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The Tax Credits (Definition and Calculation of Income) Regulations 2002

Type Statutory-Instrument
Publication 2002-07-30
Last updated 2024-04-06
State In force
Department King's Printer of Acts of Parliament
Source legislation.gov.uk
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articles Not indexed
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1.An attendance allowance under section 64 of the Contributions and Benefits Act .
2.A back to work bonus under section 26 of the Jobseekers Act 1995 .
3.A bereavement payment under section 36 of the Contributions and Benefits Act .
4.Child benefit under Part 2 of the Act.
5.A Christmas bonus under section 148 of the Contributions and Benefits Act.
6.Council tax benefit under section 131 of the Contributions and Benefits Act .
7.A disability living allowance under section 71 of the Contributions and Benefits Act.
8.Disabled person’s tax credit under section 129 of the Contributions and Benefits Act .
9.Any discretionary housing payment pursuant to regulation 2(1) of the Discretionary Financial Assistance Regulations 2001 .
10.An ex-gratia payment by the Secretary of State or, in Northern Ireland, the Department for Social Development, to a person over pensionable age by way of supplement to incapacity benefit.
11.A guardian’s allowance under section 77 of the Contributions and Benefits Act.
12.Housing benefit under section 130 of the Contributions and Benefits Act.
13.Income support under section 124 of the Contributions and Benefits Act , unless it is chargeable to tax under section 151(1) of the Taxes Act.
14.Incapacity benefit which is—(a)short term incapacity benefit payable at the lower rate; or(b)payable to a person who had received invalidity benefit before 13th April 1995 if the period of incapacity for work is treated, by virtue of regulation 2 of the Social Security (Incapacity Benefit) (Transitional) Regulations 1995 (days to be treated as days of incapacity for work) as having begun before that date.
15.Industrial injuries benefit under section 94 of the Contributions and Benefits Act.
16.A contribution-based jobseeker’s allowance under the Jobseekers Act 1995, to the extent that it exceeds the maximum contained in section 151A of the Taxes Act .
17.An income-based jobseeker’s allowance under the Jobseekers Act 1995.
18.A maternity allowance under section 35 of the Contributions and Benefits Act .
19.A severe disablement allowance under section 68 or 69 of the Contributions and Benefits Act .
20.A social fund payment under Part 8 of the Contributions and Benefits Act.
21.Statutory maternity pay under Part 12 of the Contributions and Benefits Act .
22.Statutory sick pay under Part 11 of the Contributions and Benefits Act.
23.Working families’ tax credit under section 128 of the Contributions and Benefits Act .
24.A payment by way of compensation for the non-payment of, or in respect of loss of entitlement (whether wholly or partly) of, income support, jobseeker’s allowance, housing benefit or housing benefit supplement.
25.A payment in lieu of milk tokens or the supply of vitamins under the Welfare Foods Regulations 1996 .
  • (4) If an increase in respect of a child dependant is payable with an allowance, benefit, pension or other payment (“the main payment”) listed in Table 3, the increase shall also be wholly disregarded in calculating the income of the recipient of the main payment.
  • (5) For the purpose of calculating the amount to be paid by way of either of the tax credits mentioned in section 1(1) of the Act, any amount payable by way of the other of those tax credits shall be disregarded.
  • (6) A reference in this regulation to an enactment applying only in Great Britain includes a reference to a corresponding enactment applying in Northern Ireland.

In the application of this regulation to Scotland and Northern Ireland the references to the provisions of regulation 15 of the Education (Student Support) Regulations of 2002 are to be construed as a reference to the provisions of any enactment having a corresponding effect there.

This is subject to the following qualification.

