vii)section 309 (limited exemptions for statutory redundancy payments),

(viii)section 310 (counselling and other outplacement services),

(ix)section 311 (retraining courses),

(x)section 318 (childcare: exemption for employer-provided care), or

(xi)section 318A (childcare: limited exemption for other care), or

(b)it is a payment, or reimbursement of costs incurred by the claimant, in respect of pension advice and that payment or reimbursement is exempt from a charge to income tax under Chapter 9 of Part 4 of ITEPA.

(10) A car’s CO2 emissions figure is to be determined in accordance with sections 133 to 138 of ITEPA (cars: the appropriate percentage).]

Textual Amendments

F63Words in reg. 4(1)(c) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(a)(i)

F66Words in reg. 4(1)(d) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(a)(ii)

F69Words in reg. 4(1)(e) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(a)(i)

F75Reg. 4(1)(ia) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(a)(iii)

F81Words in reg. 4(4) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(b)

F86Words in reg. 4(4) Table 1 Items 3A, 3B substituted (6.4.2014) by The Tax Credits (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/658), regs. 1, 4(5)

F108Word in reg. 4(4) Table 1 Item 16 omitted (1.9.2008) by virtue of The Tax Credits (Miscellaneous Amendments) (No. 2) Regulations 2008 (S.I. 2008/2169), regs. 1, 4(a)(i)

F110Word in reg. 4(4) Table 1 Item 16 omitted (21.11.2009) by virtue of The Tax Credits (Miscellaneous Amendments) (No. 2) Regulations 2009 (S.I. 2009/2887), regs. 1(a), 6(a)

F120Reg. 4(6)-(10) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(c)

Modifications etc. (not altering text)

Marginal Citations

CHAPTER 3U.K. Pension Income

Pension IncomeU.K.

5.—[F121(1) In these Regulations, except where the context otherwise require, “pension income” means—

(a)any pension to which section 577 or 629 of ITEPA applies;

(b)any pension to which section 569 of ITEPA applies;

(c)any voluntary annual payment to which section 633 of ITEPA applies;

[F122(d)any pension, annuity or income withdrawal to which section 579A of ITEPA applies;

(e)any unauthorised member payments to which section 208(2)(a) or (b) of the Finance Act 2004 applies;]

(f)any periodical payment to which section 619 of ITEPA applies;

F123(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F124(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F125(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F126(j). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F127(k)any annuity paid under a retirement annuity contract to which Chapter 9 of Part 9 of ITEPA applies;]

(l)any annuity to which section 609, 610 or 611 of ITEPA applies; F128...

F128(m). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F129(n)any social security pension lump sum to which section 7 of the Finance (No. 2) Act 2005 applies; and

(o)any lump sum payment to which section 636B or 636C of ITEPA applies.]]

(2) In calculating the amount of a person’s pension income there shall be disregarded any [F130payment or benefit mentioned] in Column 1 of Table 2 to the extent specified in the corresponding entry in Column 2.

Table 2
[F131Pensions, other payments and benefits] disregarded in the calculation of pension income
1. Payment2. Extent of disregard

1. A wounds pension or disability pension to which [F132section 641 of ITEPA] applies.

So much of the payment as is disregarded by virtue of [F132section 641 of ITEPA].

2. An annuity or additional pension payable to a holder of the Victoria Cross, George Cross or any other decoration mentioned in [F133section 638 of ITEPA].

The whole of the annuity or additional pension and, if both are payable, the whole of both such annuity and additional pension.

3. A pension or allowance to which [F134section 639 of ITEPA] applies.

[F135The amount of the pension or allowance.]

4. A pension or allowance by reason of payment of which a pension or allowance specified in [F136section 639 of ITEPA] is withheld or abated.

[F137The amount treated as falling within section 639 of ITEPA by virtue of section 640(2) of that Act.]
F138. . .F138. . .

6. A mobility supplement, or a payment in respect of attendance, paid in conjunction with a war pension.

The amount of the supplement or payment.
F139. . .F139. . .

8. A pension awarded at the supplementary rate under article 27(3) of the Personal Injuries (Civilians) Scheme 1983 M12.

The amount for the time being specified in paragraph 1(c) of Schedule 4 to the Scheme.

9. A pension awarded on retirement through disability caused by injury on duty or by a work-related illness.

[F140The exempt amount of the pension calculated in accordance with section 644(3) of ITEPA.]

[F14110. A lump sum on which no liability to income tax arises by virtue of [F142section 636A of ITEPA].

The amount of the lump sum.]

[F14111. Coal or smokeless fuel provided as mentioned in section 646(1) of ITEPA, or an allowance in lieu of such provision.

The amount on which no liability to income tax arises by virtue of that section.]

[F143(3) From the amount of pension income, calculated in accordance with the preceding provisions of this regulation, there shall be deducted any amount deductible for income tax purposes in computing pension income (as defined in ITEPA) under section 713 of that Act.]

Textual Amendments

F128Reg. 5(1)(m) and preceding word omitted (6.4.2008) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2008 (S.I. 2008/604), regs. 1(b), 2(3)

Modifications etc. (not altering text)

Marginal Citations

CHAPTER 4U.K. Trading Income

[F144 Trading incomeU.K.

6.  The claimant’s (“C”) trading income is—

(a)the amount of C’s taxable profits for the tax year arising from—

(i)any trade carried on in the United Kingdom or elsewhere;

(ii)any profession or vocation the income from which does not fall under any other provision of these Regulations; or

(b)the amount of C’s taxable profits for the year arising from C’s share of the partnership trading or professional income where C is a partner in a trade, profession or vocation.

In this regulation “taxable profits” has the same meaning as it has in Part 2 of ITTOIA, but disregarding the relevant benefit amount in section 23E (tax treatment of relevant benefits) and Chapter 16 of that Part (averaging profits of farmers and creative artists) [F145, and any amount of transition profits for the tax year 2023-24 under Step 5 of paragraph 70(2) and paragraphs 72 and 73 of Schedule 1 (abolition of basis periods) to the Finance Act 2022.]]

Textual Amendments

[F146Trading Income: in-year finalisationU.K.

6A.  This regulation applies where—

(a)an award of universal credit is made to a person who was previously entitled to a tax credit;

(b)the award of that tax credit has terminated;

(c)the date on which the award terminated falls in the tax year to which that award relates (“the relevant tax year”); and

(d)the claimant carried on a trade, vocation or profession during the part tax year.

Textual Amendments

6B.—(1) Where regulation 6A applies, a claimant’s trading income for the purposes of the first paragraph in Step 4 in regulation 3(1) is the claimant’s actual or estimated taxable profits attributable to the part tax year (“the relevant trading income”).

(2) The relevant trading income is to be calculated by reference to the basis period ending during the relevant tax year.

(3) The basis period is to be determined by reference to the rules in Chapter 15 of Part 2 of ITTOIA.

(4) The relevant trading income is calculated by—

(a)taking the figure for the actual or estimated taxable income earned in the basis period;

(b)dividing that figure by the number of days in the basis period to give the daily figure; and

(c)multiplying the daily figure by the number of days in the part tax year on which the trade, profession or vocation was carried on.]

Textual Amendments

CHAPTER 5U.K. Social Security Income

Social security incomeU.K.

