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The Family Credit (General) Regulations 1987

Type Statutory-Instrument

Publication 1987-11-20

Last updated 2018-04-11

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Made: 20th November 1987

Coming into force: 11th April 1988

Whereas a draft of this instrument was laid before Parliament in accordance with section 83(3) of the Social Security Act 1986 and approved by resolution of each House of Parliament;

Now, therefore, the Secretary of State for Social Services, in exercise of the powers conferred by section 20(1), (5)(c), (6), (10), (11) and (12), section 21(3) and (6)(a), section 22(1) and (5) to (9), section 51(1)(h) and section 84(1) of the Social Security Act 1986 and sections 104(5) and 166(1) to (3A) of the Social Security Act 1975 and of all other powers enabling him in that behalf, by this instrument, which is made before the end of a period of 12 months from the commencement of the enactments under which it is made, makes the following Regulations:

PART I — GENERAL

Citation and commencement

1

These Regulations may be cited as the Family Credit (General) Regulations 1987, and shall come into force on 11th April 1988.

Interpretation

2

(1) In these Regulations, unless the context otherwise requires—

“the Act” means the Social Security Act 1986;

“appropriate officer” means the Board or, as the case may be, an officer of the Board;

“assessment period” means, in the case of an employed earner, a period determined in accordance with regulation 14 or, as the case may be, 14A and, in the case of a self- employed earner, a period determined in accordance with regulation 15;

“the benefit Acts ” means the Contributions and Benefits Act and the Jobseekers Act 1995;

“the Board” means the Commissioners of Inland Revenue;

“the Children Order ” means the Children (Northern Ireland) Order 1995;

“claim” means a claim for working families' tax credit;

“claimant” means a person claiming working families' tax credit;

“close relative” means a parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-parent, step-son, step-daughter, brother, sister, or the spouse of any of the preceding persons or, if that person is one of an unmarried couple, the other member of that couple;

“community charge benefit” means community charge benefits under Part VII of the Contributions and Benefits Act as originally enacted;

“concessionary payment” means a payment made under arrangements made by the Secretary of State with the consent of the Treasury which is charged either to the National Insurance Fund or to a Departmental Expenditure Vote to which payments of benefit under the Act, the Social Security Act or the Child Benefit Act 1975 are charged;

“the Contributions and Benefits Act ” means the Social Security Contributions and Benefits Act 1992;

“Crown property” means property held by Her Majesty in right of the Crown or by a government department or which is held in trust for Her Majesty for the purposes of a government department, except (in the case of an interest held by Her Majesty in right of the Crown) where the interest is under the management of the Crown Estate Commissioners or a relevant person;

“Crown servant posted overseas” means a person performing the duties of any office or employment under the Crown in right of the United Kingdom who is, or was prior to his posting, ordinarily resident in the United Kingdom;

“date of claim” means the date on which the claimant makes, or is treated as making, a claim for working families' tax credit;

“director” means a director of a company, and for this purpose “company” means a company within the meaning of section 735(1) of the Companies Act 1985 or a body corporate to which, by virtue of section 718 of that Act, any provision of that Act applies;

“disability living allowance” means a disability living allowance under section 37ZA of the Social Security Act;

“the Disability Working Allowance Regulations” means the Disability Working Allowance (General) Regulations 1991;

“disabled person’s tax credit” means a disabled person’s tax credit under section 129 of the Contributions and Benefits Act;

“earnings” has the meaning prescribed in regulation 19 or, as the case may be, 21;

“earnings top-up” means the allowance paid by the Secretary of State under the Earnings Top-up Scheme ;

“the Earnings Top-up Scheme ” means the Earnings Top-up Scheme 1996;

“employed earner” shall be construed in accordance with section 2(1)(a) of the Social Security Act ;

“employment zones” means an area within Great Britain designated by the Employment Zones Regulations 2000 for the purposes of section 60 of the Welfare Reform and Pensions Act 1999 and an “employment zone programme” means a programme established for an employment zone or zones designed to assist claimants for a jobseeker’s allowance to obtain sustainable employment;

“employment zone contractor” means a person who is undertaking the provision of facilities in respect of an employment zone programme on behalf of the Secretary of State for Education and Employment;

“extra statutory maternity pay” means a payment or payments made by an employer to an employee during a maternity pay period in order to supplement statutory maternity pay that is paid to that employee for that period;

“Intensive Activity Period for 50 plus” means the programme known by that name and provided in pursuance of arrangements made by or on behalf of the Secretary of State under section 2 of the Employment and Training Act 1973, being a programme lasting for up to 52 weeks for any one individual aged 50 years or over on the day that he or she first joined any such programme, and consisting for that individual of any one or more of the following elements, namely assistance in pursuing self-employed earner’s employment, education and training, work experience, assistance with job search, motivation and skills training;

“lone parent” means a person who has no partner and who is responsible for, and a member of the same household as, a child or young person;

“lower rate” where it relates to rates of tax has the same meaning as in the Income and Corporation Taxes Act 1988 by virtue of section 832(1) of that Act;

“maternity allowance” has the meaning given by section 35 of the Contributions and Benefits Act;

“maternity leave” means a period during which a woman is absent from work because she is pregnant or has given birth to a child, and at the end of which she has a right to return to work either under the terms of her contract of employment or under Part III of the Employment Protection (Consolidation) Act 1978;

“mobility allowance” means an allowance under section 37A of the Social Security Act ;

“mobility supplement” means any supplement under article 26A of the Naval, Military and Air Forces etc (Disablement and Death) Service Pensions Order 1983 including such a supplement by virtue of any other scheme or order or under article 25A of the Personal Injuries (Civilians) Scheme 1983 ;

“net earnings” means such earnings as are calculated in accordance with regulation 20;

“net profit” means such profit as is calculated in accordance with regulation 22;

“New Deal option” means any of the employment programmes specified in regulation 75(1)(a)(ii) of the Jobseeker’s Allowance Regulations 1996 and the training scheme specified in regulation 75(1)(b)(ii) of those Regulations;

“occupational pension” means any pension or other periodical payment under an occupational pension scheme but does not include any discretionary payment out of a fund established for relieving hardship in particular cases;

“partner” means, where a claimant—is a member of a married or unmarried couple, the other member of that couple,is married polygamously to two or more members of the same household, any such member;

“paternity leave” means leave under section 80A of the Employment Rights Act 1996.

“pay period” has the meaning given in regulation 14(7)(b);

“payment” includes a part of a payment;

“pension fund holder” means with respect to a personal pension scheme or retirement annuity contract, the trustees, managers or scheme administrators, as the case may be, of the scheme or contract concerned;

“personal pension scheme” has the same meaning as in section 1 of the Pension Schemes Act 1993 and, in the case of a self-employed earner, includes a scheme approved by the Inland Revenue under Chapter IV of Part XIV of the Income and Corporation Taxes Act 1988;

“policy of life insurance” means any instrument by which the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, or any instrument evidencing a contract which is subject to payment of premiums for a term dependent on human life;

“Primary Care Trust” means a Primary Care Trust established under section 16A of the National Health Service Act 1977;

“qualifying person” means a person in respect of whom payment has been made from the Fund or the Eileen Trust;

“relevant person”, in relation to any property, rights or interests to which section 90B(5) of the Scotland Act 1998 applies, means the person who manages that property or those rights or interests;

“retirement annuity contract” means a contract or trust scheme approved under Chapter III of Part XIV of the Income and Corporation Taxes Act 1988;

“self-employed earner” shall be construed in accordance with section 2(1)(b) of the Social Security Act;

“self-employment route” means—that part of the Employment Option of the New Deal which is specified in regulation 75(1)(a)(ii)(aa)(ii) of the Jobseeker’s Allowance Regulations 1996; orassistance in pursuing self-employed earner’s employment while participating in—an employment zone programme; ora course of training or instruction funded by or on behalf of the Secretary of State for Education and Employment, the National Assembly for Wales, or the Scottish Enterprise or Highlands or Islands Enterprise; orthe Intensive Activity Period specified in regulation 75(1)(a)(iv) of the Jobseeker’s Allowance Regulations 1996 or the Intensive Activity Period for 50 plus;

“Social Security Act” means the Social Security Act 1975

“sports award” means an award made by one of the Sports Councils named in section 23(2) of the National Lottery etc. Act 1993 out of sums allocated to it for distribution under that section;

“statutory maternity pay” and “maternity pay period” shall be construed in accordance with Part XII of the Contributions and Benefits Act;

“statutory paternity pay” means any payment under section 171ZA of the Contributions and Benefits Act;

