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

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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.

  • Step One

    Calculate and then add together—

    (a)

    the pension income (as defined in regulation 5(1)),

    (b)

    the investment income (as defined in regulation 10),

    (c)

    the property income (as defined in regulation 11),

    (d)

    the foreign income (as defined in regulation 12) and

    (e)

    the notional income (as defined in regulation 13)

    of the claimant, or, in the case of a joint claim, of the claimants.

    If the result of this step is £300 or less, it is treated as nil.

    If the result of this step is more than £300, only the excess is taken into account in the following steps.

  • Step Two

    Calculate and then add together—

    (a)

    the employment income (as defined in regulation 4),

    (b)

    the social security income (as defined in regulation 7),

    (c)

    the student income (as defined in regulation 8) and

    (d)

    the miscellaneous income (as defined in regulation 18)

    of the claimant, or in the case of a joint claim, of the claimants.

  • Step Three

    Add together the results of Steps One and Two.

  • Step Four

    Calculate the trading income (as defined in regulation 6) of the claimant, or in the case of a joint claim, of the claimants.

    Add the result of this step to that produced by Step Three F1... in the year.

    If there has been a trading loss in the year, [F2subtract] the amount of that loss from the result of Step Three.

    [F3A loss shall not be available for tax credits purposes, unless the trade was being carried on upon a commercial basis and with a view to the realisation of profits in the trade or, where the carrying on of the trade formed part of a larger undertaking, in the undertaking as a whole.]

    [F4Any trading loss in the year not set off as a result of the calculations in Steps One to Four above due to an insufficiency of income may be carried forward and set off against trading income (if any) of the same trade, profession or vocation in subsequent years (taking earlier years first) for the purposes of calculation of income under this regulation.]

(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 [F5Chapter 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 [F6, for income tax purposes]—

(a)resident [F7and domiciled but not ordinarily resident] in the United Kingdom, F8...

(b)resident and ordinarily resident but not domiciled in the United Kingdom, [F9or]

[F10(c)resident but neither ordinarily resident nor domiciled in the United Kingdom.]

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

[F11(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 [F12taken into account] are to be construed as including a sum which would be taxable if he were resident, ordinarily resident and domiciled in the United Kingdom.

[F13(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.

[F14(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 ending on 28th March in the tax year in which the income arises.]

(7) In calculating income under this Part there shall be deducted F15...—

(a)[F16the 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)[F17the grossed-up amount of] any qualifying donation (within the meaning of section 25 of the Finance Act 1990 (donations to charity by individuals) M1), made by the claimant or, in the case of a joint claim, by either or both of the claimants; F18... [F19and]

[F20(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.]

F21(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F22(8) If—

(a)a claimant has sustained a loss in relation to a [F23UK property business] or an overseas property business; and

(b)the relief to which he is entitled in accordance with section 379A(2) and (3) of the Taxes Act 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.

[F24In this paragraph “UKproperty business” and “overseas property business” have the same meanings as they have in Chapter 2 of Part 3 ofITTOIA.]]

Textual Amendments

Marginal Citations

M1Section 25 has been partly repealed by section 71(5) and (6) of the Finance Act 1991 (c.31) and amended by subsections (1) to (7) and (10) of section 39 of the Finance Act 2000.

CHAPTER 2U.K. Employment Income

Employment incomeU.K.

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

(a)any [F25earnings] 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 [F26by virtue of section 62 or section 72 of ITEPA;]

(c)[F27the cash equivalent of] any non-cash voucher received by the claimant in that year and chargeable to income tax under [F28section 87 of ITEPA;]

(d)[F29the cash equivalent of] any credit-token received by the claimant in that year and chargeable to income tax under [F30section 94 of ITEPA;]

(e)[F31the cash equivalent of] any cash voucher received by the claimant in that year and chargeable to income tax under [F32section 81 of ITEPA;]

[F33(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 [F34by virtue of section 660 of ITEPA;]

(h)the amount (if any) by which a payment of [F35statutory maternity pay, statutory paternity pay or statutory adoption pay] exceeds £100 per week;

(i)any amount charged to income tax for that year [F36under section 120 or section 149 of ITEPA;]

[F37(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.

[F38(l)any amount charged to income tax for that year under Part 7 of ITEPA.]

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.

F39(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F39(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F40(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.

  • In such a case, the amount to be taken into account in computing the claimant’s employment income is the greater of A and B, and the lesser amount shall be disregarded.]

