PART 2 Income for the purposes of tax credits
CHAPTER 10 Notional Income
IntroductionC113
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 Acts14
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—
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section 714 (transfers of securities: treatment of deemed sums and reliefs) M1 or 716 (transfer of unrealised interest);
x
section 730 (transfer of income arising from securities) M2;
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section 761 (charge to income tax of offshore income gain) M3; and
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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
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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).
Claimants depriving themselves of income in order to secure entitlement15
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 claim16
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.
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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
- a
“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.
Claimants providing services to other persons for less than full earnings17
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—
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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 M4 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 M5.