“student” has the meaning prescribed in regulation 37;

“subsistence allowance” means an allowance which an employment zone contractor has agreed to pay to a person who is participating in an employment zone programme, which is equal to the amount of income-based jobseeker’s allowance which that person would have received in a benefit week had it been payable to him, less 50p;

“surrogate child” means a child in respect of whom an order has been made under section 30 of the Human Fertilisation and Embryology Act 1990 (parental orders) or section 54 of the Human Fertilisation and Embryology Act 2008 (parental orders);

“the Eileen Trust” means the charitable trust of that name established on 29th March 1993 out of funds provided by the Secretary of State for the benefit of persons eligible for payment in accordance with its provisions;

“the Fund” means moneys made available from time to time by the Secretary of State for the benefit of persons eligible for payment in accordance with the provisions of a scheme established by him on 24th April 1992 or, in Scotland, on 10th April 1992;

“the Independent Living (Extension) Fund” means the Trust of that name established by a deed dated 25th February 1993 and made between the Secretary of State for Social Security of the one part and Robin Glover Wendt and John Fletcher Shepherd of the other part;

“the Independent Living Fund” means the charitable trust established out of funds provided by the Secretary of State for the purpose of providing financial assistance to those persons incapacitated by or otherwise suffering from very severe disablement who are in need of such assistance to enable them to live independently;

“the Independent Living Funds” means the Independent Living Fund, the Independent Living (Extension) Fund and the Independent Living (1993) Fund;

“the Macfarlane (Special Payments) Trust” means the trust of that name, established on 29th January 1990 partly out of funds provided by the Secretary of State, for the benefit of certain persons suffering from haemophilia;

“the Macfarlane (Special Payments) ( No. 2) Trust” means the trust of that name, established on 3rd May 1991 partlyout of funds provided by the Secretary of State, for the benefit ofcertain persons suffering from haemophilia and other beneficiaries;

“the Macfarlane Trust” means the charitable trust, established partly out of funds provided by the Secretary of State to the Haemophilia Society, for the relief of poverty or distress among those suffering from haemophilia;

“training allowance” means an allowance (whether by way of periodical grants or otherwise) payable—out of public funds by a Government department or by or on behalf of the Secretary of State , the Learning and Skills Council for England, or the National Assembly for Wales, Scottish Enterprise or Highlands and Islands Enterprise;to a person for his maintenance or in respect of a member of his family; andfor the period, or part of the period, during which he is following a course of training or instruction provided by, or in pursuance of arrangements made with, that department or approved by that department in relation to him or so provided or approved by or on behalf of the Secretary of State , the National Assembly for Wales, Scottish Enterprise or Highlands and Islands Enterprise,but it does not include an allowance paid by any Government department to or in respect of a person by reason of the fact that he is following a course of full-time education, other than under arrangements made under section 2 of the Employment and Training Act 1973, or is training as a teacher;

“voluntary organisation” means a body, other than a public or local authority, the activities of which are carried on otherwise than for profit;

“water charges” means—as respects England and Wales, any water and sewerage charges under Chapter I of Part V of the Water Industry Act 1991;as respects Scotland, any water and sewerage charges under Schedule 11 to the Local Government Finance Act 1992;

“week” means a period of seven days beginning with midnight between Saturday and Sunday;

“week of claim” means the week which includes the date of claim;

“working families' tax credit” means working families' tax credit under section 128 of the Contributions and Benefits Act;

“year of assessment” has the same meaning prescribed in section 526(5) of the Income and Corporation Taxes Act 1970 ;

“young person” has the meaning prescribed in regulation 6.

(2) Unless the context otherwise requires, any reference in these Regulations to a numbered regulation, Part or Schedule is a reference to the regulation, Part or Schedule bearing that number in these Regulations and any reference in a regulation or Schedule to a numbered paragraph is a reference to the paragraph in that regulation or Schedule bearing that number.

PART II — PRESENCE IN GREAT BRITAIN AND REMUNERATIVE WORK

Circumstances in which a person is treated as being or as not being in Great Britain

3

(1) A person shall be treated as being in Great Britain if, on the date of claim—

(a) he is present and ordinarily resident in Great Britain; and

(aa) subject to paragraph (1A), he is not a person subject to immigration control (within the meaning of section 115 of the Immigration and Asylum Act 1999); and

(b) his partner, if any, is ordinarily resident in the United Kingdom; and

(c) his earnings or the earnings of his partner, if any, derive at least in part from remunerative work in the United Kingdom; and

(d) his earnings do not wholly derive from remunerative work outside the United Kingdom nor do the earnings of his partner, if any.

(1ZA) A Crown servant posted overseas, or his partner, shall be treated as being in Great Britain for the duration of his posting.

(1A) For the purposes of paragraph (1)(aa), a person is not subject to immigration control if—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) he is a national, or a member of the family of a national, of a State contracting party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993; or

(d) he is a person who is—

(i) lawfully working in Great Britain and is a national of a State with which the EU has concluded an Agreement under article 238 of the Treaty establishing the European Community providing, in the field of social security, for the equal treatment of workers who are nationals of the signatory State and their families, or

(ii) a member of the family of, and living with, such a person; or

(e) he is a person who—

(i) has been given leave to enter, or remain in, the United Kingdom by the Secretary of State upon the undertaking of another person, or persons, pursuant to the immigration rules within the meaning of the Immigration Act 1971, to be responsible for his maintenance and accommodation, and

(ii) has been resident in the United Kingdom for a period of at least 5 years beginning with his date of entry into the United Kingdom, or the date on which the undertaking was given in respect of him, whichever is the later, or

(f) he is a person who—

(i) has been given leave to enter, or remain in, the United Kingdom by the Secretary of State upon the undertaking of another person, or persons, pursuant to the immigration rules mentioned in sub-paragraph (e) above, to be responsible for his maintenance and accommodation, and

(ii) has been resident in the United Kingdom for less than 5 years beginning with his date of entry into the United Kingdom, or the date on which the undertaking was given in respect of him, whichever is the later, but the person giving the undertaking has died or, where the undertaking was given by more than one person, they have all died.

(2) A person shall be treated as not being in Great Britain during any period for which he, or his partner, is entitled to be paid working families' tax credit or disabled person’s tax credit under the law of Northern Ireland.

Remunerative work

4

(1) For the purposes of Part II of the Act as it applies to working families' tax credit, and subject to paragraph (3), a person shall be treated as engaged in remunerative work where—

(a) the work he undertakes is for not less than 16 hours per week;

(b) the work is done for payment or in expectation of payment; and

(2) A person who does not satisfy all the requirements of sub-paragraphs (a) to (c) of paragraph (1) shall not be treated as engaged in remunerative work.

(3) A person who otherwise satisfies all the requirements of paragraph (1) shall not be treated as engaged in remunerative work insofar as—

(a) he is engaged by a charitable or voluntary organisation or is a volunteer, where the only payment received by him or due to be paid to him is a payment which is to be disregarded under regulation 24(2) and paragraph 2 of Schedule 2 (sums to be disregarded in the calculation of income other than earnings);

(b) he is engaged in caring for a person in respect of whom he receives payments to which paragraph 24 of Schedule 2 refers; or

(da) he is participating in the Intensive Activity Period specified in regulation 75(1)(a)(iv) of the Jobseeker’s Allowance Regulations 1996 or in the Intensive Activity Period for 50 plus;

(e) he is engaged in an activity in respect of which—

(i) a sports award has been made, or is to be made, to him; and

(ii) no other payment is made or is expected to be made to him; or

(f) he is in receipt of an employment zone subsistence allowance.

(4) Subject to paragraphs (4A) and (4B) , in determining for the purposes of sub-paragraph (a) of paragraph (1) whether the work a person undertakes is for not less than 16 hours per week—

(a) there shall be included in the calculation any time allowed for meals or refreshment but only where the person is, or expects to be, paid earnings in respect of that time; and

(b) if he is a person to whom regulation 14(5) (normal weekly earnings of employed earners) applies, the hours worked shall be calculated by reference to the average number of hours which his employer expects him to work in a week; or

(i) a recognised cycle of working has been established at the date of claim, the hours worked shall be calculated by reference to the average number of hours worked in a week over the period of one complete cycle (including, where the cycle involves periods in which the person does not normally work, those periods, but disregarding any other absences); or

(ii) no recognised cycle of working has been established at the date of claim, the hours worked shall be calculated by reference to—

(aa) the average number of hours worked over the five weeks immediately preceding the week of claim, or such other longer time preceding that week as may, in the particular case, enable the person’s weekly average hours of work to be determined more accurately; or

(bb) where he is a self-employed earner or director and he has worked for less than 5 weeks at the date of claim, or he has, in the five weeks immediately preceding the week of claim, increased the number of hours that he works from below 16 hours to 16 hours or more per week, the average number of hours he expects to work in a week; or

(d) in the case of a woman on maternity leave at the date of the claim, the hours worked shall be calculated on the basis of a declaration made by her of the average hours worked per week prior to the commencement of her maternity leave; or

(e) in the case of a man on paternity leave at the date of the claim, the hours worked shall be calculated on the basis of a declaration made by him of the average hours worked per week prior to the commencement of his paternity leave.

