Finance Act 1994

139 Taxation of incapacity benefit

(1) For the year 1995-96 and subsequent years of assessment incapacity benefit, except—

(a) benefit payable for an initial period of incapacity, and

(b) so much of any benefit as is attributable in any case to an increase in respect of a child,

shall be treated as income for the purposes of the Income Tax Acts and charged to income tax under Schedule E.

(2) Subsection (1) above shall not apply to incapacity benefit to which a person is entitled for any day of incapacity for work falling in a period of incapacity for work which is treated for the purposes of that benefit as having begun before 13th April 1995 if the part of that period which is treated as having fallen before that date includes a day for which that person was entitled to invalidity benefit.

(3) Incapacity benefit shall for the purposes of this section be a benefit in relation to which section 41 of the [1989 c. 26.] Finance Act 1989 (year of assessment in which benefit to be charged) applies.

(4) Enactments relating to the payment of incapacity benefit shall have effect subject to such provision as may be contained for the purposes of this section in regulations under section 203 of the Taxes Act 1988 (PAYE regulations).

(5) In this section—

• “incapacity benefit” means any benefit which by virtue of provisions contained in the Social Security (Incapacity for Work) Act 1994 or any corresponding provisions made for Northern Ireland is to be known as incapacity benefit;

• “initial period of incapacity”, in relation to incapacity benefit, means any period for which that benefit is payable as short-term incapacity benefit at the rate which (apart from any increase or addition) is the lower of the rates applicable to short-term incapacity benefit; and

• “invalidity benefit” means invalidity benefit under Part II of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 or under Part II of the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992.