  • (2) In calculating investment income, there shall be disregarded—
  • (a) any amount listed in column 1 of Table 4 to the extent shown in the corresponding entry in column 2;
  • (b) any amount listed in column 1 of Table 5 during the period shown in the corresponding entry in column 2;
  • (c) any income arising from savings certificates, and interest on tax reserve certificates, exempted from tax by section 46 of the Taxes Act (savings certificates and tax reserve certificates);
  • (d) the first £70 in any tax year of interest on deposits with National Savings and Investments, exempted from income tax by section 325 of the Taxes Act (interest on deposits with National Savings and Investments).
  • (e) any payment to a claimant which does not form part of his income for the purposes of income tax by virtue of section 347A(1)(b) of the Taxes Act (general rule about annual payments otherwise subject to tax under Case III of Schedule D) .
1. Description of income to be disregarded 2. Extent of disregard
1.Any interest, dividends, distributions, profits or gains in respect of investments under—(a)a Personal Equity Plan, or(b)an Individual Savings Account,in respect of which the claimant is entitled to relief from income tax under section 333 of the Taxes Act, or which is taxed only in accordance with regulation 23 of the Individual Savings Account Regulations 1998 . The whole amount, unless it is interest under a personal equity plan to which regulation 17A(2) of the Personal Equity Plan Regulations 1989 applies. Interest to which that paragraph applies is disregarded only to the extent that it does not exceed the annual limit of £180 mentioned in that regulation.
2.Any interest or bonus payable on an account which is a tax-exempt special savings account for the purposes of section 326A of the Taxes Act . The whole amount.
3.Any terminal bonus, or interest or other sum, payable under a share option linked scheme which is a certified contractual savings scheme for the purposes of section 326 of the Taxes Act . The whole amount.
4.Any winnings from betting, including pool betting, or lotteries or games with prizes. The whole amount.
5.Any interest on a payment of £10,000 made by the Secretary of State to a person who was held prisoner by the Japanese during the Second World War or to the spouse of such a person, if the payment is held in a distinct account and no payment (other than interest) has been added to the account. The whole amount of the interest.
6.Any interest on a payment made to the claimant by, or on behalf of a government of a country outside the United Kingdom, either from its own resources or with contributions from any other organisation, by way of compensation for a victim of National Socialism if the payment is held in a distinct account and no payment (other than interest) has been added to the account.Here a reference to a victim of National Socialism is a reference to a person who was required to work as a slave or a forced labourer for National Socialists or their sympathisers during the Second World War, or suffered property loss, or suffered injury or is the parent of a child who died, at the hands of National Socialists or their sympathisers during the Second World War. The whole amount of the interest.
7.Any monies paid to the claimant by a bank or building society as compensation in respect of an unclaimed account held by a Holocaust victim and which vested in the Custodian of Enemy Property under section 7 of the Trading with the Enemy Act 1939 and treated as exempt from income tax by Extra Statutory Concession A100. The amount treated as exempt by the Extra Statutory Concession.
8.Any interest, or payment in respect of interest, which is disregarded for income tax purposes by virtue of—(a)section 329 of the Taxes Act (interest or damages for personal injuries), or(b)section 329AA of the Taxes Act (personal injury damages in the form of periodical payments) . The amount so disregarded.
10.Annuity payments under an award of compensation made under the Criminal Injuries Compensation Scheme (within the meaning of section 329AB(2) of the Taxes Act ). The amount of any payment which is treated as not being income of the claimant or his partner by virtue of section 329AA of the Taxes Act.
11.A payment under a life annuity. The amount of interest eligible for relief under section 353 of the Taxes Act by virtue of section 365 of that Act.
12.Any interest, or payment in respect of interest, which is compensation to a person who is under the age of 18 years for the death of one or both of his parents. The whole of the interest or payment.
1. Description of income to be disregarded 2. Applicable period
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1.A trust payment made to—(a)a diagnosed person;(b)the diagnosed person’s partner; or(c)the person who was his partner at the date of his death. The period beginning on the date on which the trust payment is made and ending with the death of the person to whom the payment is made.
2.A trust payment made to a parent of a deceased diagnosed person, or a person acting in the place of his parent. The period beginning on the date on which the trust payment is made and ending two years after that date.
3.The amount of any payment out of the estate of a person to whom a trust payment has been made, which is made to the person who was the diagnosed person’s partner at the date of his death. The period beginning on the date on which the payment is made and ending on the date on which that person dies.
4.The amount of any payment out of the estate of a person to whom a trust payment has been made, which is made to a parent of a deceased diagnosed person, or a person acting in the place of his parent. The period beginning on the date on which the payment is made and ending two years after that date.
  • (3) The amounts disregarded under items 3 and 4 in Table 5 shall not exceed the total amount of any trust payments made to the person to whom the trust payment had been made.
  • (4) In this regulation “diagnosed person” means—
  • (a) a person who has been diagnosed as suffering from, or who after his death has been diagnosed has having suffered from, variant Creutzfeldt-Jakob disease;
  • (b) a person who is suffering or has suffered from haemophilia; or
  • (c) a person in respect of whom a payment has been made from the 1992 Fund, the Eileen Trust or the Independent Living Funds; and

a reference to a person being a member of the diagnosed person’s household at the date of the diagnosed person’s death includes a person who would have been a member of his household but for the diagnosed person being in residential accommodation, a residential care home or a nursing home on that date.

