Income Tax (Earnings and Pensions) Act 2003 (c. 1)

(The document as of February, 2008)

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(1) No liability to income tax arises on a pension which is paid under the Oversea Superannuation Scheme (formerly known as the Colonial Superannuation Scheme) if the foreign residence condition is met.

(2) For the purposes of subsection (1) a pension is paid under the Oversea Superannuation Scheme if--

(a) the pension is paid under the Scheme as it has effect (by reason of section 2(4A) of OPA 1973) as a scheme under section 2 of OPA 1973, or

(b) the pension is paid under a scheme which--

(i) the Secretary of State has made under section 2(1) of OPA 1973, and

(ii) corresponds to the Oversea Superannuation Scheme.

651 Overseas Pensions Act 1973

(1) No liability to income tax arises on a pension which is paid under section 1 of OPA 1973 if the foreign residence condition is met.

(2) Subsection (1) applies whether or not the pension is paid out of a fund established under a scheme made under section 1 of OPA 1973.

(3) But subsection (1) does not apply to any part of a pension paid because the Pensions (Increase) Acts apply to it.

(4) In this section "the Pensions (Increase) Acts" means--

(a) the Pensions (Increase) Act 1971 (c. 56), and

(b) any Act passed after that Act for purposes which correspond to the purposes of that Act.

652 Overseas Service Act 1958

(1) No liability to income tax arises on a pension--

(a) which is paid under the authority of the Overseas Service Act 1958 (c. 14), and

(b) which the Secretary of State certifies to be attributable to the employment of a person in the public services of an overseas territory,

if the foreign residence condition is met.

(2) If the Secretary of State certifies that only part of a pension paid under the authority of the 1958 Act is attributable to the employment of a person in the public services of an overseas territory, subsection (1) applies only to that part of the pension.

(3) For the purposes of subsections (1) and (2) a pension is paid under the authority of the 1958 Act if condition A or B is met.

(4) Condition A is that the pension is paid under either of the following--

(a) an order made under section 2 of the 1958 Act, or

(b) section 4(2) of the 1958 Act,

as it has effect (by reason of section 2(3) of OPA 1973) as a scheme under section 2 of OPA 1973.

(5) Condition B is that the pension is paid under a scheme which the Secretary of State--

(a) has made under section 2(1) of OPA 1973, and

(b) has certified to correspond to--

(i) an order made under section 2 of the 1958 Act, or

(ii) section 4(2) of the 1958 Act.

(6) For the purposes of this section, a person is taken to be employed in the public service of an overseas territory at any time when--

(a) the person is employed in any capacity under the government of that territory, or under any municipal or other local authority in it,

(b) the person is employed in circumstances not falling within paragraph (a), by a body corporate established for any public purpose in that territory by an enactment of a legislature empowered to make laws for that territory, or

(c) the person is the holder of a public office in that territory in circumstances not falling within paragraph (a) or (b).

(7) In subsection (6) references to the government of an overseas territory include references to--

(a) a government constituted for two or more overseas territories, and

(b) any authority established for the purpose of providing or administering services which are common to, or relate to matters of common interest to, two or more such territories.

(8) In this section--

"the 1958 Act" means the Overseas Service Act 1958 (c. 14);
"certified" means certified for the purposes of ICTA 1970, ICTA or this Act.

653 Overseas Service Pensions Fund

(1) No liability to income tax arises on a pension which is paid out of the Overseas Service Pensions Fund if the foreign residence condition is met.

(2) In this section "the Overseas Service Pensions Fund" means the fund with that name established under section 7(1) of the Overseas Aid Act 1966 (c. 21).

(3) In this section "pension" includes not only the things mentioned in section 647(4) but also any sum payable in respect of ill-health.

654 The Pensions (India, Pakistan and Burma) Act 1955

(1) No liability to income tax arises on a pension paid under the authority of the Pensions (India, Pakistan and Burma) Act 1955 (c. 22) if the foreign residence condition is met.