(4A) Where for the purpose of paragraph (4)(c)(i), a person’s recognised cycle of work at a school, other educational establishment or other place of employment is one year and includes periods of school holidays or similar vacations during which he does not work, those periods and any other periods not forming part of such holidays or vacations during which he is not required to work shall be disregarded in establishing the average hours for which he is engaged in work.

(4B) Any period where a person is absent from work by reason of jury service shall be disregarded in establishing the average hours for which he is engaged in work.

(5) Subject to paragraph (6), the requirements of this paragraph are that the person—

(a) worked not less than 16 hours in either—

(i) the week of claim; or

(ii) either of the two weeks immediately preceding the week of claim; or

(b) is expected by his employer to work or, where he is a self-employed earner he expects to work, not less than 16 hours in the week next following the week of claim; or

(c) cannot satisfy the requirements of either sub-paragraph (a) or (b) above and at the date of claim he is absent from work by reason of a recognised, customary or other holiday but he is expected by his employer to work or, where he is a self-employed earner he expects to work, not less than 16 hours in the week following his return to work from that holiday;or

(d) cannot satisfy the requirements of sub-paragraph (a) or (b) above and at the date of claim he is absent from work by reason of jury service but he is expected by his employer to work or, where he is a self-employed earner, he expects to work, not less than 16 hours in the week following his return to work from that jury service;

(e) cannot satisfy the requirements of sub-paragraph (a) or (b) above at the date of claim because she is on maternity leave at that date but—

(i) prior to the commencement of her maternity leave, she worked, on average, not less than 16 hours a week, and

(ii) she is entitled to maternity allowance or statutory maternity pay at the date of the claim; or

(f) cannot satisfy the requirements of sub-paragraph (a) or (b) above because he is on paternity leave at that date but, prior to the commencement of his paternity leave, he worked, on average, not less than 16 hours a week,

and for the purposes of calculating the number of hours worked, sub-paragraph (a) of paragraph (4) shall apply to this paragraph as it applies to sub-paragraph (a) of paragraph (1).

(6) For the purposes of paragraph (5)—

(a) work which a person does only qualifies if—

(i) it is the work he normally does, and

(ii) it is likely to last for a period of 5 weeks or more beginning with the week of claim; and

(b) a person shall be treated as not on a recognised, customary or other holiday on any day on which the person is on maternity leave or is absent from work because he is ill.

(7) Where a person is treated as engaged in remunerative work in accordance with the above paragraphs, he shall also be treated as normally engaged in remunerative work.

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Engagement in remunerative work and normal engagement

5

(1) Subject to paragraph (3), a person shall be treated, for the purposes of section 20(5)(b) of the Act (conditions of entitlement to family credit), as engaged in remunerative work only if he carries out activities in the course of his work for not less than 24 hours in—

(a) the week of claim; or

(b) either of the two weeks immediately preceding the week of claim and he has not become unemployed before the date of claim.

(2) Subject to paragraph (3), a person shall be treated, for the purposes of section 20(5)(b) of the Act, as normally engaged in remunerative work if the remunerative work in which he is engaged in the period specified in paragraph (1)(a) or (b) is work in which he is normally engaged.

(3) A person shall not be treated as engaged in remunerative work if he is engaged by a charity or voluntary body or is a volunteer where the only payment received by him, or due to be paid to him, is a payment which is to be disregarded under regulation 24(2) and paragraph 2 of Schedule 2 (sums to be disregarded in the calculation of income other than earnings).

PART III — MEMBERSHIP OF A FAMILY

Persons of a prescribed description

6

(1) Subject to paragraph (2), a person of a prescribed description for the purposes of section 20(5)(c) (entitlement) and section 20(11) of the Act (definition of the family) as it applies to working families' tax credit is a person aged 16 or over but under 19 who is receiving full-time education within section 142(1)(c) of the Contributions and Benefits Act (meaning of child), and in these Regulations such a person is referred to as “a young person”.

(2) Paragraph (1) shall not apply to a person–

(a) who is entitled to income support or would, but for section 20(9) of the Act (provision against dual entitlement of members of family), be so entitled;

(aa) who is entitled to income-based jobseeker’s allowance or would, but for section 3(1)(d) of the Jobseekers Act 1995 (provision against dual entitlement of members of family), be so entitled;

(b) who is receiving advanced education within the meaning of regulation 1(2) of the Child Benefit (General) Regulations 1976; or

(c) who has ceased to receive full-time education but is to continue to be treated as a child by virtue of regulation 7 of the Child Benefit (General) Regulations 1976.

Circumstances in which a person is to be treated as responsible or not responsible for another

7

(1) Subject to the following provisions of this regulation, a person shall be treated as responsible for a child or young person who is normally living with him.

(2) Where a child or young person spends equal amounts of time in different households, or where there is a question as to which household he is living in, the child or young person shall be treated for the purposes of paragraph (1) as normally living with—

(a) the person who is receiving child benefit in respect of him; or

(b) if there is no such person—

(i) where only one claim for child benefit has been made in respect of him, the person who made that claim, or

(ii) in any other case the person who has the primary responsibility for him.

(3) For the purposes of these Regulations a child or young person shall be treated as the responsibility of only one person during the period of an award and any person other than the one treated as responsible for the child or young person under the foregoing paragraphs shall be treated as not so responsible.

Membership of the same household

8

(1) Except in a case to which paragraph (2) applies, where a claimant or any partner is treated as responsible for a child or young person by virtue of regulation 7 (circumstances where a person is treated as responsible or not responsible for another), that child or young person and any child of that child or young person shall be treated as a member of the claimant's household.

(2) A child or young person shall not be treated as a member of the claimant's household in any case where the child or young person—

(a) is a patient or in residential accommodation on account of physical or mental handicap or physical or mental illness and has been so accommodated for the 12 weeks immediately before the date of claim and is no longer in regular contact with the claimant or any member of the claimant's household; or

(b) has been boarded out with the claimant or his partner prior to adoption; or

has been placed with the claimant or his partner prior to adoption;

has been placed with the claimant or his partner by a local authority under section 23(2)(a) of the Children Act 1989 or by a voluntary organisation under section 59(1)(a) of that Act; or

(d) has been placed for adoption with the claimant or his partner pursuant to a decision under the Adoption Agencies Regulations 1983 or the Adoption Agencies (Scotland) Regulations 1984 ; or

(e) is detained in custody under a sentence imposed by a court.

(3) In this regulation—

(a) “patient” means a person (other than a person who is serving a sentence imposed by a court in a prison or youth custody institution) who is regarded as receiving free in-patient treatment within the meaning of the Social Security (Hospital In-Patients) Regulations 1975 .

(b) “ relevant enactment ” means the Army Act 1955 , the Air Force Act 1955 , the Naval Discipline Act 1957 , the Adoption Act 1958 , the Matrimonial Proceedings (Children) Act 1958 , the Children Act 1958 , the Social Work (Scotland) Act 1968 , the Family Law Reform Act 1969 , the Children and Young Persons Act 1969 , the Matrimonial Causes Act 1973 , the Guardianship Act 1973 , the Children Act 1975 , the Domestic Proceedings and Magistrates' Courts Act 1978 , the Adoption (Scotland) Act 1978 , the Child Care Act 1980 and the Foster Children Act 1980 ;

(c) “residential accommodation” means accommodation for a person whose stay in the accommodation has become other than temporary which is provided under—

(i) sections 21 to 24 and 26 of the National Assistance Act 1948 (provision of accommodation); or

(ii) section 21(1) of, and paragraph 1 or 2 of Schedule 8 to, the National Health Service Act 1977 (prevention, care and after-care) or, in Scotland, for the purposes of section 27 of the National Health Services (Scotland) Act 1947 (prevention of illness and after-care) or under section 59 of the Social Work (Scotland) Act 1968 (provision of residential and other establishments) or under section 7 of the Mental Health (Scotland) Act 1984 (functions of local authorities).

