The Family Credit (General) Regulations 1987

Calculation of net earnings of employed earners U.K.

20.— [F1 (1) For the purposes of regulation 14 (normal weekly earnings of employed earners) the earnings of a claimant to be taken into account shall be his average weekly net [F2 earnings and] where an estimate of earnings has been made in his case, as estimated, and those weekly net earnings shall be determined in accordance with the following paragraphs.]

(2) There shall be disregarded from a claimant's net earnings, any sum, where applicable, specified in Schedule 1.

(3) [F3 A claimant’s net earnings shall, except where paragraph (4) [F4 or (4A)] applies, be calculated by taking into account his gross earnings from that employment] F5 ..., less—

(a) any amount deducted from those earnings by way of—

(i) income tax;

(ii) primary Class 1 contributions under the Social Security Act M1 ; and

(b) one-half of any sum paid by the claimant [F6 in respect of a pay period] by way of a contribution towards an occupational or personal pension scheme; [F7 and

(c) the net amount of bonus or commission (if any) which is paid separately from his other earnings or is paid in respect of a period longer than the pay period relating to the other earnings with which it is paid and that net amount shall be the gross amount of that bonus or commission after deducting from it sums calculated in accordance with paragraphs (a) to (c) of regulation 20A (calculation of bonus or commission).]

(4) Where the earnings of a claimant are [F8 estimated under paragraph (6)][F9 , (6A) or (6B)] of regulation 14 (normal weekly earnings of employed earners), his net earnings shall be calculated by taking into account those earnings over [F10 the period in respect of which the estimate is made], less—

(a) an amount in respect of income tax equivalent to an amount calculated by applying to those earnings [F11 the lower rate or, as the case may be, the lower rate and the basic rate of tax] in the year of assessment in which the claim was made less only the personal relief to which the claimant is entitled under sections 8(1) and (2) and 14(1)(a) and (2) of the Income and Corporation Taxes Act 1970 M2 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year, [F12 the earnings to which the lower rate F13 ... of tax is to be applied and] the amount of the personal relief deductible under this sub-paragraph shall be calculated on a pro rata basis;

[F14 (b) where the weekly amount of those earnings equals or exceeds the lower earnings limit, an amount representing primary Class 1 contributions under the Contributions and Benefits Act, calculated by applying to those earnings the initial and main primary percentages applicable at the date of claim in accordance with section 8(1) (a) and (b) of that Act; and]

[F15 (c) one half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme, if the earnings so estimated were actual earnings.]

[F16 (4A) Where earnings are estimated under paragraph (6ZA) of regulation 14 (normal weekly earnings of employed earner in overseas territory), net earnings shall be calculated by taking into account those earnings over the period in respect of which the estimate is made, less—

(a) the amount (if any) of income tax deducted in respect of those earnings in accordance with the laws of the overseas territory concerned,

(b) the amount (if any) of social security contributions deducted in respect of those earnings in accordance with those laws, and

(c) one half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme, if the earnings so estimated were actual earnings.]

[F17 (5) When a claimant’s net earnings have been calculated in accordance with paragraph (3), his average net earnings in respect of his pay period shall be calculated as follows—

(a) the net earnings in each of the pay periods in his assessment period shall be aggregated, that total shall then be divided by the number of pay periods in his assessment period and the resulting amount shall be the average net earnings for his pay period;

(b) where in respect of any pay period, a claimant’s net earnings are twenty per cent. or more higher, or twenty per cent. or more lower, than his average net earnings, those net earnings and that pay period shall be omitted, his assessment period shall be reduced accordingly and his average net earnings shall, subject to sub- paragraph (c), be re-calculated in accordance with sub-paragraph (a);

(c) where the operation of sub-paragraph (b) results in no pay period remaining in a claimant’s assessment period there shall be omitted from the assessment period any pay period in which no earnings are received or in which the net earnings received are for a period longer than his normal pay period and his average net earnings shall be re-calculated in accordance with sub-paragraph (a);

(d) where the operation of sub-paragraph (c) results in no pay periods remaining, paragraph (6) of regulation 14 (normal weekly earnings of employed earners) and paragraph (4) of this regulation shall apply in his case.

(6) Where a claimant’s average net earnings for his pay period have been calculated in accordance with paragraph (5) and his pay period is—

(a) a week, a fortnight or four weeks, his average net earnings for his pay period shall be divided by the number of weeks in that period;

(b) a month, his average net earnings shall be multiplied by 12, the resulting product divided by 52;

(c) any shorter or longer period than those referred to in sub- paragraphs (a) and (b), his average net earnings for his pay period shall be multiplied by 7 and the product divided by the number equal to the number of days in his pay period,

and the resulting amount shall be his average weekly net earnings.]