  • (5) In this regulation—
  • “relevant trust” means—a trust established out of funds provided by the Secretary of State in respect of persons who suffered, or who are suffering, from variant Creutzfeldt-Jakob disease for the benefit of persons eligible for payments in accordance with its provisions;the Macfarlane Trusts, orthe 1992 Fund, the Eileen Trust or the Independent Living Funds.
  • “residential accommodation”, “residential care home” and “nursing home” have the meanings given by regulation 2(1) of the Income Support (General) Regulations 1987; and
  • “trust payment” means a payment under a relevant trust.

Expressions which are used in this paragraph which are defined in section 15 of the Taxes Act for the purposes of that section bear the same meaning here as they bear in that section.

This paragraph is subject to the following qualification.

  • (2) In calculating property income there shall be disregarded any profits or gains—
  • (a) treated as nil by paragraph 9 of Schedule 10 to the Finance (No. 2) Act 1992 ; or
  • (b) excluded from profits or gains by paragraph 11 of that Schedule .

This is subject to the following provisions of this regulation.

  • (2) The reference in paragraph (1) to income arising from or possessions or from securities out of the United Kingdom shall be construed in accordance with section 18(3B) of the Taxes Act .
  • (3) In calculating the claimant’s foreign income there shall be disregarded—
  • (a) any payment by way of an annuity or pension payable under any special provision for victims of National Socialist persecution which is made by the law of the Federal Republic of Germany, or any part of it, or of Austria;
  • (b) if the claimant’s foreign income comprises or includes a pension to which section 65(2) or section 196 of the Taxes Act applies, the amount authorised to be deducted by that section; and
  • (c) any amount which would be disregarded for the purposes of income tax by virtue of—
  • (i) Extra Statutory Concession A10 (lumps sums paid by overseas pension schemes);
  • (ii) Extra Statutory Concession A24 (foreign social security payments);
  • (iii) Extra Statutory Concession A30 (interest on damages for personal injuries awarded by a foreign court); or
  • (iv) Extra Statutory Concession A44 (education allowances payable to public officials of overseas territories).

This is subject to the following qualification.

  • (2) Paragraph (1) does not apply in relation to income—
  • (a) under a trust derived from a payment made in consequence of a personal injury;
  • (b) under a personal pension scheme or retirement annuity contract;
  • (c) consisting in a sum to which item 8 of Table 4 in regulation 10 refers (compensation for personal injuries which is administered by the Court); or
  • (d) consisting in a rehabilitation allowance made under section 2 of the Employment Act.

Editorial notes

134

Section 67 is cited because of the meaning ascribed to “prescribed”.

142

Copies of Inland Revenue Extra-Statutory Concessions may be obtained from the Inland Revenue Leaflets and booklets Orderline, PO Box 37, Saint Austell, Cornwall, PL25 5YN. They are also available on the Inland Revenue's website (http://www.inlandrevenue.gov.uk).

148

Section 64 has been amended: the relevant amendment is that made by section 66(1) of the Welfare Reform and Pensions Act 1999 (c.30) (“the Welfare Reform Act”).

150

Section 131 was substituted by paragraph 4 of Schedule 9 to the Local Government Finance Act 1992 (c.14).

151

Section 129 was amended by paragraph 2(h) of Schedule 1 to the Tax Credits Act 1999 (c.10) in consequence of the renaming of disability working allowance by that Act. Disabled person's tax credit is to be abolished by section 1(3)(c), and section 129 is repealed by section 56 of the Act.

153

Section 124(1) was amended by paragraph 30 of Schedule 2 to the Jobseekers Act 1995 (c.18) (“the Jobseekers Act”) and paragraph 28 of Schedule 8 to the Welfare Reform Act. Subsections (2) and (3) of section 124 were repealed by Schedule 3 to the Jobseekers Act.

154

S.I. 1995/310; relevant amending instrument S.I. 2002/491.