Circumstances in which a person is to be treated as being no longer a member of the same household

9

(1) Subject to the following provisions of this regulation, where the claimant and any partner of his are living apart from each other they shall be treated as members of the same household unless they do not intend to resume living together.

(2) Where one of the members of a married or unmarried couple is a hospital patient or detained in custody he shall not be treated, on this account, as ceasing to be a member of the same household as his partner—

(a) unless he has been a patient in a hospital for 52 weeks or more; or

(b) unless he is a patient detained in a hospital provided under section 4 of the National Health Service Act 1977 (special hospitals) or section 90(1) of the Mental Health (Scotland) Act 1984 (provision of hospitals for patients requiring special security); or

but shall be treated as not being a member of the same household as his partner wherever the conditions in sub-paragraphs (a), (b) or (c) are fulfilled.

(3) In this regulation “patient” has the same meaning as in regulation 8(3)(a) (membership of the same household).

PART IV — INCOME AND CAPITAL

CHAPTER I — GENERAL

Calculation of income and capital of members of claimant's family and of a polygamous marriage

10

(1) The income and capital of a claimant's partner and, subject to regulation 27 (modifications in respect of children and young persons), the income of a child or young person, which by virtue of section 22(5) of the Act is to be treated as income and capital of the claimant, shall be calculated or estimated in accordance with the following provisions of this Part in like manner as for the claimant; and any reference to the “claimant” shall, except where the context otherwise requires, be construed, for the purposes of this Part, as if it were a reference to his partner or that child or young person.

(2) Where a claimant or the partner of a claimant is married polygamously to two or more members of the same household—

(a) the claimant shall be treated as possessing capital and income belonging to each such member and the income of any child or young person who is one of that member's family; and

(b) the income and capital of that member or, as the case may be, the income of that child or young person shall be calculated in accordance with the following provisions of this Part in like manner as for the claimant or, as the case may be, as for any child or young person who is a member of his family.

Calculation of income and capital of students

11

The provisions of Chapters II to VI of this Part (income and capital) shall have effect in relation to students and their partners subject to the modifications set out in Chapter VII thereof (students).

Disregard of fractions

12

Where any calculation under this Part or Part V results in a fraction of a penny that fraction shall, if it would be to the claimant’s advantage, be treated as a penny, otherwise it shall be disregarded.

CHAPTER II — NORMAL WEEKLY INCOME

Calculation of income on a weekly basis

13

(1) For the purposes of section 20(5) of the Act (conditions of entitlement to working families' tax credit), the income of a claimant shall be calculated on a weekly basis—

(a) by ascertaining in accordance with this Chapter and Chapter V of this Part (other income) the amount of his normal weekly income; ...

(b) by adding to that amount the weekly income calculated under regulation 36 (calculation of tariff income from capital); ...

(1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) For the purposes of paragraph (1) “income” includes capital treated as income under regulation 25 (capital treated as income) and income which a claimant is treated as possessing under regulation 26 (notional income).

Normal weekly earnings of employed earners

14

(1) Where a claimant’s income consists of earnings from employment as an employed earner, except where those earnings arise from employment as a director, his normal weekly earnings from that employment shall, subject to paragraphs (3) to (6C), be determined by taking account of his earnings from that employment which are received in the assessment period relevant to his case, whether the amount so received was earned in respect of that period or not, and in accordance with the following provisions of this regulation.

(2) A claimant’s assessment period, subject to paragraphs (2A) to (6C) , shall be, in respect of a claimant whose pay period is—

(a) a week—

(i) except where head (ii) applies, a period of 6 consecutive weeks immediately preceding the week of claim; or

(ii) where the appropriate officer has insufficient information for the claimant’s normal weekly earnings to be determined in accordance with head (i), a period of 6 consecutive weeks ending with the week before the week immediately preceding the week of claim;

(aa) a fortnight—

(i) except where head (ii) applies, a period of three consecutive fortnights immediately preceding the week of claim; or

(ii) where the appropriate officer has insufficient information for the claimant’s normal weekly earnings to be determined in accordance with head (i), a period of three consecutive fortnights ending with the fortnight before the week immediately preceding the week of claim;

(b) four weeks or a month, a period of 12 consecutive weeks or, as the case may be, 3 consecutive months, immediately preceding the week of claim;

(c) any period of less than one month (a shorter period), other than one to which sub-paragraph (a) or (b) refers, 6 consecutive shorter periods immediately preceding the week of claim;

(d) any period of more than one month (a longer period), a period of one year ending immediately before the week of claim.

(2A) Where an appropriate officer considers, on the basis of available evidence, that the claimant has elected to work fewer hours than he would otherwise have worked in the whole or part of the assessment period referred to in paragraph (2) with the result that, but for this paragraph, he would secure entitlement or increased entitlement to working families' tax credit, the adjudication officer may determine the claimant’s normal weekly earnings by taking account of his earnings received during the period equal to, and ending immediately before, the period determined in accordance with paragraph (2), unless the claimant satisfies him that the reason for reducing his hours of work was otherwise than to secure such an entitlement or increased entitlement.

(3) Where during a claimant’s assessment period his earnings are reduced because of his involvement in a trade dispute at his place of employment or because of his absence from work by reason of jury service, that assessment period shall be varied in that—

(a) any pay period during which his earnings are so reduced shall be omitted from it; and

(b) subject to sub-paragraph (c), his assessment period shall commence one pay period earlier (the extra period) for each period so omitted;

(c) where any extra period under sub-paragraph (b) is one in which his earnings are reduced because of his involvement in a trade dispute at his place of employment or because of his absence from work by reason of jury service, that extra period shall also be omitted from his assessment period and his assessment period shall commence one pay period earlier, for each extra period so omitted,

but so that his assessment period remains a period equal in length to the assessment period which would otherwise apply in his case under paragraph (2) but as if the words “consecutive” and “immediately” were omitted from that paragraph on each occasion where they appear.

(4) Where a claimant’s earnings, whether during his assessment period or not, include a bonus or commission which is paid within 52 weeks preceding the week of claim and that bonus or commission is paid separately from his other earnings or is paid in respect of a period longer than the pay period relating to the other earnings with which it is paid, his normal weekly earnings shall be treated as including an amount in respect of that bonus or commission calculated in accordance with regulation 20A (calculation of bonus or commission).

(5) Where at the date of claim—

(a) the claimant—

(i) has been in his employment, or

(ii) after a continuous period of interruption exceeding 4 weeks, has resumed his employment, or

(iii) has changed the number of hours for which he is contracted to work; and

(b) the period of his employment or the period since he resumed his employment or the period since the change in the number of hours took place, as the case may be, is less than the assessment period in paragraph (2) appropriate in his case,

his normal weekly earnings shall be determined in accordance with paragraph (6).

(6) In a case to which this paragraph applies, the the Board shall require the claimant’s employer to furnish him with an estimate of the claimant’s likely earnings for the pay period for which he is or will normally be paid and the claimant’s normal earnings shall be determined by taking account of that estimate.

(6ZA) Where at the date of claim—

(a) the claimant is a Crown servant posted overseas or a partner of such a Crown servant, and

(b) either or both of them has employment other than as a Crown servant which is carried on in an overseas territory,

the Board shall require either or both of them to furnish either evidence of earnings from that employment or, if that is not available, an estimate of likely earnings from that employment for the pay periods for which they will normally be paid, and normal weekly earnings shall be determined by taking account of that evidence or estimate.

(6A) Where—

(a) the claimant is entitled at the date of the claim to statutory maternity pay and is or will be receiving extra statutory maternity pay from her employer, and

(b) the next payment from her employer following the date of the claim is a payment which will include statutory maternity pay paid to her for a full pay period at the lower rate only,

the Board shall require the claimant to furnish them with an estimate of her likely earnings and statutory maternity pay to be contained in that payment, and her normal weekly earnings shall be determined by taking account of that estimate.

(6B) Where—

(a) the claimant is entitled at the date of the claim to statutory maternity pay and is or will be receiving extra statutory maternity pay from her employer,

(b) the claim is made during a maternity pay period and at a time when less than half of that maternity pay period has expired, and

(c) in consequence the next payment from her employer following the date of the claim is a payment which will not include statutory maternity pay paid to her for a full pay period at the lower rate only,

the Board shall require the claimant to furnish them with an estimate of her likely earnings and statutory maternity pay to be contained in the first future payment from her employer in which statutory maternity pay will be paid to her at the lower rate only, and her normal weekly earnings shall be determined by taking account of that estimate.