7.—(1) The claimant’s social security income is the total amount payable—

(a)under any provision of the Social Security Act 1988 M13, the Contributions and Benefits Act [F147or the Jobseekers Act 1995 ]M14 [F147, the Jobseekers Act 1995 or Part 1 of the Welfare Reform Act 2007] or under section 69 of the Child Support, Pensions and Social Security Act 2000 M15;

[F148(aa)under Part 3 of the Welfare Supplementary Payments Regulations (Northern Ireland) 2016 or Part 2 of the Welfare Supplementary Payment (Loss of Carer Payments) Regulations (Northern Ireland) 2016;]

[F149(ab)under regulations made under section 28 of the Social Security (Scotland) Act 2018;]

F150(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)by the Secretary of State in respect of the non-payment of a payment which ought to have been made under a provision mentioned in sub-paragraph (a); F151...

[F152(ca)by the Scottish Ministers in respect of the non-payment of a payment which ought to have been made under the regulations mentioned in sub-paragraph (ab); and]

(d)by way of an ex gratia payment made by the Secretary of State, or in Northern Ireland by the [F153Department for Communities], in connection with a benefit, pension or allowance under the Contributions and Benefits Act.

This is subject to the following provisions of this regulation.

(2) Pensions under the Contributions and Benefits Act which are pension income by virtue of regulation 5(1)(a) are not social security income.

(3) In calculating the claimant’s social security income the payments in Table 3 shall be disregarded.

Table 3
Payments under, or in connection with, the Act, the Social Security Act 1988, the Contributions and Benefits Act [F154or the Jobseekers Act 1995] [F154, the Jobseekers Act 1995 or Part 1 of the Welfare Reform Act 2007] disregarded in calculation of social security income

1.An attendance allowance under section 64 of the Contributions and Benefits Act M16.

2.A back to work bonus under section 26 of the Jobseekers Act 1995 M17.

[F1553 A bereavement support payment under section 30 of the Pensions Act 2014.]

4.Child benefit under Part 2 of the Act.

5.A Christmas bonus under section 148 of the Contributions and Benefits Act.

6.Council tax benefit under section 131 of the Contributions and Benefits Act M18.

7.A disability living allowance under section 71 of the Contributions and Benefits Act.

8.Disabled person’s tax credit under section 129 of the Contributions and Benefits Act M19.

9.Any discretionary housing payment pursuant to regulation 2(1) of the Discretionary Financial Assistance Regulations 2001 M20.

10.An ex-gratia payment by the Secretary of State or, in Northern Ireland, the [F156Department for Communities], to a person over pensionable age by way of supplement to incapacity benefit.

11.A guardian’s allowance under section 77 of the Contributions and Benefits Act.

12.Housing benefit under section 130 of the Contributions and Benefits Act.

13.Income support under section 124 of the Contributions and Benefits Act M21, unless it is chargeable to tax under [F157section 665 of ITEPA].

14.Incapacity benefit which is—

(a)short term incapacity benefit payable at the lower rate; or

(b)payable to a person who had received invalidity benefit before 13th April 1995 if the period of incapacity for work is treated, by virtue of regulation 2 of the Social Security (Incapacity Benefit) (Transitional) Regulations 1995 M22 (days to be treated as days of incapacity for work) as having begun before that date.

15.Industrial injuries benefit [F158(except industrial death benefit)] under section 94 of the Contributions and Benefits Act.

16.A contribution-based jobseeker’s allowance under the Jobseekers Act 1995 [F159as amended by the provisions of Part 1 of Schedule 14 to the Welfare Reform Act 2012 that remove references to an income-based allowance, and a contribution-based allowance under the Jobseekers Act 1995 as that Act has effect apart from those provisions], to the extent that it exceeds the maximum contained in [F160section 674 of ITEPA].

17.An income-based jobseeker’s allowance under the Jobseekers Act 1995.

18.A maternity allowance under section 35 [F161or section 35B] of the Contributions and Benefits Act M23.

19.A severe disablement allowance under section 68 or 69 of the Contributions and Benefits Act M24.

20.A social fund payment under Part 8 of the Contributions and Benefits Act.

[F16220A. Statutory adoption pay under Part 12ZB of the Contributions and Benefits Act.]

21.Statutory maternity pay under Part 12 of the Contributions and Benefits Act M25.

[F16321A. F164[F165... Statutory paternity pay F166...F167...] under Part 12ZA of the Contributions and Benefits Act.]

[F16821B Statutory shared parental pay under Part 12ZC of the Contributions and Benefits Act.]

[F16921C Statutory parental bereavement pay under Part 12ZD of the Contributions and Benefits Act.]

22.Statutory sick pay under Part 11 of the Contributions and Benefits Act.

23.Working families’ tax credit under section 128 of the Contributions and Benefits Act M26.

24.A payment by way of compensation for the non-payment of, or in respect of loss of entitlement (whether wholly or partly) of, income support, jobseeker’s allowance, [F170or housing benefit] .

25.A payment in lieu of milk tokens or the supply of vitamins under the Welfare Foods Regulations 1996 M27.

[F17126.An income-related employment and support allowance payable under Part 1 of the Welfare Reform Act 2007.]

[F17227. A payment by way of health in pregnancy grant made pursuant to Part 8A of the Contributions and Benefits Act.]

[F17328. Personal independence payment under Part 4 of the Welfare Reform Act 2012.]

(4) If an increase in respect of a child dependant is payable with an allowance, benefit, pension or other payment (“the main payment”) listed in Table 3, the increase shall also be wholly disregarded in calculating the income of the recipient of the main payment.

F174(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F175(5A) From the amount of social security income, calculated in accordance with the preceding provisions of this regulation, there shall be deducted any amount deductible for income tax purposes in computing social security income (as defined in ITEPA) under section 713 of ITEPA.]

(6) A reference in this regulation to an enactment applying only in Great Britain includes a reference to a corresponding enactment applying in Northern Ireland.

Textual Amendments

F155Reg. 7 Table 3 Item 3 substituted (coming into force in accordance with art. 1-3 of the amending S.I.) by The Pensions Act 2014 (Consequential, Supplementary and Incidental Amendments) Order 2017 (S.I. 2017/422), arts. 1(2), 22

F165Words in reg. 7 Table 3 Item 21A substituted (14.11.2010) by The Tax Credits (Miscellaneous Amendments) (No. 2) Regulations 2010 (S.I. 2010/2494), regs. 1, 6

F170Words in reg. 7 Table 3 Item 24 substituted (26.11.2003) by The Tax Credits (Miscellaneous Amendments No.2) Regulations 2003 (S.I. 2003/2815), regs. 1, 6(2)

Modifications etc. (not altering text)

Marginal Citations

M16Section 64 has been amended: the relevant amendment is that made by section 66(1) of the Welfare Reform and Pensions Act 1999 (c.30) (“the Welfare Reform Act”).

M18Section 131 was substituted by paragraph 4 of Schedule 9 to the Local Government Finance Act 1992 (c.14).

M19Section 129 was amended by paragraph 2(h) of Schedule 1 to the Tax Credits Act 1999 (c.10) in consequence of the renaming of disability working allowance by that Act. Disabled person's tax credit is to be abolished by section 1(3)(c), and section 129 is repealed by section 56 of the Act.

M21Section 124(1) was amended by paragraph 30 of Schedule 2 to the Jobseekers Act 1995 (c.18) (“the Jobseekers Act”) and paragraph 28 of Schedule 8 to the Welfare Reform Act. Subsections (2) and (3) of section 124 were repealed by Schedule 3 to the Jobseekers Act.