155

Subsection (1) was substituted for the previous subsections (1) and (1A) by section 53(1) of the Welfare Reform Act.

156

Sections 68 and 69 were repealed by Part 4 of Schedule 13 to the Welfare Reform Act. However, they continue to have effect in respect of beneficiaries whose period of incapacity for work began before 6th April 2001 by virtue of the saving in article 4 of S.I. 2000/2958.

157

Statutory maternity pay and statutory sick pay, although payable under the Contributions and Benefits Act are taken into account in calculating employment income, whether paid by the employer or the Board.

158

Section 128 was amended by paragraph 2(g) of Schedule 1 to the Tax Credits Act 1999 in consequence of the renaming of family credit by that Act. Working families' tax credit is abolished by section 1(3)(b), and section 128 is repealed by section 56, of the Act from a date to be provided for by commencement order.

159

S.I. 1996/1434, amended by 1997/857, 1999/2561, 2000/694 and 2001/758. The functions of the Secretary of State as respects Wales under this instrument were transferred to the National Assembly by S.I. 1999/672 and, as respects Scotland, to the Scottish Ministers by S.I. 1999/750.

160

S.I. 1998/1870: there are amendments which are not relevant for the purposes of this instrument.

161

S.I. 1989/469: regulation 17A was inserted by S.I. 1991/733 and amended by S.I. 1991/2774, 1995/3287 and 1996/846.

162

1939 c.89. There is an amendment to section 7 which is not relevant for present purposes.

163

Section 714 was amended by Part 5(3) of Schedule 41 to the Finance Act 1996.

164

Section 730 was amended by paragraph 23 of Schedule 7 to the Finance Act 1996.

165

Section 761 was amended by paragraph 11 of Schedule 14 to the Finance Act 1990 (c.29) and paragraph 14(47) of Schedule 10, and Schedule 12, to the Taxation of Chargeable Gains Act 1992.

166

S.R. 1996 No. 198.

167

Regulation 75 was substituted by regulation 8 of S.R. 1997 No. 541 and paragraph (1)(a)(v) inserted by regulation 5(a) of S.R. 2001 No. 151.

168

1944 c.10. Section 15 was amended by section 61 of the Disability Discrimination Act 1995 (c.50).

171

Paragraph (1)(a)(v) was inserted by regulation 5(a) of S.R. 2001 No. 151.

172

1996 c.56. Section 518 was substituted by section 129 of the Schools Standards and Framework Act 1998 (c.31).

176

1988 c.1. Section 347B was inserted by section 36 of the Finance Act 1988 (c.39) and amended (for the tax year beginning on 6th April 1990 and subsequent tax years) by paragraph 13 of Schedule 3, further amended by Part 8 of Schedule 14 to the Finance Act 1988, section 5 of and paragraph 6 of Schedule 4 to the Contracts (Applicable Law) Act 1990 (c.36), sections 61 and 62 of the Finance (No. 2) Act 1992 (c.48), section 79 to and Schedule 26 Part 5(1) to the Finance Act 1994 (c.9), paragraphs 11 and 15 of Schedule 2 to the Jobseekers Act 1995 (c.18), section 27 to and Schedule 27 Part 3(1) of the Finance Act 1998 (c.36) and sections 36 and 139 of and Schedule 20 Part 3(6) to the Finance Act 1999 (c.16).

180

Section 2 was substituted by section 25 of the Employment Act 1988 (c.19) and amended by section 29(4) of and Schedule 7 Part 1 to the Employment Act 1989 (c.38) and section 47(1) of the Trade Union Reform and Employment Rights Act 1993 (c.19).

183

Regulation 17A(7) was amended by regulation 2(4) of S.I. 1998/2874 and regulation 2 of S.I. 1999/3083.

184

1948 c.29. Section 26(3A) was inserted by section 42(4) of the National Health Service and Community Care Act 1990 (c.19).

185

S.I. 1972/1265 (N.I. 14). Article 36 was substituted by Article 25 of S.I. 1991/194 (N.I. 1) and amended by paragraph 2(4) and (5) of Schedule 1 to S.I. 1992/3204 (N.I. 20).

186

1968 c.34 (N.I.). Section 137 was amended by Schedule 18 to the Health and Personal Social Services (Northern Ireland) Order 1972 and Article 185(1) of, and paragraph 42 of Schedule 9 to, the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (N.I. 2)).