(2) A pension is paid under the authority of the 1955 Act if--

(a) the pension is paid under the 1955 Act as it has effect (by reason of section 2(3) of OPA 1973) as a scheme under section 2 of OPA 1973, or

(b) the pension is paid under a scheme which the Secretary of State--

(i) has made under section 2(1) of OPA 1973, and

(ii) has certified to correspond to the provision made under the 1955 Act.

(3) This section does not apply to any part of a pension paid because the Pensions (Increase) Acts apply to it.

(4) In this section--

"the 1955 Act" means the Pensions (India, Pakistan and Burma) Act 1955 (c. 22);
"certified" means certified for the purposes of ICTA 1970, ICTA or this Act;
"the Pensions (Increase) Acts" means--
(a)
the Pensions (Increase) Act 1971 (c. 56), and
(b)
any Act passed after that Act for purposes which correspond to the purposes of that Act.

Part 10 Social security income

Chapter 1 Introduction

655 Structure of Part 10

(1) The structure of this Part is as follows--

Chapter 2--

(a)

imposes the charge to tax on social security income, and

(b)

provides for deductions to be made from the amount of income chargeable;

Chapter 3 sets out the UK social security benefits which are charged to tax under this Part and identifies--

(a)

the amount of income chargeable to tax for a tax year, and

(b)

the person liable to pay any tax charged;

Chapters 4 and 5 deal with exemptions from the charge to tax on UK social security benefits (whether under this Part or any other provision);

Chapters 6 and 7 make provision about foreign benefits.

(2) For other provisions about the taxation of social security benefits, see--

section 151 of FA 1996 (power for the Treasury to make orders about the taxation of benefits payable under Government pilot schemes);
section 84 of FA 2000 (exemption of payments under New Deal 50plus);
section 85 of FA 2000 (exemption of payments under Employment Zones programme).

(3) For the charge to tax on social security pensions, see Part 9 (pension income).

Chapter 2 Tax on social security income

656 Nature of charge to tax on social security income

(1) The charge to tax on social security income is a charge to tax on that income excluding any exempt income.

(2) "Exempt income" is social security income on which no liability to income tax arises as a result of any provision of Chapter 4, 5 or 7 of this Part.

This definition applies for the purposes of this Part.

657 Meaning of "social security income", "taxable benefits" etc.

(1) This section defines--

"social security income" for the purposes of the Tax Acts, and
"taxable benefits", "Table A" and "Table B" for the purposes of this Part.

(2) "Social security income" means--

(a) the United Kingdom social security benefits listed in Table A,

(b) the United Kingdom social security benefits listed in Table B,

(d) the foreign benefits to which section 681(2) applies.

(3) "Taxable benefits" means--

(a) the United Kingdom social security benefits listed in Table A, and

(b) the foreign benefits to which section 678 applies.

(4) Subsections (2) and (3) are subject to section 660(2).

(5) "Table A" means Table A in section 660.

(6) "Table B" means Table B in section 677.

658 Amount charged to tax

(1) The amount of social security income which is charged to tax under this Part for a particular tax year is as follows.

(2) In relation to a taxable benefit, the amount charged to tax is the net taxable social security income for the tax year.

(3) The net taxable social security income for a taxable benefit for a tax year is given by the formula--

TSSI - PGD

where--

TSSI means the amount of taxable social security income for that benefit for that year (see subsections (4) to (7)), and
PGD means the amount of the deduction (if any) allowed from the benefit under Part 12 (payroll giving).

(4) In relation to bereavement allowance, carer's allowance, incapacity benefit and income support (which are listed in Table A), the amount of taxable social security income is determined in accordance with section 661.

(5) In relation to any other benefit listed in Table A, the amount of taxable social security income is the amount of the benefit that falls to be charged to tax.

(6) In relation to foreign benefits to which section 678 applies, the amount of taxable social security income is determined in accordance with section 679.

(7) In determining for the purposes of this Act the amount of taxable social security income, any exempt income is to be excluded.