M22S.I. 1995/310; relevant amending instrument S.I. 2002/491.

M23Subsection (1) was substituted for the previous subsections (1) and (1A) by section 53(1) of the Welfare Reform Act.

M24Sections 68 and 69 were repealed by Part 4 of Schedule 13 to the Welfare Reform Act. However, they continue to have effect in respect of beneficiaries whose period of incapacity for work began before 6th April 2001 by virtue of the saving in article 4 of S.I. 2000/2958.

M25Statutory maternity pay and statutory sick pay, although payable under the Contributions and Benefits Act are taken into account in calculating employment income, whether paid by the employer or the Board.

M26Section 128 was amended by paragraph 2(g) of Schedule 1 to the Tax Credits Act 1999 in consequence of the renaming of family credit by that Act. Working families' tax credit is abolished by section 1(3)(b), and section 128 is repealed by section 56, of the Act from a date to be provided for by commencement order.

M27S.I. 1996/1434, amended by 1997/857, 1999/2561, 2000/694 and 2001/758. The functions of the Secretary of State as respects Wales under this instrument were transferred to the National Assembly by S.I. 1999/672 and, as respects Scotland, to the Scottish Ministers by S.I. 1999/750.

CHAPTER 6U.K. Student Income

[F176Student IncomeU.K.

8.  “Student income” means, in relation to a student—

[F177(a)in England, any adult dependant’s grant payable [F178pursuant to regulations under section 22 of the Teaching and Higher Education Act 1998;]

(b)in Scotland, any dependant’s grant payable under regulation 4(1)(c) of the Students' Allowances (Scotland) Regulations [F1792007]; F180...

(c)in Northern Ireland, any grant which corresponds to income treated as student income in England F181...by virtue of paragraph (a)] [F182and]

[F183(d)in Wales, any adult dependant’s grant payable [F184pursuant to regulations under section 22 of the Teaching and Higher Education Act 1998.]]]

Textual Amendments

Modifications etc. (not altering text)

[F185 Payments of income in connection with students to be disregarded for the purposes of regulation 3U.K.

9.  Income which is exempt from income tax by virtue of section 753 or 776 of ITTOIA (which deal respectively with interest on the repayment of student loans and scholarship income) is disregarded in calculating a claimant’s income under regulation 3.]

Textual Amendments

CHAPTER 7U.K. Investment Income

Investment incomeU.K.

10.—(1) In these Regulations “investment income” means the gross amount of—

(a)any interest of money, whether yearly or otherwise, or any annuity or other annual payment, whether such payment is payable within or out of the United Kingdom, either as a charge on any property of the person paying it by virtue of any deed or will or otherwise, or as a reservation out of it, or as a personal debt or obligation by virtue of any contract, or whether the payment is received and payable half-yearly or at any shorter or longer periods, but not including property income;

(b)any discounts on securities;

(c)any income from securities payable out of the public revenues of the United Kingdom or Northern Ireland;

(d)dividends and other distributions of a company resident in the United Kingdom and any tax credit associated with that payment; and

(e)any amount treated as forming part of the individual’s income for the year for income tax purposes by virtue of [F186Chapter 9 of Part 4 of ITTOIA disregarding section 535 (top slicing relief).]

This is subject to the following qualification.

(2) In calculating investment income, there shall be disregarded—

(a)any amount listed in column 1 of Table 4 to the extent shown in the corresponding entry in column 2;

(b)any amount listed in column 1 of Table 5 during the period shown in the corresponding entry in column 2;

(c)any income arising from savings certificates, and interest on tax reserve certificates, exempted from tax by [F187section 692, 693 or 750 of ITTOIA] (savings certificates and tax reserve certificates);

(d)the first £70 in any tax year of interest on deposits with National Savings and Investments, exempted from income tax by [F188section 691 of ITTOIA (National Savings Bank ordinary account interest).]

(e)any payment to a claimant which does not form part of his income for the purposes of income tax by virtue of [F189section 727 of ITTOIA (certain annual payments by individuals)][F190; and

(f)any interest on a payment made under, or in connection with, the Windrush Compensation Scheme administered by the Home Office, for the period beginning on the date on which the payment is made and ending 52 weeks after that date].

Table 4
Payments disregarded in the calculation of investment income
1. Description of income to be disregarded2. Extent of disregard

1. Any interest, dividends, distributions, profits or gains in respect of investments under—

(a) a Personal Equity Plan, or

(b) an Individual Savings Account, in respect of which the claimant is entitled to relief from income tax under [F191Chapter 3 of Part 6 of ITTOIA], or which is taxed only in accordance with regulation 23 of the Individual Savings Account Regulations 1998 M28.

The whole amount, unless it is interest under a personal equity plan to which regulation 17A(2) of the Personal Equity Plan Regulations 1989 M29 applies. Interest to which that paragraph applies is disregarded only to the extent that it does not exceed the annual limit of £180 mentioned in that regulation.
2. F192. . .F192. . .

[F1933. Any interest payable under a certified SAYE savings arrangement for the purposes of Chapter 4 of Part 6 of ITTOIA.]

The whole amount.

4. Any winnings from betting, including pool betting, or lotteries or games with prizes.

The whole amount.

5. Any interest on a payment of £10,000 made by the Secretary of State to a person who was held prisoner by the Japanese during the Second World War or to the spouse of such a person, if the payment is held in a distinct account and no payment (other than interest) has been added to the account.

The whole amount of the interest.

6. Any interest on a payment made to the claimant by, or on behalf of a government of a country outside the United Kingdom, either from its own resources or with contributions from any other organisation, by way of compensation for a victim of National Socialism if the payment is held in a distinct account and no payment (other than interest) has been added to the account.

Here a reference to a victim of National Socialism is a reference to a person who was required to work as a slave or a forced labourer for National Socialists or their sympathisers during the Second World War, or suffered property loss, or suffered injury or is the parent of a child who died, at the hands of National Socialists or their sympathisers during the Second World War.

The whole amount of the interest.

7. Any monies paid to the claimant by a bank or building society as compensation in respect of an unclaimed account held by a Holocaust victim and which vested in the Custodian of Enemy Property under section 7 of the Trading with the Enemy Act 1939 M30 and treated as exempt from income tax by [F194section 756A of ITTOIA.]

The amount [F195of interest exempted from income tax under section 756A of ITTOIA.]

8. Any interest, or payment F196..., which is disregarded for income tax purposes by virtue of—

[F197(a) section 751 of ITTOIA (interest on damages for personal injury), or]

(b) [F198section 731 of ITTOIA (periodical payments of personal injury damages)] (personal injury damages in the form of periodical payments).

The amount so disregarded.

[F1999.] Annuity payments under an award of compensation made under the Criminal Injuries Compensation Scheme (within the meaning of [F200section 732(3) of ITTOIA]) [F201or under the Victims of Overseas Terrorism Compensation Scheme 2012 or any corresponding scheme established under section 47 of the Crime and Security Act 2010].

[F202The amount to which no liability to income tax arises under section 732 of ITTOIA.]

[F19910.] A payment under a life annuity.

The amount of interest eligible for relief under section 353 of the Taxes Act by virtue of section 365 of that Act.