195

Words in reg. 7 Table 3 Item 21A substituted (14.11.2010) by The Tax Credits (Miscellaneous Amendments) (No. 2) Regulations 2010 (S.I. 2010/2494), regs. 1, 6

197

Words in reg. 10 Table 4 Item 9 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 14(4)(e)(i)

198

Words in reg. 2(2) substituted (1.10.2007) by The Independent Living Fund (2006) Order 2007 (S.I. 2007/2538), arts. 1, 7(3)

199

Reg. 4(1)(ia) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 3(a)(iii)

208

Reg. 11(2A) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 5

210

Words in reg. 7 Table 3 Item 24 substituted (26.11.2003) by The Tax Credits (Miscellaneous Amendments No.2) Regulations 2003 (S.I. 2003/2815), regs. 1, 6(2)

214

Words in reg. 19 Table 6 Item 3 inserted (6.4.2010) by The Tax Credits (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/751), regs. 1, 5(2)(a)

223

Words in reg. 7 Table 3 Item 18 inserted (6.4.2014) by The Tax Credits (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/658), regs. 1, 4(6)

229

Words in reg. 10 Table 4 Item 12 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 14(4)(f)(i)

232

Words in reg. 10 Table 4 Item 7 substituted (6.4.2007) by The Tax Credits (Miscellaneous Amendments) Regulations 2007 (S.I. 2007/824), regs. 1, 12(2)

250

Words in reg. 2(2) inserted (1.10.2007) by The Independent Living Fund (2006) Order 2007 (S.I. 2007/2538), arts. 1, 7(2)

251

Reg. 16(3)(aa) inserted (coming into force in accordance with art. 1(2)(b) of the amending S.I.) by The Pensions Act 2014 (Consequential, Supplementary and Incidental Amendments) Order 2015 (S.I. 2015/1985), arts. 1(2)(b), 25(a)

254

Words in reg. 19 Table 7 Item 2 inserted (6.4.2010) by The Tax Credits (Miscellaneous Amendments) Regulations 2010 (S.I. 2010/751), regs. 1, 5(3)(c)

256

Words in reg. 10 Table 4 Item 8 omitted (6.4.2006) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 14(4)(d)(i)

258

Reg. 3(4)(c) and preceding word omitted (6.4.2014) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2014 (S.I. 2014/658), regs. 1, 4(3)

259

Word in reg. 19 Table 7 Item 2 omitted (5.10.2009) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2009 (S.I. 2009/697), regs. 1(b), 8(a)

262

Reg. 10 Table 4 Item 15 inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Tax Credits (Definition and Calculation of Income) (Amendment) Regulations 2017 (S.I. 2017/396), regs. 1(1), 4

263

Words in reg. 19 Table 6 Item 11 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 19(2)(b)

264

Reg. 10 Table 4 Item 2 omitted (6.4.2006) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 14(4)(b)

277

Word in reg. 19 Table 7 Item 2 omitted (21.11.2009) by virtue of The Tax Credits (Miscellaneous Amendments) (No. 2) Regulations 2009 (S.I. 2009/2887), regs. 1(a), 7(3)(a)

281

Reg. 14(2)(b)(c) substituted for reg. 14(2)(b) (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 17(3)

284

Reg. 19 Table 6 Item 7 omitted (6.4.2004) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2004 (S.I. 2004/762), regs. 1(1), 16(2)(b)

292

Reg. 5(1)(m) and preceding word omitted (6.4.2008) by virtue of The Tax Credits (Miscellaneous Amendments) Regulations 2008 (S.I. 2008/604), regs. 1(b), 2(3)

296

Reg. 19 Table 6 Item 11(a) substituted (26.11.2003) by The Tax Credits (Miscellaneous Amendments No.2) Regulations 2003 (S.I. 2003/2815), regs. 1, 11(3)

300

Words in reg. 10 Table 4 Item 1 substituted (6.4.2006) by The Tax Credits (Miscellaneous Amendments) Regulations 2006 (S.I. 2006/766), regs. 1, 14(4)(a)

301

Word in reg. 7 Table 3 Item 21A omitted (6.4.2016) by virtue of The Tax Credits and Child Benefit (Miscellaneous Amendments) Regulations 2016 (S.I. 2016/360), regs. 1, 3(2)

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