659 Person liable for tax

The person liable for any tax charged under this Part is identified in--

(a) section 662 (UK benefits), or

(b) section 680 (foreign benefits).

Chapter 3 Taxable UK social security benefits

660 Taxable benefits: UK benefits – Table A

(1) This is Table A--

TABLE A

TAXABLE UK BENEFITS

Social security benefit	Payable under
Bereavement allowance	SSCBA 1992 SSCB(NI)A 1992	Section 39B Section 39B
Carer's allowance	SSCBA 1992 SSCB(NI)A 1992	Section 70 Section 70
Incapacity benefit	SSCBA 1992 SSCB(NI)A 1992	Section 30A(1) or (5), 40 or 41 Section 30A(1) or (5), 40 or 41
Income support	SSCBA 1992 SSCB(NI)A 1992	Section 124 Section 123
Jobseeker's allowance	JSA 1995 JS(NI)O 1995	Section 1 Article 3
Statutory adoption pay	SSCBA 1992	Section 171ZL
	Any provision made for Northern Ireland which corresponds to section 171ZL of SSCBA 1992
Statutory maternity pay	SSCBA 1992 SSCB(NI)A 1992	Section 164 Section 160
Statutory paternity pay	SSCBA 1992	Section 171ZA or 171ZB
	Any provision made for Northern Ireland which corresponds to section 171ZA or section 171ZB of SSCBA 1992
Statutory sick pay	SSCBA 1992 SSCB(NI)A 1992	Section 151 Section 147.

(2) A benefit listed below is not "social security income" or a "taxable benefit" if it is charged to tax under another Part of this Act--

statutory adoption pay;
statutory maternity pay;
statutory paternity pay;
statutory sick pay.

661 Taxable social security income

(1) This section applies in relation to each of the following taxable benefits listed in Table A--

bereavement allowance,
carer's allowance,
incapacity benefit, and
income support.

(2) The amount of taxable social security income for a taxable benefit for a tax year is the full amount of the benefit accruing in the tax year irrespective of when any amount is actually paid.

662 Person liable for tax

The person liable for any tax charged under this Part on a taxable benefit listed in Table A is the person receiving or entitled to the benefit.

Chapter 4 Taxable UK social security benefits: exemptions

Incapacity benefit

663 Long-term incapacity benefit: previous entitlement to invalidity benefit

(1) No liability to income tax arises on long-term incapacity benefit if--

(a) a person is entitled to the benefit for a day of incapacity for work which falls in a period of incapacity for work which is treated for the purposes of that benefit as having begun before 13th April 1995, and

(b) the part of that period which is treated as having fallen before that date includes a day for which that person was entitled to invalidity benefit.

(2) In this section--

"invalidity benefit" means invalidity benefit under--
(a)
Part 2 of SSCBA 1992, or
(b)
Part 2 of SSCB(NI)A 1992;
"long-term incapacity benefit" means incapacity benefit payable under--
(a)
section 30A(5), 40 or 41 of SSCBA 1992, or
(b)
section 30A(5), 40 or 41 of SSCB(NI)A 1992.

664 Short-term incapacity benefit not payable at the higher rate

(1) No liability to income tax arises on short-term incapacity benefit unless it is payable at the higher rate.

(2) In this section--

(a) "short-term incapacity benefit" means incapacity benefit payable under--

(i) section 30A(1) of SSCBA 1992, or

(ii) section 30A(1) of SSCB(NI)A 1992;

(b) the reference to short-term incapacity benefit payable at the higher rate is to be construed in accordance with--

(i) section 30B of SSCBA 1992, or

(ii) section 30B of SSCB(NI)A 1992.

Income support

665 Exempt unless payable to member of couple involved in trade dispute

(1) No liability to income tax arises on income support unless--

(a) the income support is payable to one member of a married or unmarried couple ("the claimant"), and

(b) section 126 of SSCBA 1992 or section 125 of SSCB(NI)A 1992 (trade disputes) applies to the claimant but not to the other member of the couple.