(6C) Where—

(a) the claimant is entitled at the date of the claim to statutory maternity pay and is or will be receiving extra statutory maternity pay from her employer,

(b) the claim is made during a maternity pay period and at a time when more than half of that maternity pay period has expired, and

(c) in consequence the next payment from her employer following the date of the claim is a payment which will not include statutory maternity pay paid to her for a full pay period at the lower rate only,

the Board shall require the claimant to furnish them with details of her earnings and statutory maternity pay contained in the payment from her employer immediately preceding the date of the claim, and her normal weekly earnings shall be determined accordingly.

(7) For the purposes of this regulation—

(a) the claimant’s earnings shall be calculated in accordance with Chapter III of this Part;

(b) “pay period” means the period in respect of which a claimant is, or expects to be normally paid by his employer, being a week, a fortnight, four weeks, a month or other shorter or longer period, as the case may be.

Normal weekly earnings of self-employed earners

15

(1) Subject to regulation 17 (periods to be disregarded), where a claimant's income consists of earnings from employment as a self-employed earner, his normal weekly earnings shall be determined, subject to paragraph (2), by reference to his weekly earnings from that employment—

(a) except where sub-paragraph (aa) or (b) applies, over a period of 6 consecutive complete months up to and including the second last complete month immediately preceding the date of claim; or

(aa) except where sub-paragraph (b) applies, where the claimant provides in respect of the employment a statement of his earnings and expenses for the six consecutive complete months up to and including the last complete month immediately preceding the date of claim, over that period of six months; or

(b) where the claimant provides in respect of the employment a profit and loss account and, where appropriate, a trading account or a balance sheet or both, and the profit and loss account is in respect of a period of at least 6 months but not exceeding 15 months and that period terminates within the 12 months preceding the date of claim, over that period; or

(c) over such other period of weeks or months preceding the week in which the date of claim falls as may, in any particular case, enable his normal weekly earnings to be determined more accurately.

(1A) in paragraph (1)(b)—

(a) “balance sheet” means a statement of the financial position of the employment disclosing its assets, liabilities and capital at the end of the period in question;

(b) “profit and loss account” means a financial statement showing the net profit or loss of the employment for the period in question; and

(c) “trading account” means a financial statement showing the revenue from sales, the cost of those sales and the gross profit arising during the period in question.

(2) Subject to regulation 17, in a case where the claimant has been in employment as a self-employed earner for less than 7 complete months, his normal weekly earnings shall be determined over a period of 6 consecutive complete months commencing with the first complete month after the claimant began that employment, and that determination shall be based on either—

(a) where the claimant provides in relation to that employment a statement of his earnings and expenses for the complete months up to and including the last complete month immediately preceding the date of claim, the earnings he received in those months, or

(b) where no such statement is provided, any earnings he received in the period up to and including the second last complete month immediately preceding the date of claim,

together with an estimate of the earnings likely to be received in the balance of the 6 month period.

(3) For the purposes of this regulation, the claimant's earnings shall be calculated in accordance with Chapter IV of this Part.

(4) In this regulation a “complete month” begins on the first day of the month and ends on the last day of the month.

Normal weekly income other than earnings

16

(1) Subject to paragraphs (2) and (2A), where a claimant’s normal weekly income does not consist of earnings, or includes income that does not consist of earnings, that income shall be determined by reference to his weekly income over a period of 26 weeks immediately preceding the week in which the date of claim falls or over such period immediately preceding that date as may, in any particular case, enable his normal weekly income, except where paragraph (2A) applies, to be determined more accurately.

(2) Where a claimant's income consists of any payments made by a person, whether under a court order or not, for the maintenance of any member of the claimant’s family, and those payments are made or due to be made at regular intervals, his normal weekly income shall be determined—

(a) if before the date of claim those payments are made at regular intervals and of regular amounts, by reference to the normal weekly amount;

(b) if they are not so made, by reference to the average of such payments received in the 13 weeks immediately preceding the week in which the date of claim falls.

(2A) Where a claimant’s income consists of child support maintenance, his normal weekly income in respect of that maintenance shall be determined—

(a) if before the date of claim those maintenance payments are made at regular intervals and of regular amounts, by reference to the normal weekly amount;

(b) if they are not so made, except in a case to which sub-paragraph (c) applies, by reference to the average of such payments received in the 13 weeks immediately preceding the week in which the date of claim falls,

(c) where the maintenance assessment has been notified to the claimant under regulation 10 of the Child Support (Maintenance Assessment Procedure) Regulations 1992 during the 13 weeks immediately preceding the week of claim, by reference to the average of such payments, calculated on a weekly basis, received in the interim period,

and if the resulting sum exceeds the amount of child support maintenance due under the maintenance assessment, the normal weekly income shall be the amount due under the maintenance assessment.

(3) For the purposes of this regulation, income other than earnings shall be calculated in accordance with Chapter V of this Part.

(4) In this regulation—

(a) “child support maintenance” means such periodical payments as are referred to in section 3(6) of the Child Support Act 1991;

(b) “maintenance assessment” has the same meaning as in the Child Support Act 1991 by virtue of section 54 of that Act.

(c) “the interim period” means the week in which the date of notification of the maintenance assessment falls and the subsequent period up to and including the week immediately preceding the week of claim.

Periods to be disregarded

17

For the purposes of ascertaining a claimant’s normal weekly earnings there shall be disregarded—

(a) where the claimant is a self-employed earner, any week or period of weeks in his assessment period during which no activities have been carried out for the purposes of the business;

(b) where the claimant is a director, any week or period of weeks in his assessment period during which he has done no work and in respect of which he has received no earnings; and

his normal weekly earnings shall be determined by reference to his earnings in the remainder of that period (the reduced period) and in these Regulations any reference to an assessment period shall in its application to such a case be construed as a reference to that reduced period.

Calculation of weekly amount of income

18

(1) For the purposes of regulation 14 (normal weekly earnings of employed earners) and 16 (normal weekly income other than income other than earnings), where the claimant’s pay period or, as the case may be, the period in respect of which a payment is made—

(a) does not exceed a week, the weekly amount shall be the amount of that payment;

(b) exceeds a week, the weekly amount shall be determined—

(i) in a case where that period is a month, by multiplying the amount of the payment by 12 and dividing the product by 52;

(ii) in a case where that period is 3 months, by multiplying the amount of the payment by 4 and dividing the product by 52;

(iii) in a case where that period is a year, by dividing the amount of the payment by 52;

(iv) in any other case, by multiplying the amount of the payment by 7 and dividing the product by the number equal to the number of days in the period in respect of which it is made.

(2) For the purposes of regulation 15 (normal weekly earnings of self-employed earners) the weekly amount of earnings of a claimant shall be determined—

(a) except where sub-paragraph (b) applies, by multiplying by 7 his earnings

(i) received in the assessment period, or

(ii) estimated for the assessment period, or

(iii) both received in and estimated for that period,

as the ease may be, and dividing the product by the number equal to the number of days in that period;

(b) in a case where regulation 15(1)(b) applies, by multiplying his earnings relevant to the assessment period (whether or not received in that period) by 7 and dividing the product by the number equal to the number of days in that period.

(3) For the purposes of regulation 14A (normal weekly earnings of directors) the weekly amount of earnings of a claimant shall be determined by dividing his earnings—

(i) received in the assessment period, or

(ii) estimated for the assessment period, or

(iii) both received in and estimated for that period,

as the case may be, by the number equal to the number of weeks in that period.

CHAPTER III — EMPLOYED EARNERS

Earnings of employed earners

19

(1) Subject to paragraph (2), “earnings” means in the case of employment as an employed earner, any remuneration or profit derived from that employment and includes—

(a) any bonus or commission;

(b) any holiday pay except any payable more than 4 weeks after termination of the employment;

(d) any payment made by the claimant's employer in respect of any expenses not wholly, exclusively and necessarily incurred in the performance of the duties of the employment, including any payment made by the claimant's employer in respect of—

(i) travelling expenses incurred by the claimant between his home and place of employment;

(ii) expenses incurred by the claimant under arrangements made for the care of a member of his family owing to the claimant's absence from home;

(e) any award of compensation made under section 68(2) or 71(2)(a) of the Employment Protection (Consolidation) Act 1978 (remedies and compensation for unfair dismissal);

(f) any such sum as is referred to in section 18(2) of the Social Security (Miscellaneous Provisions) Act 1977 (certain sums to be earnings for social security purposes);

(g) any statutory sick pay under Part I of the Social Security and Housing Benefits Act 1982 ;

(h) any statutory sick pay under Part II of the Social Security (Northern Ireland) Order 1982.