(4) In calculating employment income, the payments and benefits listed in Table 1 shall be disregarded.

Table 1
Payments [F41and 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 [F42Chapter 7 of Part 4 of ITEPA].

[F432A. 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.

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, [F44in 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 [F45in respect of which no liability to income tax arises by virtue of section 240 of ITEPA.]

[F467. 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, [F47if 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, [F48in 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, [F49if, 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 [F50in respect of which no liability to income tax arises by virtue of section 304 of ITEPA.]

[F5111A. 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 [F52Part 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.]

12. An award made to the claimant under a Staff Suggestion Scheme, if the conditions specified in [F53sections 321 and 322 of ITEPA [F54are satisfied].]

13. Travelling and subsistence allowances paid to or on behalf of the claimant by his employer [F55in 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, [F56in respect of which no liability to income tax arises by virtue of section 270 or 324 of ITEPA.]

[F5714A. 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.]

[F5814C.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 M2.

[F5916. A payment made by the Department for Work and Pensions under section 2 of the Employment Act—

(a)

by way of In-Work Credit, Job Grant or Return to Work Credit, or

(b)

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

[F6016A. A payment made by the Department for Employment and Learning in Northern Ireland under section 1 of the Employment and Training Act (Northern Ireland) 1950 by way of Return to Work Credit.]

[F6117.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.]

[F6219. Provision of computer equipment in respect of which no liability to income tax arises by virtue of section 320 of ITEPA.]

(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 [F63calculating earnings by virtue of any provision of sections [F64231 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].

Textual Amendments

Marginal Citations

CHAPTER 3U.K. Pension Income

Pension IncomeU.K.

5.—[F65(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;

[F66(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;

F67(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F68(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F69(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F70(j). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F71(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; and

(m)any payment to which section 623 of ITEPA applies.

[F72(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 [F73payment or benefit mentioned] in Column 1 of Table 2 to the extent specified in the corresponding entry in Column 2.

Table 2
[F74Pensions, 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 [F75section 641 of ITEPA] applies.

So much of the payment as is disregarded by virtue of [F75section 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 [F76section 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 [F77section 639 of ITEPA] applies.

[F78The amount of the pension or allowance.]

4. A pension or allowance by reason of payment of which a pension or allowance specified in [F79section 639 of ITEPA] is withheld or abated.

[F80The amount treated as falling within section 639 of ITEPA by virtue of section 640(2) of that Act.]

5. In the case of a claimant in receipt of a pension under the Service Pensions Order, any increase in the rate of that pension in respect of a dependant who is not a member of the claimant’s family.

The amount of the increase.

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.

7. Any supplementary pension under Article 29(1A) of the Service Pensions Order M3.

The amount of the supplementary pension.

8. A pension awarded at the supplementary rate under article 27(3) of the Personal Injuries (Civilians) Scheme 1983 M4.

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.

[F81The exempt amount of the pension calculated in accordance with section 644(3) of ITEPA.]

[F8210. A lump sum on which no liability to income tax arises by virtue of [F83section 636A of ITEPA].

The amount of the lump sum.]

[F8211. 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.]

[F84(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

Marginal Citations

M3Paragraph (1A) was inserted by S.I. 1994/1906. The amount of the pension mentioned in that paragraph has been increased, most recently by S.I. 2002/792.

CHAPTER 4U.K. Trading Income

Trading incomeU.K.

6.  The claimant’s trading income is—

(a)the amount of his taxable profits for the tax year 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 provisions of these Regulations; or

(b)if the claimant is a partner in the trade, profession or vocation, his taxable profit for the year arising from his share of the partnership’s trading or professional income.

[F85Here “taxable profits” has the same meaning as it has in Part 2 of ITTOIA but disregarding Chapter 16 of that Part (averaging profits of farmers and creative artists).]

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 M5, the Contributions and Benefits Act or the Jobseekers Act 1995 M6 or under section 69 of the Child Support, Pensions and Social Security Act 2000 M7;

F86(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); and

(d)by way of an ex gratia payment made by the Secretary of State, or in Northern Ireland by the Department for Social Development, 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 or the Jobseekers Act 1995 disregarded in calculation of social security income

1. An attendance allowance under section 64 of the Contributions and Benefits Act M8.

2. A back to work bonus under section 26 of the Jobseekers Act 1995 M9.

3. A bereavement payment under section 36 of the Contributions and Benefits Act M10.

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 M11.