(2) In this section "married couple" and "unmarried couple" have the same meaning as in section 137(1) of SSCBA 1992 or section 133(1) of SSCB(NI)A 1992.

666 Child maintenance bonus

No liability to income tax arises on a part of income support which is attributable to a child maintenance bonus (within the meaning of section 10 of CSA 1995 or Article 4 of CS(NI)O 1995).

667 Amounts in excess of taxable maximum

(1) If the amount of income support paid to a person ("the claimant") for a week or a part of a week exceeds the claimant's taxable maximum for that period, no liability to income tax arises on the excess.

(2) The claimant's taxable maximum for a period is determined under section 668.

668 Taxable maximum

(1) A claimant's taxable maximum for a week is determined under this subsection if the applicable amount for the purpose of calculating the income support consists only of an amount in respect of the relevant couple.

The taxable maximum is equal to one half of the applicable amount.

(2) A claimant's taxable maximum for a week is determined under this subsection if the applicable amount includes amounts that are not in respect of the relevant couple.

The taxable maximum is equal to one half of the amount which is included in the applicable amount in respect of the relevant couple.

(3) A claimant's taxable maximum for a part of a week is determined as follows--

Step 1

Assume that the income support is paid to the claimant for the whole of, rather than part of, the week.

Step 2

Determine under subsection (1) or (2) what the claimant's taxable maximum for that week would be on that assumption.

Step 3

Determine the claimant's taxable maximum for the part of the week using this formula--

---

where--

N is the number of days in the part of the week for which the claimant is actually paid the income support, and
TMW is the taxable maximum for the whole week determined under step 2.

669 Interpretation

(1) In section 668, except in relation to Northern Ireland--

"applicable amount" means the amount prescribed in relation to income support in regulations made under section 135 of SSCBA 1992;
"married couple" and "unmarried couple" have the same meaning as in section 137(1) of SSCBA 1992.

(2) In section 668, in relation to Northern Ireland--

"applicable amount" means the amount prescribed in relation to income support in regulations made under section 131 of SSCB(NI)A 1992;
"married couple" and "unmarried couple" have the same meaning as in section 133(1) of SSCB(NI)A 1992.

(3) In section 668 "relevant couple", in relation to a claimant, means the married or unmarried couple of which the claimant is a member.

Jobseeker's allowance

670 Child maintenance bonus

No liability to income tax arises on a part of a jobseeker's allowance which is attributable to a child maintenance bonus (within the meaning of section 10 of CSA 1995 or Article 4 of CS(NI)O 1995).

671 Amounts in excess of taxable maximum

(1) If the amount of jobseeker's allowance paid to a person ("the claimant") for a week or a part of a week exceeds the claimant's taxable maximum for that period, no liability to income tax arises on the excess.

(2) The claimant's taxable maximum for a period is determined under sections 672 to 674.

672 Taxable maximum: general

(1) A claimant's taxable maximum for a week is determined--

(a) under section 673, if the claimant is paid an income-based jobseeker's allowance for that week, or

(b) under section 674, if the claimant is paid a contribution-based jobseeker's allowance for that week.

(2) A claimant's taxable maximum for a part of a week is determined as follows--

Step 1

Assume that the jobseeker's allowance is paid to the claimant for the whole of, rather than part of, the week.

Step 2

Determine under section 673 or 674 what the claimant's taxable maximum for that week would be on that assumption.

Step 3

Determine the claimant's taxable maximum for the part of the week using this formula--

---

where--

N is the number of days in the part of the week for which the claimant is actually paid the jobseeker's allowance, and
TMW is the taxable maximum for the whole week determined under step 2.

673 Taxable maximum: income-based jobseeker's allowance

(1) A claimant's taxable maximum for a week is determined under this section if--

(a) the claimant is paid an income-based jobseeker's allowance for that week, or

(b) the claimant is assumed under section 672(2) to be paid an income-based jobseeker's allowance for that week.

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