[F19911.] Any interest, or payment in respect of interest, which is compensation to a person who is under the age of 18 years for the death of one or both of his parents.

The whole of the interest or payment.

[F20312. A purchased life annuity to which [F204Chapter 7 of Part 4 of ITTOIA] applies.

[F205The amount exempted under section 717 of ITTOIA as calculated under section 719 of that Act.]]

[F20613. Any payments which are exempt from income tax by virtue of—

(a) section 725 of ITTOIA (annual payments under immediate needs annuities), or

(b) section 735 of ITTOIA (health and employment insurance payments).]

[F206The whole amount.]
F207. . .F207. . .
[F20815. Any payment of, or in respect of, a government bonus under section 1 [F209or 2] of the Savings (Government Contributions) Act 2017.] [F208The whole amount.]
Table 5
Payments in connection with very severe disablement, Creutzfeldt-Jakob disease and haemophilia
1. Description of income to be disregarded2. Applicable period

1. A trust payment made to—

(a) a diagnosed person;

(b) the diagnosed person’s partner; or

(c) the person who was his partner at the date of his death.

The period beginning on the date on which the trust payment is made and ending with the death of the person to whom the payment is made.

2. A trust payment made to a parent of a deceased diagnosed person, or a person acting in the place of his parent.

The period beginning on the date on which the trust payment is made and ending two years after that date.

3. The amount of any payment out of the estate of a person to whom a trust payment has been made, which is made to the person who was the diagnosed person’s partner at the date of his death.

The period beginning on the date on which the payment is made and ending on the date on which that person dies.

4. The amount of any payment out of the estate of a person to whom a trust payment has been made, which is made to a parent of a deceased diagnosed person, or a person acting in the place of his parent.

The period beginning on the date on which the payment is made and ending two years after that date.

(3) The amounts disregarded under items 3 and 4 in Table 5 shall not exceed the total amount of any trust payments made to the person to whom the trust payment had been made.

(4) In this regulation “diagnosed person” means—

(a)a person who has been diagnosed as suffering from, or who after his death has been diagnosed has having suffered from, variant Creutzfeldt-Jakob disease;

(b)a person who is suffering or has suffered from haemophilia; or

(c)a person in respect of whom a payment has been made from the 1992 Fund, the Eileen Trust or the Independent Living Funds; and

a reference to a person being a member of the diagnosed person’s household at the date of the diagnosed person’s death includes a person who would have been a member of his household but for the diagnosed person being in residential accommodation, a residential care home or a nursing home on that date.

(5) In this regulation—

Textual Amendments

F194Words in reg. 10 Table 4 Item 7 substituted (6.4.2007) by The Tax Credits (Miscellaneous Amendments) Regulations 2007 (S.I. 2007/824), regs. 1, 12(2)

F195Words in reg. 10 Table 4 Item 7 substituted (6.4.2007) by The Tax Credits (Miscellaneous Amendments) Regulations 2007 (S.I. 2007/824), regs. 1, 12(3)

F196Words in reg. 10 Table 4 Item 8 omitted (6.4.2006) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 14(4)(d)(i)

F199Reg. 10 Table 4 Items 10, 11, 12 renumbered as reg. 10 Table 4 Items 9, 10, 11 (6.4.2003) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2003 (S.I. 2003/732), regs. 1, 9

F208Reg. 10 Table 4 Item 15 inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 4

Modifications etc. (not altering text)

Marginal Citations

M28S.I. 1998/1870: there are amendments which are not relevant for the purposes of this instrument.

M29S.I. 1989/469: regulation 17A was inserted by S.I. 1991/733 and amended by S.I. 1991/2774, 1995/3287 and 1996/846.

M301939 c.89. There is an amendment to section 7 which is not relevant for present purposes.

CHAPTER 8U.K. Property income

Property incomeU.K.

11.—(1) In these Regulations “property income” means the annual taxable profits arising from a business carried on for the exploitation, as a source of rents or other receipts, of any estate, interest or rights in or over land in the United Kingdom.

Expressions which are used in this paragraph which are defined in [F210Part 3 of ITTOIA] for the purposes of [F211that Part] bear the same meaning here as they bear in [F211that Part].

This paragraph is subject to the following [F212qualifications].

[F213(2) In calculating property income there shall be disregarded any profits—

(a)treated as nil by section 791 to 794 of ITTOIA (full rent-a-room relief); or

(b)excluded from profits by section 795 to 798 of ITTOIA (alternative calculation of profits if amount exceeds limit).]

[F214(2A) In calculating property income, the restrictions in section 272A of ITTOIA (restricting deductions for finance costs related to residential property) and section 399A of ITA (property partnerships: restriction of relief for investment loan interest) shall be disregarded.]

[F215(3) [F216Where a property business (as defined in Part 3 of ITTOIA)] makes a loss to which the relief provisions [F217contained in sections 118 (carry forward against subsequent property business profits) and 119 (how relief works) of ITA] apply, then such relief as may arise under [F218those sections] shall be applied in calculating property income for the purposes of this regulation.]

Textual Amendments

F214Reg. 11(2A) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 5

Modifications etc. (not altering text)

CHAPTER 9U.K. Foreign income

12.—(1) In these Regulations “foreign income” means income arising, in the year in question, from [F219a source outside the United Kingdom or from foreign holdings] which is not—

(a)employment income;

(b)trading income; or

(c)investment income falling within regulation 10(1)(e).

This is subject to the following provisions of this regulation.

[F220(2) The reference in paragraph (1) to “foreign holdings” shall be construed in accordance with section 571 of ITTOIA.]

(3) In calculating the claimant’s foreign income there shall be disregarded—

(a)any payment by way of an annuity or pension payable under any special provision for victims of National Socialist persecution which is made by the law of the Federal Republic of Germany, or any part of it, or of Austria;

[F221(aa)any monies paid by a bank or building society which are exempted from income tax under section 756A of ITTOIA (interest on certain deposits of victims of National-Socialist persecution).]

[F222(bb)any pension, annuity, allowance or other payment provided in accordance with the provisions of the scheme established under the law of the Netherlands and known as Wet uitkeringen vervolgingsslachtoffers 1940-1945 (Netherlands Benefit Act for Victims of Persecution 1940-1945).]

[F223(b)the amount authorised to be deducted by the relevant provision if the claimant’s foreign income comprises or includes a pension to which the following provisions of ITEPA apply—

(i)section 567(5) and 617 (deduction allowed from taxable pension income);

(ii)section 575(2) (taxable pension income: foreign pensions);

(iii)section 613(3) (taxable pension income: foreign annuities); and

(iv)section 635(3) (taxable pension income: foreign voluntary annual payments); and]

(c)any amount which would be disregarded for the purposes of income tax by virtue of—

(i)Extra Statutory Concession A10 (lumps sums paid by overseas pension schemes);

[F224(ii)section 681 of ITEPA;]

(iii)[F225section 751(1)(c) of ITTOIA] (interest on damages for personal injuries awarded by a foreign court); F226...

(iv)Extra Statutory Concession A44 (education allowances payable to public officials of overseas territories); [F227or

(v)section 730 of ITTOIA (foreign maintenance payments).]

[F228(4) Where an overseas property business [F229(within the meaning of Part 3 of ITTOIA)] makes a loss to which the relief provisions [F230contained in sections 118 (carry forward against subsequent property business profits) and 119 (how relief works) of ITA apply], then such relief as may arise under [F231those sections] shall be applied in calculating foreign income for the purposes of this regulation.]

