The Income Tax (Exemption of Social Security Benefits) Regulations 2021

EXPLANATORY NOTE

(This note is not part of the Regulations)

The Regulations amend Chapter 5 of Part 10 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1; “ITEPA”), so as to provide that no liability to income tax arises on social security benefits of a description specified in the Regulations, including social security benefits paid by the Scottish Ministers and local authorities.

Regulation 1 provides for citation and commencement, and gives a definition of “ITEPA” which applies to the Regulations.

Regulation 2 amends section 677 of ITEPA by inserting new rows into Part 1 of Table B contained within that provision, in order to wholly exempt short-term assistance (“STA”) and winter heating assistance (“WHA”), respectively, from income tax. The Regulations are made in exercise of the power in section 13(2)(b) of the Finance Act 2020 (c. 14; “FA 2020”), which provides that regulations made under section 13(1) of that Act may make retrospective provision. Regulation 3 therefore provides that the amendments to ITEPA made by the Regulations have effect in relation to payments of STA made by the Scottish Ministers during the tax year 2021-22 and subsequent tax years; whilst regulation 4 provides that the amendments have effect in relation to payments of WHA made during the tax year 2020-21 and subsequent tax years.

Regulation 6, which is also made under section 13(1) of FA 2020 and in exercise of the specific power in section 13(2)(b), modifies the effect of section 677 of ITEPA so that—

• payments made pursuant to the Covid Winter Grant Scheme or the Covid Local Support Grant; and

• payments made pursuant to any scheme or grant in Scotland, Wales or Northern Ireland corresponding to the Covid Winter Grant Scheme or the Covid Local Support Grant,

will be wholly exempt from income tax, where such payments were made pursuant to such a scheme or grant for the tax year 2020-21 and subsequent tax years.

Regulation 7 makes a consequential modification to the Table in Part 1 of Schedule 1 to ITEPA, so that the Table has effect as if an abbreviation for the Local Government Act 2003 (c. 26) (“LGA 2003”) were inserted into it. This modification has effect for the tax year 2020-21 and subsequent tax years (see regulation 8).

A Tax Information and Impact Note has not been prepared for this instrument as it contains no substantive changes to tax policy.