(i) the amount of any payment by way of a non-cash voucher which has been taken into account in the computation of a person’s earnings in accordance with regulation 18(22) to (25) of the Social Security (Contributions) Regulations 1979.

(2) Earnings shall not include—

(a) subject to paragraphs (3) and (4), any payment in kind;

(b) any payment in respect of expenses wholly, exclusively and necessarily incurred in the performance of the duties of the employment;

(d) any statutory maternity pay or a corresponding benefit under any enactment having effect in Northern Ireland.

(e) any statutory paternity pay or a corresponding benefit under any enactment having effect in Northern Ireland.

(3) Where living accommodation is provided for a claimant by reason of his employment, the claimant shall be treated as being in receipt of weekly earnings of an amount equal to—

(a) where no charge is made in respect of the provision of that accommodation, £12;

(b) where a charge is made and that weekly charge is less than £12, the amount of the difference,

except that where the claimant satisfies the appropriate officer that the weekly value to him of the provision of that accommodation is an amount less than the amount in sub-paragraph (a) or (b), as the case may be, he shall be treated as being in receipt of that lesser value.

(4) Paragraph (2)(a) shall not apply in respect of any non-cash voucher referred to in paragraph (1)(i).

(5) An employed earner shall not be treated as being in receipt of earnings in any assessment period as long as she is entitled to maternity allowance at the date of the claim.

(6) An employed earner shall not be treated as being in receipt of earnings in any assessment period as long as she is entitled to statutory maternity pay at the date of the claim and is neither receiving nor expecting to receive at that date extra statutory maternity pay from her employer.

Calculation of net earnings of employed earners

20

(1) For the purposes of regulation 14 (normal weekly earnings of employed earners) the earnings of a claimant to be taken into account shall be his average weekly net earnings and where an estimate of earnings has been made in his case, as estimated, and those weekly net earnings shall be determined in accordance with the following paragraphs.

(2) There shall be disregarded from a claimant's net earnings, any sum, where applicable, specified in Schedule 1.

(3) A claimant’s net earnings shall, except where paragraph (4) or (4A) applies, be calculated by taking into account his gross earnings from that employment ..., less—

(a) any amount deducted from those earnings by way of—

(i) income tax;

(ii) primary Class 1 contributions under the Social Security Act ; and

(b) one-half of any sum paid by the claimant in respect of a pay period by way of a contribution towards an occupational or personal pension scheme; and

(c) the net amount of bonus or commission (if any) which is paid separately from his other earnings or is paid in respect of a period longer than the pay period relating to the other earnings with which it is paid and that net amount shall be the gross amount of that bonus or commission after deducting from it sums calculated in accordance with paragraphs (a) to (c) of regulation 20A (calculation of bonus or commission).

(4) Where the earnings of a claimant are estimated under paragraph (6), (6A) or (6B) of regulation 14 (normal weekly earnings of employed earners), his net earnings shall be calculated by taking into account those earnings over the period in respect of which the estimate is made, less—

(a) an amount in respect of income tax equivalent to an amount calculated by applying to those earnings the lower rate or, as the case may be, the lower rate and the basic rate of tax in the year of assessment in which the claim was made less only the personal relief to which the claimant is entitled under sections 8(1) and (2) and 14(1)(a) and (2) of the Income and Corporation Taxes Act 1970 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year, the earnings to which the lower rate ... of tax is to be applied and the amount of the personal relief deductible under this sub-paragraph shall be calculated on a pro rata basis;

(b) where the weekly amount of those earnings equals or exceeds the lower earnings limit, an amount representing primary Class 1 contributions under the Contributions and Benefits Act, calculated by applying to those earnings the initial and main primary percentages applicable at the date of claim in accordance with section 8(1) (a) and (b) of that Act; and

(c) one half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme, if the earnings so estimated were actual earnings.

(4A) Where earnings are estimated under paragraph (6ZA) of regulation 14 (normal weekly earnings of employed earner in overseas territory), net earnings shall be calculated by taking into account those earnings over the period in respect of which the estimate is made, less—

(a) the amount (if any) of income tax deducted in respect of those earnings in accordance with the laws of the overseas territory concerned,

(b) the amount (if any) of social security contributions deducted in respect of those earnings in accordance with those laws, and

(c) one half of any sum which would be payable by the claimant by way of a contribution towards an occupational or personal pension scheme, if the earnings so estimated were actual earnings.

(5) When a claimant’s net earnings have been calculated in accordance with paragraph (3), his average net earnings in respect of his pay period shall be calculated as follows—

(a) the net earnings in each of the pay periods in his assessment period shall be aggregated, that total shall then be divided by the number of pay periods in his assessment period and the resulting amount shall be the average net earnings for his pay period;

(b) where in respect of any pay period, a claimant’s net earnings are twenty per cent. or more higher, or twenty per cent. or more lower, than his average net earnings, those net earnings and that pay period shall be omitted, his assessment period shall be reduced accordingly and his average net earnings shall, subject to sub- paragraph (c), be re-calculated in accordance with sub-paragraph (a);

(c) where the operation of sub-paragraph (b) results in no pay period remaining in a claimant’s assessment period there shall be omitted from the assessment period any pay period in which no earnings are received or in which the net earnings received are for a period longer than his normal pay period and his average net earnings shall be re-calculated in accordance with sub-paragraph (a);

(d) where the operation of sub-paragraph (c) results in no pay periods remaining, paragraph (6) of regulation 14 (normal weekly earnings of employed earners) and paragraph (4) of this regulation shall apply in his case.

(6) Where a claimant’s average net earnings for his pay period have been calculated in accordance with paragraph (5) and his pay period is—

(a) a week, a fortnight or four weeks, his average net earnings for his pay period shall be divided by the number of weeks in that period;

(b) a month, his average net earnings shall be multiplied by 12, the resulting product divided by 52;

(c) any shorter or longer period than those referred to in sub- paragraphs (a) and (b), his average net earnings for his pay period shall be multiplied by 7 and the product divided by the number equal to the number of days in his pay period,

and the resulting amount shall be his average weekly net earnings.

CHAPTER IV — SELF-EMPLOYED EARNERS

Earnings of self-employed earners

21

(1) Subject to paragraphs (2) and (3), “earnings”, in the case of employment as a self-employed earner, means the gross receipts of the employment and shall include any allowance paid under section 2 of the Employment and Training Act 1973 or section 2 of the Enterprise and New Towns (Scotland) Act 1990 to the claimant for the purpose of assisting him in carrying on his business unless at the date of claim the allowance has been terminated.

(2) Where a claimant is employed in providing board and lodging accommodation for which a charge is payable, any income consisting of payments of such a charge shall only be taken into account under this Chapter as earnings if it forms a major part of the total of the claimant's weekly income less any sums disregarded under Schedule 2 other than under paragraph 40 of that Schedule.

(3) “Earnings” shall not include any payments to which paragraph 24 of Schedule 2 refers (sums to be disregarded in the calculation of income other than earnings) nor shall it include any sports award.

(4) A self-employed earner shall not be treated as being in receipt of earnings in any assessment period as long as she is entitled to maternity allowance at the date of the claim.

Calculation of net profit of self-employed earners

22

(1) For the purposes of regulation 15 (normal weekly earnings of self-employed earners), the earnings of a claimant to be taken into account shall be—

(a) in the case of a self-employed earner who is engaged in employment on his own account, the net profit derived from that employment;

(b) in the case of a self-employed earner whose employment is carried on in partnership or is that of a share fisherman within the meaning of the Social Security (Mariners' Benefits) Regulations 1975 , his share of the net profit derived from that employment less—

(i) an amount in respect of income tax and social security contributions payable under the Social Security Act calculated in accordance with regulation 23 (deduction of tax and contributions for self-employed earners); and

(ii) one-half of the amount in respect of any qualifying premium calculated in accordance with paragraph (13).

(2) There shall be disregarded from a claimant's net profit any sum, where applicable, specified in Schedule 1.