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 M12.

9. Any discretionary housing payment pursuant to regulation 2(1) of the Discretionary Financial Assistance Regulations 2001 M13.

10. An ex-gratia payment by the Secretary of State or, in Northern Ireland, the Department for Social Development, 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 M14, unless it is chargeable to tax under [F87section 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 M15 (days to be treated as days of incapacity for work) as having begun before that date.

15. Industrial injuries benefit [F88(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, to the extent that it exceeds the maximum contained in [F89section 674 of ITEPA].

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

18. A maternity allowance under section 35 of the Contributions and Benefits Act M16.

19. A severe disablement allowance under section 68 or 69 of the Contributions and Benefits Act M17.

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

[F9020A. 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 M18.

[F9121A. Statutory paternity pay under Part 12ZA 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 M19.

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, [F92or housing benefit].

25. A payment in lieu of milk tokens or the supply of vitamins under the Welfare Foods Regulations 1996 M20.

(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.

F93(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F94(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

F92Words 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)

Marginal Citations

M8Section 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”).

M10Section 36 was substituted by section 54(1) of the Welfare Reform Act.

M11Section 131 was substituted by paragraph 4 of Schedule 9 to the Local Government Finance Act 1992 (c.14).

M12Section 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.

M14Section 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.

M15S.I. 1995/310; relevant amending instrument S.I. 2002/491.

M16Subsection (1) was substituted for the previous subsections (1) and (1A) by section 53(1) of the Welfare Reform Act.

M17Sections 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.

M18Statutory 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.

M19Section 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.

M20S.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

[F95Student IncomeU.K.

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

[F96(a)in England, any adult dependants' grant payable—

(i)under regulation 17 of the Education (Student Support) Regulations 2005 in relation to an academic year which begins on or after 1st September 2005 but before 1st September 2006; or

(ii)under regulation 41 of the Education (Student Support) Regulations 2006 in relation to an academic year which begins on or after 1st September 2006;]

(b)in Scotland, any dependant’s grant payable under regulation 4(1)(c) of the Students' Allowances (Scotland) Regulations 1999; F97...

(c)in Northern Ireland, any grant which corresponds to income treated as student income in England and Wales by virtue of paragraph (a)] [F98and]

[F99(d)in Wales, any adult dependants' grant payable—

(i)under regulation 17 of the Education (Student Support) Regulations 2005 in relation to an academic year which begins on or after 1st September 2005 but before 1st September 2006; or

(ii)under regulation 22 of the Assembly Learning Grants and Loans (Higher Education) (Wales) Regulations 2006 in relation to an academic year which begins on or after 1st September 2006.]

Textual Amendments

[F100 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 [F101Chapter 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 [F102section 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 [F103section 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 [F104section 727 of ITTOIA (certain annual payments by individuals).]

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 [F105Chapter 3 of Part 6 of ITTOIA], or which is taxed only in accordance with regulation 23 of the Individual Savings Account Regulations 1998 M21.

The whole amount, unless it is interest under a personal equity plan to which regulation 17A(2) of the Personal Equity Plan Regulations 1989 M22 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. F106. . .F106. . .

[F1073. 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 M23 and treated as exempt from income tax by Extra Statutory Concession A100.

The amount treated as exempt by the Extra Statutory Concession.

8. Any interest, or payment F108..., which is disregarded for income tax purposes by virtue of—

[F109(a) section 751 of ITTOIA (interest on damages for personal injury), or]

(b) [F110section 731 of ITTOIA (periodical payments of personal injury damages)] (personal injury damages in the form of periodical payments).

The amount so disregarded.

[F1119.] Annuity payments under an award of compensation made under the Criminal Injuries Compensation Scheme (within the meaning of [F112section 732(3) of ITTOIA]).

The amount of any payment which is treated as not being income of the claimant or his partner by virtue of [F113section 731 of ITTOIA].

[F11110.] 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.

[F11111.] 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.

[F11412. A purchased life annuity to which [F115Chapter 7 of Part 4 of ITTOIA] applies.

[F116The amount exempted under section 717 of ITTOIA as calculated under section 719 of that Act.]]

[F11713. 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).]