Textual Amendments

Modifications etc. (not altering text)

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 [F232, but this is subject to paragraph (1A)].

[F233(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—

F234(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(iv). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(v). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(vi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(vii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F234(viii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ix)section 714 (transfers of securities: treatment of deemed sums and reliefs) M31 or 716 (transfer of unrealised interest);

(x)section 730 (transfer of income arising from securities) M32;

F235(xi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F236(xii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F237(xiii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(xiv)section 761 (charge to income tax of offshore income gain) M33; and

F238(xv). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F239(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

[F240(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

F239Reg. 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

M31Section 714 was amended by Part 5(3) of Schedule 41 to the Finance Act 1996.

M32Section 730 was amended by paragraph 23 of Schedule 7 to the Finance Act 1996.

M33Section 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.

[F241(3) Paragraph (1) also does not apply to income by way of—

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

[F242(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 [F243or 55AA] of the Contributions and Benefits Act or section 55A [F243or 55AA] of the Northern Ireland Contributions and Benefits Act.]

Textual Amendments

F243Words 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—

[F244(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 M34 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 M35.

Textual Amendments

Marginal Citations

M35Regulation 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.

CHAPTER 11U.K. Miscellaneous income

[F245 Miscellaneous incomeU.K.

18.  In these Regulations “miscellaneous income” means income which does not fall within any other provision of these Regulations, and which is either—

(a)subject to income tax under Part 5 of ITTOIA; or

(b)a payment under, or in connection with, a coronavirus support scheme.]

Textual Amendments

PART 3U.K. Sums disregarded in the calculation of income

General disregards in the calculation of incomeU.K.

19.—(1) For the purposes of regulation 3—

(a)the sums specified in Table 6 are disregarded in the calculation of income;

(b)the sums specified in column 1 of Table 7 are disregarded in the calculation of income if the condition in the corresponding entry in column 2 of that Table is satisfied; and

(c)the sums specified in column 1 of Table 8 are disregarded in the calculation of income to the extent specified in the corresponding entry in column 2 of that Table.

(2) In this regulation—

Table 6

Sums disregarded in the calculation of income

1. Any payment of an employment credit under a scheme under section 2(2) of the Employment Act known as “New Deal 50 plus” or the corresponding scheme under section 1 of the Employment and Training Act (Northern Ireland) 1950.

2. Any payment made—

(a) under section 15 of the Disabled Persons (Employment Act) 1944 M36 or section 15 of the Disabled Persons (Employment) Act (Northern Ireland) 1945 M37; or

(b) in accordance with arrangements made under section 2 of the Employment Act or section 1 of the Employment and Training Act (Northern Ireland) 1950 M38to assist disabled persons to obtain or retain employment despite their disability.

3. Any mandatory top-up payment made pursuant to—

(a) section 2 of the Employment Act [F249or section 1 of the Employment and Training Act (Northern Ireland) 1950] in respect of the claimant’s participation in—

(i) an employment programme specified in regulation 75(1)(a)(ii)(bb) of the JSA Regulations or regulation 75(1)(a)(ii) of the JSA (NI) Regulations (Voluntary Sector Option of the New Deal);

(ii) an employment programme specified in regulation 75(1)(a)(ii)(cc) of the JSA Regulations (Environmental Task Force Option of the New Deal) or regulation 75(1)(a)(iii) of the JSA (NI) Regulations; F250...

[F251(iia) an employment programme specified in regulation 75(1)(a)(ii)(dd) of the JSA Regulations (Community Task Force);]

(iii) the Intensive Activity Period of the New Deal Pilots for 25 plus specified in regulation 75(1)(a)(iv) of the JSA Regulations or, in Northern Ireland, the Preparation for Employment Programme specified in regulation 75(1)(a)(v) of the JSA (NI) Regulations M39; F252...[F253or

(iv) the Backing Young Britain programme pursuant to arrangements made under section 2 of the Employment Act;]

(b) a written arrangement entered into between—

(i) the Secretary of State and the person who has arranged for the claimant’s participation in the Intensive Activity Period of the New Deal for 25 plus and which is made in respect of his participation in that Period; or

(ii) the Department for Employment and Learning and the person who has arranged for the claimant’s participation in the Preparation for Employment Programme and which is made in respect of the claimant’s participation in the Programme.

[F254This item applies only to the extent that the payment is not taxable as a profit of a trade, profession or vocation][F255; or

(c) the Steps to Work Programme specified in regulation 75(1)(a)(vi) of the Jobseeker’s Allowance Regulations (Northern Ireland) 1996.]

4. Any discretionary payment pursuant to section 2 of the Employment Act, or, in Northern Ireland, section 1(1) of the Employment and Training Act (Northern Ireland) 1950 to meet, or help to meet, special needs in respect of the claimant’s participation in the Full-Time Education and Training Option of the New Deal as specified in regulation 75(1)(b)(ii) of the JSA Regulations or of the JSA (NI) Regulations.

5. Any—

(a) education maintenance allowance in accordance with regulations made under section 518 of the Education Act 1996 M40 (payment of school expenses; grant of scholarships etc.); or

(b) payment (not within sub-paragraph (a)) in respect of a course of study attended by a child or qualifying young person payable—

(i) in accordance with regulations made under section 518 of the Education (Scotland) Act 1980 M41 (power to assist persons to take advantage of educational facilities) or section 12(2)(c) of the Further and Higher Education (Scotland) Act 1992 M42 (provision of financial assistance to students); or

(ii )by virtue of regulations made Article 50, 51 or 55(1) of the Education and Libraries (Northern Ireland) Order 1986 (provisions to assist persons to take advantage of educational facilities) M43.

6. Any payment made by an employment zone contractor payable in respect of the claimant’s participation in the employment zone programme by way of—

(a) a training premium;

(b) a discretionary payment, being a fee, grant, loan or otherwise; or

(c) any arrears of subsistence allowance paid as a lump sum.

7. F256. . .

8. An amount of income equal to any qualifying maintenance payment within section 347B of the Taxes Act M44.

[F2579. Any payment by way of qualifying care receipts to the extent that those receipts qualify for relief under Chapter 2 of Part 7 of the Income Tax (Trading and Other Income) Act 2005.]

10. Any payment of maintenance, whether under a court order or not, which is made or due to be made by—

(a) the claimant’s former partner, or the claimant’s partner’s former partner; or

(b) the parent of a child or qualifying young person where that child or qualifying young person is a member of the claimant’s household except where that parent is the claimant or the claimant’s partner.

11. Any payment in respect of a child or qualifying young person who is a member of the claimant’s household made—

[F258(a) to adopters which is exempt from income tax by virtue of [F259sections 744 to 746 of ITTOIA;]]

(b) by a local authority in pursuance of paragraph 15(1) of Schedule 1 to the Children Act 1989 M45 (local authority contribution to child’s maintenance);

[F260(bb) by a local authority by way of special guardianship support services pursuant to regulations under section 14F(1)(b) of the Children Act 1989; or]

(c) by an authority, as defined in Article 2 of the Children (Northern Ireland) Order 1995 M46, in pursuance of Article 15 of, and paragraph 17 of Schedule 1 to, that Order (contribution by an authority to child’s maintenance).

