PART 2Income for the purposes of tax credits

CHAPTER 10Notional Income

Introduction13

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—

i

section 34 (treatment of premiums etc. as rent)79;

ii

section 56 (transactions in deposits with and without certificates or in debts)80 or 56A (disposal or exercise of rights in pursuance of deposits)81;

iii

section 249 (stock dividends treated as income)82;

iv

section 421 (taxation of borrower when loan to participators in a close company released etc.)83;

v

section 660A (income arising under settlement where settlor retains an interest)84;

vi

section 660B (payments to unmarried minor children of settlor)85;

vii

section 677 (sums paid to settlor otherwise than as income)86 or 678 (capital sums paid by body connected with settlement)87;

viii

section 695 (limited interests in residue of estate in administration)88 or 696 (absolute interests in residue of estate in administration)89;

ix

section 714 (transfers of securities: treatment of deemed sums and reliefs)90 or 716 (transfer of unrealised interest);

x

section 730 (transfer of income arising from securities)91;

xi

section 730A (treatment of price differential on sale and repurchase of securities)92;

xii

section 739 (prevention of avoidance of income tax)93;

xiii

section 740 (liability of non-transferors)94;

xiv

section 761 (charge to income tax of offshore income gain)95; and

xv

section 776 (transactions in land: taxation of chargeable gains)96; and

b

paragraph 1 of Schedule 13 to the Finance Act 1996 (discounted securities: charge to tax on realised profit comprised on a discount).

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.

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—

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) 199697 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 Regulations98.