[F117The 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—

  • “relevant trust” means—

    (a)

    a trust established out of funds provided by the Secretary of State in respect of persons who suffered, or who are suffering, from variant Creutzfeldt-Jakob disease for the benefit of persons eligible for payments in accordance with its provisions;

    (b)

    the Macfarlane Trusts, or

    (c)

    the 1992 Fund, the Eileen Trust or the Independent Living Funds.

  • “residential accommodation”, “residential care home” and “nursing home” have the meanings given by regulation 2(1) of the Income Support (General) Regulations 1987; and

  • “trust payment” means a payment under a relevant trust.

Textual Amendments

F108Words 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)

F111Reg. 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

Marginal Citations

M21S.I. 1998/1870: there are amendments which are not relevant for the purposes of this instrument.

M22S.I. 1989/469: regulation 17A was inserted by S.I. 1991/733 and amended by S.I. 1991/2774, 1995/3287 and 1996/846.

M231939 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 [F118Part 3 of ITTOIA] for the purposes of [F119that Part] bear the same meaning here as they bear in [F119that Part].

This paragraph is subject to the following [F120qualifications].

[F121(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).]

[F122(3) [F123Where a property business (as defined in Part 3 of ITTOIA)] makes a loss to which the relief provisions of section 379A of the Taxes Act apply, then such relief as may arise under subsection (1) of that section shall be applied in calculating property income for the purposes of this regulation.]

Textual Amendments

CHAPTER 9U.K. Foreign income

12.—(1) In these Regulations “foreign income” means income arising, in the year in question, from [F124a 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.

[F125(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;

[F126(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);

[F127(ii)section 681 of ITEPA;]

(iii)[F128section 751(1)(c) of ITTOIA] (interest on damages for personal injuries awarded by a foreign court); F129...

(iv)Extra Statutory Concession A44 (education allowances payable to public officials of overseas territories); [F130or

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

[F131(4) Where an overseas property business [F132(within the meaning of Part 3 of ITTOIA)] makes a loss to which the relief provisions of section 379A of the Taxes Act apply, by virtue of section 379B of that Act, then such relief as may arise under section 379A(1) shall be applied in calculating foreign income for the purposes of this regulation.]

Textual Amendments

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.

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.

(2) The provisions mentioned in paragraph (1) are—

(a)the following provisions of the Taxes Act—

F133(i). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(ii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(iii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(iv). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(v). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(vi). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(vii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F133(viii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(ix)section 714 (transfers of securities: treatment of deemed sums and reliefs) M24 or 716 (transfer of unrealised interest);

(x)section 730 (transfer of income arising from securities) M25;

(xi)section 730A (treatment of price differential on sale and repurchase of securities) M26;

(xii)section 739 (prevention of avoidance of income tax) M27;

(xiii)section 740 (liability of non-transferors) M28;

(xiv)section 761 (charge to income tax of offshore income gain) M29; and

(xv)section 776 (transactions in land: taxation of chargeable gains) M30; and

[F134(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

(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

Marginal Citations

M24Section 714 was amended by Part 5(3) of Schedule 41 to the Finance Act 1996.

M25Section 730 was amended by paragraph 23 of Schedule 7 to the Finance Act 1996.

M26Section 730A was inserted by section 80(1) of the Finance Act 1995 and amended by paragraph 37 of Schedule 14 to the Finance Act 1996.

M27Section 739 was amended by section 81 of the Finance Act 1997 (c.16).

M28Section 740 was amended by paragraph 6 of Schedule 26 to the Finance Act 2000.

M29Section 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.

M30Section 776 was amended by paragraph 14(50) of Schedule 10 to the Taxation of Chargeable Gains Act 1992 and section 46(3) of, and paragraph 1 of Schedule 7 to, the Finance Act 1998.

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.

[F135(3) Paragraph (1) also does not apply to income by way of—

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

(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 of the Contributions and Benefits Act or section 55A of the Northern Ireland Contributions and Benefits Act.]

Textual Amendments

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—

(i)in Great Britain in accordance with regulation 19(1)(q) of the Jobseeker’s Allowance Regulations 1996 other than where it is provided in connection with the claimant’s participation in the Intensive Activity period specified in regulation 75(1)(a)(iv) of those Regulations; or

(ii)in Northern Ireland in accordance with regulation 19(1)(p) of the Jobseeker’s Allowance Regulations (Northern Ireland) 1996 M31 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 M32.

Marginal Citations

M32Regulation 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

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 subject to income tax under [F136Part 5 of ITTOIA.]

Textual Amendments

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