[F26112. Any payment in respect of travelling expenses—

(a) in relation to England under regulation 5, 6 or 12 of the National Health Service (Travel Expenses and Remission of Charges) Regulations 2003;

(b) in relation to Wales under regulation 5, 6 or 11 of the National Health Service (Travelling Expenses and Remission of Charges) (Wales) Regulations 2007;

(c) in relation to Scotland, under regulation 3, 5, or 11 of the National Health Service (Travelling Expenses and Remission of Charges) (Scotland) (No. 2) Regulations 2003;

(d) in relation to Northern Ireland, under regulation 5, 6 or 11 of the Travelling Expenses and Remission of Charges Regulations (Northern Ireland) 2004; or

(e) made by the Secretary of State for Health [F262and Social Care], the Scottish Ministers, the Welsh Ministers or the Department of Health, Social Services and Public Safety and which is analogous to a payment specified in paragraph (a), (b), (c) or (d).]

13. Any payment made by the Secretary of State or the Scottish Ministers under a scheme established to assist relatives and other persons to visit persons in custody.

[F26314. Any payment under the Community Care (Direct Payments) Act 1996, section 57 of the Health and Social Care Act 2001, F264... Article 15A of the Health and Personal Social Services (Direct Payments) (Northern Ireland) Order 1996 [F265or regulations made under section 57 of the Health and Social Care Act 2001 (direct payments)] [F266, sections 50 to 53 of the Social Services and Well-being (Wales) Act 2014] or section 8 of the Carers and Direct Payments Act (Northern Ireland) 2002 [F267or as a direct payment as defined in section 4(2) of the Social Care (Self-directed Support) (Scotland) Act 2013].]

[F26814A. Any payment made under the “Supporting People” programme—

(a)in England and Wales, under section 93 of the Local Government Act 2000;

(b)in Scotland, under section 91 of the Housing (Scotland) Act 2001; or

(c)in Northern Ireland, under Article 4 of the Housing Support Services (Northern Ireland) Order 2002.]

15. [F269Any payment or a voucher] provided under section 95 or 98 of the Immigration and Asylum Act 1999 M47 for any former asylum-seeker or his dependants.

16. Any payment of a provident benefit by a trade union.

Here—

“provident benefit” has the meaning given in section 467(2) of the Taxes Act; and

“trade union” has the meaning given in section 467(4) of the Taxes Act.

[F27017. Armed forces independence payment under the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011.]

[F27118. Any payment made under the Welfare Supplementary Payment (Loss of Disability Living Allowance) Regulations (Northern Ireland) 2016, the Welfare Supplementary Payment (Loss of Disability-Related Premiums) Regulations (Northern Ireland) 2016, Part 2 of the Welfare Supplementary Payments Regulations (Northern Ireland) 2016, or Parts 3 to 5 of the Welfare Supplementary Payment (Loss of Carer Payments) Regulations (Northern Ireland) 2016 .]

[F27219. Any payment made by the Scottish Ministers to a claimant who is, or who has been, in receipt of carer’s allowance under section 70 of the Contributions and Benefits Act (carer’s allowance) during the relevant tax year to supplement that allowance.

F273...]

[F27220. Any payment in respect of funeral expense assistance which is made by the Scottish Ministers to a claimant who has accepted responsibility for the expenses of a funeral to meet, or help towards meeting, those expenses.]

[F27221. Any payment made by the Scottish Ministers in respect of early years assistance, which is made for the purposes of meeting some of the costs associated with having, or expecting to have, a baby or child in the family.]

[F27222. Any discretionary financial assistance payment which is made by a Scottish local authority to a claimant who is in receipt of housing benefit provided by virtue of a scheme under section 123 of the Contributions and Benefits Act (income-related benefits) to meet, or help towards meeting, a claimant’s housing costs. ]

F274...

[F27523. Any discretionary payment made pursuant to the Discretionary Support Regulations (Northern Ireland) 2016.

24. Any payment made under, or in connection with, the Windrush Compensation Scheme administered by the Home Office.]

[F27625. Any payment made, in accordance with arrangements made by the Scottish Ministers, to a person to whom an offer of employment has been made, in order to assist that person to retain employment, if—

(a) that person—

(i) was, at the date on which the offer of employment was made, at least 16 years of age but had not reached 25 years of age;

(ii) had not been in employment at any time in the period of 6 months before the date on which that offer was made; and

(iii) applies to the Scottish Ministers for assistance under arrangements made under section 2 of the Employment and Training Act 1973,within the period of one year beginning with the date on which that offer was made; or

(b) that person—

(i) was, at the date on which the offer of employment was made, aged at least 16 years of age but had not reached 26 years of age;

(ii) had been looked after by a local authority on or after that person’s 16th birthday but was at the date that the offer of employment was made no longer looked after by a local authority; and

(iii) applies to the Scottish Ministers for assistance under arrangements made under section 2 of the Employment and Training Act 1973 within the period of one year beginning with the date on which that offer was made.

In this item “looked after by a local authority” has the same meaning as in regulation 2

(interpretation) of the Child Tax Credit Regulations 2002.]

[F27626. Any payment of disability assistance under section 31 of the Social Security (Scotland) Act 2018.]

[F27627. Any payment made in accordance with arrangements made by the Scottish Ministers for, or in connection with, the abuse or neglect of a person whilst that person was a child who was under the care or responsibility of a body, society or organisation in Scotland.]

[F27628. Any payment made by the Scottish Ministers in accordance with regulations made under section 79 of the Social Security (Scotland) Act 2018 to a person in respect of a child for whom that person is responsible.]

[F27629. Any payment of young carer grant made under the Carer’s Assistance (Young Carers Grant) (Scotland) Regulations 2019.]

[F27630. Any payment in respect of short-term assistance given in accordance with section 36 of the Social Security (Scotland) Act 2018.]

[F27631. Any payment of winter heating assistance given in accordance with section 30 of the Social Security (Scotland) Act 2018.]

[F27632. Any payment made by the National Emergencies Trust (a registered charity established on 28th March 2019 with registered charity number: 1182809).]

[F27633. Any payment made under a scheme established by the Secretary of State in accordance with section 10 of the Northern Ireland (Executive Formation etc) Act 2019.]

[F27734. A payment, whether in cash or by way of a voucher, in lieu of free school meals.]

[F27735. A payment in connection with emergency volunteering leave under Schedule 7 to the Coronavirus Act 2020.]

36. F278. . .

[F27937. Any payment made under the scheme known as the NHS Test and Trace Self-Isolation Payment Scheme established on 1st September 2020 [F280or the scheme known as the Test and Trace Support Payment scheme established on 28th September 2020 in respect of England or any other scheme established in any part of the United Kingdom for the purpose of providing financial support to people who are required to self-isolate due to coronavirus and cannot work from home] F281....]

[F28238. Any payment, made by or on behalf of the Scottish Ministers under Part 5 of the Welfare Food (Best Start Foods) (Scotland) Regulations 2019.]

[F28339. Any payment, funded by the Scottish Government, for the purpose of supporting women affected by complications after mesh implant surgery.]

[F28440. Any payment made under the scheme known as the Covid Winter Grant Scheme or the Covid Local Support Grant established under section 31 of the Local Government Act 2003 in respect of England or any corresponding schemes established by the Northern Ireland Executive, the Scottish Government or the Welsh Government for the purpose of providing financial support to families and vulnerable individuals to assist with the cost of food and utilities.]

