2021 No. 1341

Income Tax

The Income Tax (Exemption of Social Security Benefits) Regulations 2021

Made

Laid before the House of Commons

Coming into force

The Treasury, in exercise of the powers conferred by section 13(1) and (2)(b) and (d) of the Finance Act 20201, make the following Regulations.

Citation, commencement and interpretation1

1

These Regulations may be cited as the Income Tax (Exemption of Social Security Benefits) Regulations 2021 and come into force on 22nd December 2021.

2

In these Regulations, “ITEPA” means the Income Tax (Earnings and Pensions) Act 20032.

Amendments to the Income Tax (Earnings and Pensions) Act 2003

2

In Part 1 of Table B in section 677(1) of ITEPA3 (UK social security benefits wholly exempt from tax: Table B: benefits payable under primary legislation etc)—

a

at the appropriate place insert—

Short-term assistance4

SS(S)A 20185

Section 36

and

b

at the appropriate place insert—

Winter heating assistance6

SS(S)A 2018

Section 30

3

The amendment made by regulation 2(a) has effect for the tax year 2021-22 and subsequent tax years.

4

The amendment made by regulation 2(b) has effect for the tax year 2020-21 and subsequent tax years.

Modifications to the Income Tax (Earnings and Pensions) Act 2003

5

ITEPA is modified as follows.

6

Section 677 has effect as if—

a

in subsection (1), in Part 1 of Table B, at the appropriate place there were inserted—

Payments made pursuant to the Covid Winter Grant Scheme or the Covid Local Support Grant7

LGA 2003

Section 31

Payments made pursuant to any scheme or grant in Scotland, Wales or Northern Ireland corresponding to the Covid Winter Grant Scheme or the Covid Local Support Grant

and

b

after subsection (1) there were inserted—

1A

In this section—

a

“the Covid Winter Grant Scheme” means the scheme that was the subject of guidance published by the Department for Work and Pensions on 23 November 2020; and

b

“the Covid Local Support Grant” means the grant that was the subject of guidance published by that Department on 17 April 2021 and further guidance published by that Department on 21 June 2021.

1B

References in this section to payments made pursuant to—

a

the Covid Winter Grant Scheme or the Covid Local Support Grant; or

b

any scheme or grant in Scotland, Wales or Northern Ireland corresponding to the scheme or grant in sub-paragraph (a),

are references only to payments made pursuant to such a scheme or grant for the tax year 2020-21 and subsequent tax years.

7

In Schedule 1, the Table in Part 1 (abbreviations of Acts and instruments) has effect as if at the appropriate place there were inserted—

LGA 2003

Local Government Act 20038

8

The modification made by regulation 7 has effect for the tax year 2020-21 and subsequent tax years.

Michael TomlinsonAlan MakTwo of the Lords Commissioners of Her Majesty’s Treasury
EXPLANATORY NOTE

(This note is not part of the Regulations)

The Regulations amend Chapter 5 of Part 10 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1; “ITEPA”), so as to provide that no liability to income tax arises on social security benefits of a description specified in the Regulations, including social security benefits paid by the Scottish Ministers and local authorities.

Regulation 1 provides for citation and commencement, and gives a definition of “ITEPA” which applies to the Regulations.

Regulation 2 amends section 677 of ITEPA by inserting new rows into Part 1 of Table B contained within that provision, in order to wholly exempt short-term assistance (“STA”) and winter heating assistance (“WHA”), respectively, from income tax. The Regulations are made in exercise of the power in section 13(2)(b) of the Finance Act 2020 (c. 14; “FA 2020”), which provides that regulations made under section 13(1) of that Act may make retrospective provision. Regulation 3 therefore provides that the amendments to ITEPA made by the Regulations have effect in relation to payments of STA made by the Scottish Ministers during the tax year 2021-22 and subsequent tax years; whilst regulation 4 provides that the amendments have effect in relation to payments of WHA made during the tax year 2020-21 and subsequent tax years.

Regulation 6, which is also made under section 13(1) of FA 2020 and in exercise of the specific power in section 13(2)(b), modifies the effect of section 677 of ITEPA so that—

  • payments made pursuant to the Covid Winter Grant Scheme or the Covid Local Support Grant; and

  • payments made pursuant to any scheme or grant in Scotland, Wales or Northern Ireland corresponding to the Covid Winter Grant Scheme or the Covid Local Support Grant,

will be wholly exempt from income tax, where such payments were made pursuant to such a scheme or grant for the tax year 2020-21 and subsequent tax years.

Regulation 7 makes a consequential modification to the Table in Part 1 of Schedule 1 to ITEPA, so that the Table has effect as if an abbreviation for the Local Government Act 2003 (c. 26) (“LGA 2003”) were inserted into it. This modification has effect for the tax year 2020-21 and subsequent tax years (see regulation 8).

A Tax Information and Impact Note has not been prepared for this instrument as it contains no substantive changes to tax policy.