Textual Amendments

F1 Reg. 20(1) substituted (7.4.1992) by The Family Credit (General) Amendment Regulations 1992 (S.I. 1992/573), regs. 1(1), 7(a)

F2 Words in reg. 20(1) substituted (7.1.1997) by The Disability Working Allowance and Family Credit (General) Amendment Regulations 1996 (S.I. 1996/3137), regs. 1, 3(5)(a)

F3 Words in reg. 20(3) substituted (7.4.1992) by The Family Credit (General) Amendment Regulations 1992 (S.I. 1992/573), regs. 1(1), 7(b)(i)

F4 Words in reg. 20(3) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by Tax Credits (Miscellaneous Amendments No.4) Regulations 2002 (S.I. 2002/1696), regs. 1(1), 8(a)

F5 Words in reg. 20(3) omitted (7.1.1997) by The Disability Working Allowance and Family Credit (General) Amendment Regulations 1996 (S.I. 1996/3137), regs. 1, 3(5)(b)

F6 Words in reg. 20(3)(b) inserted (4.10.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No.5) Regulations 1994 (S.I. 1994/2139), regs. 1(1)(b), 15(2)

F7 Reg. 20(3)(c) and preceding word added (7.4.1992) by The Family Credit (General) Amendment Regulations 1992 (S.I. 1992/573), regs. 1(1), 7(b)(ii)

F8 Words in reg. 20(4) substituted (7.4.1992) by The Family Credit (General) Amendment Regulations 1992 (S.I. 1992/573), regs. 1(1), 7(c)(i)

F9 Words in reg. 20(4) inserted (with effect in accordance with reg. 1(4) of the amending S.I.) by The Tax Credits (Miscellaneous Amendments No. 3) Regulations 2001 (S.I. 2001/892), regs. 1(2), 15(2)

F10 Words in reg. 20(4) substituted (7.4.1992) by The Family Credit (General) Amendment Regulations 1992 (S.I. 1992/573), regs. 1(1), 7(c)(ii)

F11 Words in reg. 20(4)(a) substituted (5.10.1992) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No. 3) Regulations 1992 (S.I. 1992/2155), regs. 1(1), 6(a)

F12 Words in reg. 20(4)(a) inserted (5.10.1992) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No. 3) Regulations 1992 (S.I. 1992/2155), regs. 1(1), 6(b)

F13 Words in reg. 20(4)(a) omitted (4.10.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No.5) Regulations 1994 (S.I. 1994/2139), regs. 1(1)(b), 14

F14 Reg. 20(4)(b) substituted (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 16

F15 Reg. 20(4)(c) substituted (4.10.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No.5) Regulations 1994 (S.I. 1994/2139), regs. 1(1)(b), 15(3)

F16 Reg. 20(4A) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by Tax Credits (Miscellaneous Amendments No.4) Regulations 2002 (S.I. 2002/1696), regs. 1(1), 8(b)

F17 Reg. 20(5) (6) added (7.4.1992) by The Family Credit (General) Amendment Regulations 1992 (S.I. 1992/573), regs. 1(1), 7(d)

Marginal Citations

M1 See sections 1 and 4 of the Social Security Act 1975 (c. 14); section 1 was amended by section 40 of the Employment Protection Act 1975 (c. 71), section 24 of, and Schedule 2 to, the Social Security (Miscellaneous Provisions) Act 1977 (c. 5), section 2 of the Social Security (Contributions) Act 1982 (c. 2), section 29 of, and paragraph 5 of Schedule 5 to, the Social Security Act 1985 (c. 53), section 86 of, and Schedule 11 to, the Social Security Act 1986 (c. 50) and S.I. 1987/48; section 4 was amended by paragraph 36 of Schedule 4 to the Social Security Pensions Act 1975 (c. 60), section 2(4) of the Education (School-Leaving Dates) Act 1976 (c. 5), section 14(1) of the Social Security Act 1979 (c. 18), Schedule 5 of the Social Security and Housing Benefits Act 1982 (c. 24), sections 7(1) and (2) and 8(1) of the Social Security Act 1985, sections 74(1)(a) and (2) and 86 of, and paragraph 104 of Schedule 10 to, the Social Security Act 1986 and S.I. 1986/25 and 1987/46.

M2 1970 c. 10; section 8(1) was amended by the Finance Act 1971 (c. 68) section 37, Schedule 6 paragraphs 1 and 5, and by the Finance Act 1985 (c. 54) section 36; subsection (1A) was added by the Finance (No. 2) Act 1975 (c. 45) section 31 and amended by the Finance Act 1977 (c. 36) section 22. Subsection (1B) was added by the Finance (No. 2) Act 1975, section 31. Section 8(2) was amended by the Finance Act 1971 section 37, Schedule 6 paragraphs 1 and 5 and by article 2 of S.I. 1985/430; sub-paragraph (b) was substituted by the Finance (No. 2) Act 1979 (c. 47) section 12, Schedule 2 paragraph 1; sub-paragraphs (b)(i) and (ii) were amended by the Finance Act 1981 (c. 35), section 139, Schedule 19 Part VI and the Finance Act 1982 (c. 39) section 157, Schedule 22 Part IV; sub-paragraph (b)(iii) was added by the Finance Act 1981 section 27 and sub-paragraph (b)(iv) by the Finance Act 1987 (c. 16) section 27. Section 14(1) was amended by the Finance Act 1970 (c. 24) section 14, Schedule 8 Part VI; section 14(2) was amended by the Finance Act 1976 (c. 40) section 36, the Finance (No. 2) Act 1979, section 11, Schedule 1 paragraph 2 and the Finance Act 1980 (c. 48) section 24.