(3) For the purposes of paragraph (1)(a) the net profit of the employment shall, except where paragraph (3A), (9) or (10) applies, be calculated by taking into account the earnings of the employment received in the assessment period, less—

(a) subject to paragraphs (5) to (7), any expenses wholly and exclusively defrayed in that period for the purposes of that employment;

(b) an amount in respect of—

(i) income tax; and

(ii) social security contributions payable under the Social Security Act, calculated in accordance with regulation 23 (deduction of tax and contributions for self-employed earners); and

(3A) For the purposes of paragraph (1)(a), in a case where the assessment period is determined under regulation 15(1)(b), the net profit of the employment shall, except where paragraph (9) applies, be calculated by taking into account the earnings of the employment relevant to that period (whether or not received in that period), less—

(a) subject to paragraphs (5) to (7), any expenses relevant to that period (whether or not defrayed in that period) and which were wholly and exclusively incurred for the purposes of that employment;

(b) an amount in respect of—

(i) income tax; and

(ii) social security contributions payable under the Social Security Act,

calculated in accordance with regulation 23; and

(4) For the purposes of paragraph (1)(b) the net profit of the employment shall, except where paragraph (4A), (9) or (10) applies, be calculated by taking into account the earnings of the employment received in the assessment period less, subject to paragraphs (5) to (7), any expenses wholly and exclusively defrayed in that period for the purposes of that employment.

(4A) For the purposes of paragraph (1)(b), in a case where the assessment period is determined under regulation 15(1)(b), the net profit of the employment shall, except where paragraph (9) applies, be calculated by taking into account the earnings of the employment relevant to that period (whether or not received in that period) less, subject to paragraphs (5) to (7), any expenses relevant to that period (whether or not defrayed in that period) and which were wholly and exclusively incurred for the purposes of that employment.

(5) Subject to paragraph (6), no deduction shall be made under paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be, in respect of—

(a) any capital expenditure;

(b) the depreciation of any capital asset;

(d) any loss incurred before the beginning of the assessment period;

(e) the repayment of capital on any loan taken out for the purposes of the employment;

(f) any expenses incurred in providing business entertainment.

(6) A deduction shall be made under paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be, in respect of the repayment of capital on any loan used for—

(a) the replacement in the course of business of equipment or machinery; and

(b) the repair of an existing business asset except to the extent that any sum is payable under an insurance policy for its repair.

(7) An appropriate officer shall refuse to make a deduction in respect of any expenses under paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be, where he is not satisfied that the expense has been defrayed or given the nature and the amount of the expense that it has been reasonably incurred.

(8) For the avoidance of doubt—

(a) a deduction shall not be made under paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be, in respect of any sum unless it has been expended for the purposes of the business;

(b) a deduction shall be made thereunder in respect of—

(i) the excess of any VAT paid over VAT received in the assessment period;

(ii) any income expended in the repair of an existing business asset except to the extent that any sum is payable under an insurance policy for its repair;

(iii) any payment of interest on a loan taken out for the purposes of the employment.

(9) Where a claimant is engaged in employment as a child minder the net profit of the employment shall be one-third of the earnings of that employment, less—

(a) an amount in respect of—

(i) income tax; and

(ii) social security contributions payable under the Social Security Act,

calculated in accordance with regulation 23 (deduction of tax and contributions for self-employed earners); and

(b) one-half of the amount in respect of any qualifying premium calculated in accordance with paragraph (13).

(10) Where regulation 15(2) (normal weekly earnings of self-employed earners) applies—

(a) for the purposes of paragraph (1)(a), the net profit derived from the employment shall be calculated by taking into account the claimant’s estimated and, where appropriate, actual earnings from the employment less the amount of the deductions likely to be made and, where appropriate, made under sub-paragraphs (a) to (c) of paragraph (3); or

(b) for the purposes of paragraph (1)(b), his share of the net profit of the employment shall be calculated by taking into account the claimant’s estimated and, where appropriate, his share of the actual earnings from the employment less the amount of his share of the expenses likely to be deducted and, where appropriate, deducted under paragraph (4); or

(c) in the case of employment as a child-minder, the net profit of the employment shall be calculated by taking into account one-third of the claimant’s estimated earnings and, where appropriate, actual earnings from that employment less the amount of the deductions likely to be made and, where appropriate, made under sub-paragraphs (a) and (b) of paragraph (9).

(11) For the avoidance of doubt where a claimant is engaged in employment as a self-employed earner and he is also engaged in one or more other employments as a self-employed or employed earner any loss incurred in any one of his employments shall not be offset against his earnings in any other of his employments.

(12) In this regulation—

(a) “qualifying premium” means any premium which at the date of claim is payable periodically in respect of a retirement annuity contract or a personal pension scheme;

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13) The amount in respect of any qualifying premium shall be calculated by multiplying the daily amount of the qualifying premium by the number equal to the number of days in the assessment period; and for the purposes of this regulation the daily amount of the qualifying premium shall be determined—

(a) where the qualifying premium is payable monthly, by multiplying the amount of the qualifying premium by 12 and dividing the product by 365;

(b) in any other case, by dividing the amount of the qualifying premium by the number equal to the number of days in the period to which the qualifying premium relates.

Deduction of tax and contributions for self-employed earners

23

(1) The amount to be deducted in respect of income tax under regulation 22(1)(b)(i), (3)(b)(i) , (3A)(b)(i) or (9)(a)(i) (calculation of net profit of self-employed earners) shall be calculated on the basis of the amount of chargeable income, and as if that income were assessable to income tax at the lower rate or, as the case may be, the lower rate and the basic rate of tax in the year of assessment in which the claim was made, less only the personal relief to which the claimant is entitled under sections 8(1) and (2) and 14(1)(a) and (2) of the Income and Corporation Taxes Act 1970 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year the earnings to which the lower rate ... of tax is to be applied and the amount of the personal relief deductible under this paragraph shall be calculated on a pro rata basis.

(2) The amount to be deducted in respect of social security contributions under regulation 22(1)(b)(i), (3)(b)(ii) , (3A)(b)(ii) or (9)(a)(ii) shall be ...—

(a) an amount in respect of Class 2 contributions calculated by multiplying the weekly rate of such contributions applicable at the date of claim by virtue of section 11(1) or, as the case may be, (3) of the Contributions and Benefits Act by the number of days in the assessment period and dividing the product by 7, except where a claimant’s chargeable income is less than the amount specified in section 11(4) of that Act (small earnings exception) for the tax year in which the date of claim falls; but if the assessment period is less than a year, the amount specified for that tax year shall be calculated on a pro rata basis; and

(b) the amount of Class 4 contributions (if any) which would be payable under section 15(3) of that Act (Class 4 contributions) at the percentage rate applicable at the date of claim on so much of the chargeable income as exceeds the lower limit but does not exceed the upper limit of profits and gains applicable for the tax year in which the date of claim falls; but, if the assessment period is less than a year, those limits shall be calculated on a pro rata basis.

(3) In this regulation “chargeable income” means—

(a) except where sub-paragraph (b) or (c) applies, the earnings derived from the employment, less any expenses deducted under paragraph (3)(a), (3A)(a), (4) or (4A), as the case may be, of regulation 22;

(b) except where sub-paragraph (c)(iii) applies, in the case of employment as a child minder one-third of the earnings of that employment; or

(i) in the case of a self-employed earner who is engaged in employment on his own account, the claimant’s estimated and, where appropriate, actual earnings from the employment less the amount of the deductions likely to be made and, where appropriate, made under sub-paragraph (a) of paragraph (3) of regulation 22;

(ii) in the case of a self-employed earner whose employment is carried on in partnership or is that of a share fisherman within the meaning of the Social Security (Mariners' Benefits) Regulations 1975, the claimant’s estimated and, where appropriate, his share of the actual earnings from the employment less the amount of his share of the expenses likely to be deducted and, where appropriate, deducted under paragraph (4) of regulation 22;

(iii) in the case of employment as a child minder, one-third of the claimant’s estimated and, where appropriate, actual earnings from that employment.

CHAPTER V — OTHER INCOME

Calculation of income other than earnings

24

(1) For the purposes of regulation 16 (normal weekly income other than earnings), the income of a claimant which does not consist of earnings to be taken into account shall, subject to paragraphs (2) to (4A), be his gross income and any capital treated as income under regulations 25 and 27 (capital treated as income and modifications in respect of children and young persons).

(2) There shall be disregarded from the calculation of a claimant's gross income under paragraph (1) any sum, where applicable, specified in Schedule 2.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Where the payment of any benefit under the benefit Acts is subject to any deduction by way of recovery the amount to be taken into account under paragraph (1) shall be the gross amount payable.