[F28541. A payment made under the Covid-19 support scheme: working households receiving tax credits.]

[F28642. Any payment made under the scheme known as the “Household Support Fund” in respect of England or any corresponding schemes established by the Northern Ireland Executive, the Scottish Government or the Welsh Government.]

[F28743. Any payment made in accordance with the terms of the Homes for Ukraine Scheme to a person who has been approved under that scheme to provide accommodation to persons who are eligible under that scheme.

In this item, “Homes for Ukraine Scheme” means the scheme established by the Department for Levelling Up, Housing and Communities on 18th March 2022 F288.]

[F28944. An award of compensation made under the Victims of Overseas Terrorism Compensation Scheme 2012 or any corresponding scheme established under section 47 of the Crime and Security Act 2010.]

[F29045. Any payment made by the Post Office or the Secretary of State for the purpose of providing compensation which is—

(a) in connection with the failings of the Horizon System, or

(b) otherwise payable following the judgment of Bates and Others v Post Office Limited ((No. 3) “Common Issues”).

In this item—

(a) “the Horizon System” means a version of the computer system used by the Post Office known as Horizon, Horizon Legacy, Horizon Online or HNG-X;

(b) “the Post Office” means Post Office Limited (registered number 02154540).

46. Any payment made by a Scottish local authority to parents, under section 20 of the Local Government in Scotland Act 2003, as part of the scheme entitled Parental Transitions Support, to ease progression into work, the eligibility for which is dependent on—

(a) the receipt of certain social security benefits, as specified by that scheme, and

(b) the receipt of a formal offer to start work.

47. Any payment made by a housing association or local authority in England, from funding granted by the Department for Work and Pensions under section 2 of the Employment Act, to a person residing in social housing, as an incentive to enter employment.]

Table 7

Sums disregarded in calculating income if conditions are satisfied

1. Description of payment2. [F291Conditions] that must be satisfied

1. Any payment in respect of any expenses incurred by a claimant who is engaged by a charitable or voluntary organisation or is a volunteer.

The claimant does not receive remuneration or profit from the engagement and is not treated as possessing any employment income under regulation 17 in respect of that engagement.

2. A payment by way of—

(a) travelling expenses reimbursed to the claimant;

(b) a living away from home allowance under section 2(2)(d) of the Employment Act M48, section 2(4)(c) of the Enterprise and New Towns (Scotland) Act 1990 M49 or section 1 of the Employment and Training Act (Northern Ireland) 1950 M50;

(c) training grant; F292...

(d) child care expenses reimbursed to the claimant in respect of his participation in—

(i) a New Deal option,

(ii) the Intensive Activity Period of the New Deal Pilots for 25 plus, F293...

(iii) the Preparation for Employment Programme [F294; F295...

(iv) the Flexible New Deal specified in regulation 75(1)(a)(v) of the [F296JSA Regulations]] [F297; or

[F298(v) the Community Task Force specified in regulation 75(1)(a)(ii)(dd) of the JSA Regulations; or]

(e) child care expenses under the Steps to Work Programme specified in regulation 75(1)(a)(vi) of the [F299JSA (NI) Regulations].]

The claimant—

(a)participates in arrangements for training made under—

(i)section 2 of the Employment Act;

(ii)section 2 of the Enterprise and New Towns (Scotland) Act 1990; or

(iii)section 1 of the Employment and Training Act (Northern Ireland) 1950; or

(b)attends a course at an employment rehabilitation centre established under section 2 of the Employment Act.

[F300The payment is not taxable as a profit of a trade, profession or vocation.]

Table 8

Sums partly disregarded in the calculation of income

Type of payment to be disregardedLimit on, or exception to, the extent of disregard

1. Any discretionary payment made pursuant to section 2 of the Employment Act, or, in Northern Ireland section 1(1) of the Employment and Training Act (Northern Ireland) 1950 to meet, or help meet, the claimant’s special needs in undertaking a qualifying course within the meaning of regulation 17A(7) of the JSA Regulations M51 or regulation 17A(7) of the JSA (NI) Regulations.

A payment is not within this item to the extent that it relates to travel expenses incurred as a result of the claimant’s attendance on the course if an amount in respect of those expenses has already been disregarded pursuant to regulation 8.

2. Any payment made in respect of a career development loan paid pursuant to section 2 of the Employment Act.

A payment is not within this item to the extent that the loan has been applied for or paid in respect of living expenses for the period of education and training supported by the loan.

3. Any payment made to the claimant or his partner in respect of a person who is not normally a member of the claimant’s household but is temporarily in his care, by—

(a) a health authority;

(b) a local authority;

(c) a voluntary organisation;

(d) that person pursuant to section 26(3A) of the National Assistance Act 1948 M52;

[F301(dza) that person where the payment is for the provision of accommodation in respect of the meeting of that person’s needs under section 18 or 19 of the Care Act 2014 (duty and power to meet needs for care and support) [F302or section 35 or 36 of the Social Services and Well-being (Wales) Act 2014 (duty and power to meet care and support needs of an adult)];]

[F303(da) [F304an integrated care board established under Chapter A3 of Part 2 of the National Health Service Act 2006] ;

(db) [F305NHS England].]

F306...

A payment is only to be disregarded by virtue of this item if—

[F307(a)] any profits F308... arising from the payment mentioned in column 1 are treated as nil by [F309section 791 to 794 of ITTOIA (full rent-a-room relief)] [F310; or

(b) excluded from profits [F311by section 795 to 798 of ITTOIA (alternative calculation of profits if amount exceeds limit)].]

4. Any payment made in Northern Ireland to the claimant or his partner in respect of a person who is not normally a member of the claimant’s household but is temporarily in his care—

(a) pursuant to Article 36(7) of the Health and Personal Social Services (Northern Ireland) Order 1972 M53 by an authority; a voluntary organisation; or the person concerned, or

(b) by a training school within the meaning of section 137 of the Children and Young Persons Act (Northern Ireland) 1968 M54.

In this item “an authority” has the meaning given by Article 2 of the Children (Northern Ireland) Order 1995.

A payment is only to be disregarded by virtue of this item if—

[F312(a)] any profits F308... arising from the payment mentioned in column 1 are treated as nil by [F309section 791 to 794 of ITTOIA (full rent-a-room relief)] [F313; or

(b) excluded from profits [F311by section 795 to 798 of ITTOIA (alternative calculation of profits if amount exceeds limit)].]

5. Any payment under an insurance policy taken out to insure against the risk of being unable to maintain the repayments—

(a) on a loan which is secured on the dwelling house which the claimant occupies as his home; or

(b) under a regulated agreement or under a hire-purchase agreement or a conditional sale agreement.

For the purposes of paragraph (b)—

“regulated agreement” has the meaning given in the Consumer Credit Act 1974 M55; and

“hire-purchase agreement” and “conditional sale agreement” have the meanings given in Part 3 of the Hire-Purchase Act 1964 M56.

A payment is only to be disregarded by virtue of this item to the extent that it is used to—

(a) maintain the repayments referred to in column (1); and

(b) meet any amount due by way of premiums on—

(i) that policy; or

(ii) in a case to which paragraph (a) of this item applies, an insurance policy taken out to insure against loss or damage to any building or part of a building which is occupied by the claimant as his home and which is required as a condition of the loan referred to in column (1).

[F3146.] Any payment in respect of the claimant’s attendance at court as a juror or witness.

This item applies only to the extent that the payment is not compensation for loss of earnings or for the loss of payment of social security income.

[F3157.] Any payment of a sports award except to the extent that it has been made in respect of living expenses.

For the purposes of this item “living expenses” does not include—

(a)the cost of vitamins, minerals or other special dietary supplements intended to enhance the performance of the claimant in the sport in respect of which the award was made; or

(b)accommodation costs incurred as a consequence of living away from home whilst training for, or competing in, the sport in respect of which the award was made.

Textual Amendments

F250Word in reg. 19 Table 6 Item 3 omitted (6.4.2010) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/751), regs. 1, 5(2)(a)

F259Words in reg. 19 Table 6 Item 11 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 19(2)(b)

F288Details of this scheme have been published on www.homesforukraine.campaign.gov.uk. Paper copies of all relevant documentation relating to the scheme are available for inspection at: Her Majesty’s Revenue and Customs at 14 Westfield Avenue, Stratford, London E20 1HZ.

F293Word in reg. 19 Table 7 Item 2 omitted (5.10.2009) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/697), regs. 1(b), 8(a)

F295Word in reg. 19 Table 7 Item 2 omitted (6.4.2010) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/751), regs. 1, 5(3)(a)

F296Words in reg. 19 Table 7 Item 2 substituted (6.4.2010) by The Tax Credits (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/751), regs. 1, 5(3)(b)

F299Words in reg. 19 Table 7 Item 2 substituted (6.4.2010) by The Tax Credits (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/751), regs. 1, 5(3)(d)

F307Words in reg. 19 Table 8 Item 3 renumbered as reg. 19 Table 8 Item 3(a) (6.4.2003) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2003 (S.I. 2003/732), regs. 1, 11(3)(a)(i)

F308Words in reg. 19 Table 8 Items 3, 4 omitted (6.4.2006) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 19(3)(a)(i)

F309Words in reg. 19 Table 8 Items 3, 4 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 19(3)(a)(ii)

F311Words in reg. 19 Table 8 Items 3, 4 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 19(3)(b)

F312Words in reg. 19 Table 8 Item 4 renumbered as reg. 19 Table 8 Item 4(a) (6.4.2003) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2003 (S.I. 2003/732), regs. 1, 11(3)(a)(i)

Marginal Citations

M361944 c.10. Section 15 was amended by section 61 of the Disability Discrimination Act 1995 (c.50).

M39Paragraph (1)(a)(v) was inserted by regulation 5(a) of S.R. 2001 No. 151.

M401996 c.56. Section 518 was substituted by section 129 of the Schools Standards and Framework Act 1998 (c.31).

M441988 c.1. Section 347B was inserted by section 36 of the Finance Act 1988 (c.39) and amended (for the tax year beginning on 6th April 1990 and subsequent tax years) by paragraph 13 of Schedule 3, further amended by Part 8 of Schedule 14 to the Finance Act 1988, section 5 of and paragraph 6 of Schedule 4 to the Contracts (Applicable Law) Act 1990 (c.36), sections 61 and 62 of the Finance (No. 2) Act 1992 (c.48), section 79 to and Schedule 26 Part 5(1) to the Finance Act 1994 (c.9), paragraphs 11 and 15 of Schedule 2 to the Jobseekers Act 1995 (c.18), section 27 to and Schedule 27 Part 3(1) of the Finance Act 1998 (c.36) and sections 36 and 139 of and Schedule 20 Part 3(6) to the Finance Act 1999 (c.16).

M48Section 2 was substituted by section 25 of the Employment Act 1988 (c.19) and amended by section 29(4) of and Schedule 7 Part 1 to the Employment Act 1989 (c.38) and section 47(1) of the Trade Union Reform and Employment Rights Act 1993 (c.19).

M51Regulation 17A(7) was amended by regulation 2(4) of S.I. 1998/2874 and regulation 2 of S.I. 1999/3083.

M521948 c.29. Section 26(3A) was inserted by section 42(4) of the National Health Service and Community Care Act 1990 (c.19).

M53S.I. 1972/1265 (N.I. 14). Article 36 was substituted by Article 25 of S.I. 1991/194 (N.I. 1) and amended by paragraph 2(4) and (5) of Schedule 1 to S.I. 1992/3204 (N.I. 20).

M541968 c.34 (N.I.). Section 137 was amended by Schedule 18 to the Health and Personal Social Services (Northern Ireland) Order 1972 and Article 185(1) of, and paragraph 42 of Schedule 9 to, the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (N.I. 2)).

Jim Fitzpatrick

John Heppell

Two of the Lords Commissioners of Her Majesty’s Treasury

Explanatory Note

(This note is not part of the Regulations)

These Regulations define what is income for the purposes of working tax credit and child tax credit under the Tax Credits Act 2002 (c.21).

Regulation 1 provides for the commencement and citation of these Regulations, and regulation 2 for the interpretation of certain terms used in them.

Regulation 3 sets out the steps to be taken to calculate the income of a claimant, or in the case of a joint claim, of the claimants for an award of either of the tax credits payable under Part 1 of the Tax Credits Act 2002 (c.21).

Regulations 4 to 12 set out the extent to which a claimant’s employment income, pension income, trading income, social security income, student income, investment income, property income and foreign income are to be taken into account for the purposes of regulation 3.

Regulations 13 to 17 contain a series of provisions which treat a claimant as having income which he does not have.

Regulation 14 provides that if a person is treated as having income for income tax purposes under specified provisions of the Income and Corporation Taxes Act 1988 (c.1) or under paragraph 1 of Schedule 13 to the Finance Act 1996 (c.8).

Regulation 15 provides that a claimant depriving himself of income in order to secure entitlement to or increasing the amount of a tax credit is to be treated as having it.

Regulation 16 provides that a claimant to whom income would become available upon the making of an application for it is to be treated as having that income. It does not apply if the income in question arises under a trust derived from a payment made in consequence of a personal injury, a personal pension scheme or retirement annuity contract, comprises compensation for personal injury which is being administered by a court, or a rehabilitation allowance under section 2 of the Employment and Training Act 1973 (c.50).

Regulation 17(1) treats a claimant who provides a service for another, either without payment or at less than the rate which would be reasonable for comparable employment in the area in question, where the other has the means to pay or to pay more for the service, as having such amount of employment or trading income as would be reasonable for the employment of the claimant to provide the service. The paragraph does not apply where the recipient of the service is a charity or voluntary organisation. Nor does it apply if the service is provided in connection with participation in an employment or training programme in Great Britain under regulation 19(1)(q) of the Jobseekers Allowance Regulations 1996 (S.I. 1996/207) unless it is provided in connection with the Intensive Activity period specified in regulation 75(1)(a)(iv) of those Regulations, or in corresponding circumstances in Northern Ireland.

Regulation 18 provides that income which is not otherwise dealt with in the Regulations, but which is chargeable to income tax under Case VI of Schedule D for the purposes of income tax, is to be taken into account in calculating the claimant’s income under regulation 3.

Regulation 19 provides a series of miscellaneous disregards in the calculation of income under regulation 3.

A regulatory impact assessment in respect of the Tax Credits Act 2002 has been prepared and placed in the Library of each House of Parliament. A copy may be found on the Inland Revenue website (www.inlandrevenue.gov.uk).