(4A) Where a loan is made to a person pursuant to arrangements made under section 1 of the Education (Student Loans) Act 1990 or Article 3 of the Education (Student Loans) (Northern Ireland) Order 1990 and that person ceases to be a student before the end of the academic year in respect of which the loan is payable or, as the case may be, before the end of his course, a sum equal to the weekly amount apportionable under paragraph (2) of regulation 42A shall be taken into account under paragraph (1) for each week, in the period over which the loan fell to be apportioned, following the date on which that person ceases to be a student; but in determining the weekly amount apportionable under paragraph (2) of regulation 42A so much of that paragraph as provides for a disregard shall not have effect.

(5) For the avoidance of doubt there shall be included as income to be taken into account under paragraph (1) any payment to which regulation 19(2) applies (payments not earnings).

Capital treated as income

25

(1) Any capital payable by instalments which are outstanding at the date of the claim shall, if the aggregate of the instalments outstanding and the amount of the claimant's capital otherwise calculated in accordance with Chapter VI of this Part exceeds £8,000, be treated as income.

(2) Any payment received under an annuity shall be treated as income.

(3) Any Career Development Loan paid pursuant to section 2 of the Employment and Training Act 1973 shall be treated as income.

Notional income

26

(1) A claimant shall be treated as possessing income of which he has deprived himself for the purpose of securing entitlement to working families' tax credit or increasing the amount of that benefit.

(2) Except in the case of—

(a) a discretionary trust;

(b) a trust derived from a payment made in consequence of a personal injury; or

(d) any sum to which paragraph 46(a) or 47(a) of Schedule 3 (disregard of compensation for personal injuries which is administered by the Court) refers; or

(e) rehabilitation allowance made under section 2 of the Employment and Training Act 1973,

any income which would become available to the claimant upon application being made, but which has not been acquired by him, shall be treated as possessed by the claimant.

(2A) Where a person, aged not less than 60, is a member of, or a person deriving entitlement to a pension under, a personal pension scheme, or is a party to, or a person deriving entitlement to a pension under, a retirement annuity contract, and—

(a) in the case of a personal pension scheme, he fails to purchase an annuity with the funds available in that scheme where—

(i) he defers, in whole or in part, the payment of any income which would have been payable to him by his pension fund holder;

(ii) he fails to take any necessary action to secure that the whole of any income which would be payable to him by his pension fund holder upon his applying for it, is so paid; or

(iii) income withdrawal is not available to him under that scheme; or

(b) in the case of a retirement annuity contract, he fails to purchase an annuity with the funds available under that contract,

the amount of any income foregone shall be treated as possessed by him, but only from the date one which it could be expected to be acquired were an application for it to be made.

(2B) The amount of any income foregone in a case to which either head (2A)(a)(i) or (ii) applies shall be the maximum amount of income which may be withdrawn from the fund and shall be determined by the appropriate officer who shall take account of information provided by the pension fund holder in accordance with regulation 7(5) of the Social Security (Claims and Payments) Regulations 1987.

(2C) The amount of any income foregone in a case to which either head (2A)(a)(iii) or sub-paragraph (2A)(b) applies shall be the income that the claimant could have received without purchasing an annuity had the funds held under the relevant personal pension scheme or retirement annuity contract been held under a personal pension scheme where income withdrawal was available and shall be determined in the manner specified in paragraph (2B).

(3) Any payment of income, other than a payment of income specified in paragraph (3A)

(a) to a third party in respect of a member of the family (but not a member of the third party’s family) shall be treated as possessed by that member of the family to the extent that it is used for his food, ordinary clothing or footwear, household fuel ... or housing costs or is used for any personal community charge, collective community charge contribution or council tax for which that member is liable; and in this sub-paragraph the expression “ordinary clothing or footwear” means clothing or footwear for normal daily use, but does not include school uniforms, or clothing or footwear used solely for sporting activities;

(b) to a member of the family in respect of a third party (but not in respect of another member of that family) shall be treated as possessed by that member to the extent that it is kept by him or used by or on behalf of any member of the family.

(3A) Paragraph (3) shall not apply in respect of a payment of income made—

(a) under the Macfarlane Trust, the Macfarlane (Special Payments) Trust, the Macfarlane (Special Payments) (No.2) Trust, the Fund, the Eileen Trust or the Independent Living Funds;

(b) pursuant to section 19(1)(a) of the Coal Industry Act 1994 (concessionary coal); or

(i) in an employment programme specified in regulation 75(1)(a)(ii) of the Jobseeker’s Allowance Regulations 1996;

(ii) in a training scheme specified in regulation 75(1)(b)(ii) of those Regulations; or

(iia) in the Intensive Activity Period specified in regulation 75(1)(a)(iv) of those Regulations or in the Intensive Activity Period for 50 plus; or

(iii) in a qualifying course within the meaning specified in regulation 17A(7) of those Regulations.

(4) Where—

(a) a claimant performs a service for another person; and

(b) that person makes no payment of earnings or pays less than that paid for a comparable employment in the area; and

(c) the appropriate officer is satisfied that the means of that person are sufficient for him to pay or to pay more for the service,

the appropriate officer shall treat the claimant as possessing such earnings (if any) as is reasonable for that employment; but this paragraph shall not apply to a claimant who is engaged by a charitable or voluntary organisation or is a volunteer if the appropriate officer is satisfied in any of those cases that it is reasonable for him to provide his services free of charge or in a case where the service is performed in connection with the claimant’s participation in an employment or training programme in accordance with regulation 19(1)(q) of the Jobseeker’s Allowance Regulations 1996.

(5) Where a claimant is treated as possessing any income under any of paragraphs (1) to (3), the foregoing provisions of this Part shall apply for the purposes of calculating the amount of that income as if a payment had actually been made and as if it were actual income which he does possess.

(6) Where a claimant is treated as possessing any earnings under paragraph (4), the foregoing provisions of this Part shall apply for the purposes of calculating the amount of those earnings as if a payment had actually been made and as if they were actual earnings which he does possess, except that paragraph (3) of regulation 20 (calculation of net earnings of employed earners) shall not apply and his net earnings shall be calculated by taking into account those earnings which he is treated as possessing, less—

(a) an amount in respect of income tax equivalent to an amount calculated by applying to those earnings the lower rate or, as the case may be, the lower rate and the basic rate of tax in the year of assessment in which the claim was made less only the personal relief to which the claimant is entitled under sections 8(1) and (2) and 14(1)(a) and (2) of the Income and Corporation Taxes Act 1970 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year, the earnings to which the lower rate ... of tax is to be applied and the amount of the personal relief deductible under this sub-paragraph shall be calculated on a pro rata basis;

(b) where the weekly amount of those earnings equals or exceeds the lower earnings limit, an amount representing primary Class 1 contributions under the Contributions and Benefits Act, calculated by applying to those earnings the initial and main primary percentages applicable at the date of claim in accordance with section 8(1) (a) and (b) of that Act; and

(c) one-half of any sum payable by the claimant by way of a contribution towards an occupational or personal pension scheme.

Modifications in respect of children and young persons

27

(1) Any capital of a child or young person payable by instalments which are outstanding at the date of claim shall, if the aggregate of the instalments outstanding and the amount of that child's or young person's other capital calculated in accordance with Chapter VI of this Part in like manner as for the claimant... would exceed £3,000, be treated as income.

(2) Where the income of a child or young person, other than income consisting of payments of maintenance whether under a court order or not, calculated in accordance with Chapters I to V of this Part exceeds the sum specified as a credit for that child or young person in Schedule 4 and regulation 46(5) (sum for child or young person who has income in excess to be nil) applies , that income shall not be treated as income of the claimant.

(3) Where the capital of a child or young person, if calculated in accordance with Chapter VI of this Part in like manner as for the claimant, except as provided in paragraph (1), would exceed £3,000, any income of that child or young person , other than income consisting of any payment of maintenance whether under a court order or not, shall not be treated as income of the claimant.

(4) Any income of a child or young person which is to be disregarded under Schedule 2 shall be disregarded in such manner as to produce the result most favourable to the claimant.

CHAPTER VI — CAPITAL

Capital limit

28

For the purposes of section 22(6) of the Act as it applies to working families' tax credit (no entitlement to benefit if capital exceeds prescribed amount), the prescribed amount is £8,000.

Calculation of capital

29

(1) For the purposes of Part II of the Act as it applies to working families' tax credit, the capital of a claimant to be taken into account shall, subject to paragraph (2), be the whole of his capital calculated in accordance with this Part and any income treated as capital under regulation 31 (income treated as capital).

(2) There shall be disregarded from the calculation of a claimant's capital under paragraph (1) any capital, where applicable, specified in Schedule 3.

Disregard of capital of child or young person

30

The capital of a child or young person who is a member of the claimant's family shall not be treated as capital of the claimant.

Income treated as capital

31

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