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The Council Tax Reduction Schemes (Default Scheme) (Wales) Regulations 2013

Type Welsh-Statutory-Instrument

Publication 2013-11-27

Last updated 2026-01-26

State In force

Jurisdiction Wales

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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an award of universal credit the authority must, subject to the following provisions of this paragraph, use the calculation or estimate of the income of the applicant, or the applicant and the applicant’s partner jointly (as the case may be), made by the Secretary of State for the purpose of determining the award of universal credit.

(2) The authority must adjust the amount of the income referred to in sub-paragraph (1) by multiplying the amount by 12 and dividing the product by 52.

(3) The authority must only adjust the amount of the income as adjusted in accordance with sub-paragraph (2) so far as necessary to take into account—

(a) the amount of the award of universal credit, determined in accordance with sub-paragraph (4);

(b) paragraph 31 (income and capital of non-dependant to be treated as applicant’s), if the authority determines that the provision applies in the applicant’s case;

(c) such further reduction (if any) as the authority thinks fit under section 13A(1)(c) of the 1992 Act (power of billing authority to reduce amount of council tax payable).

(4) The amount for the award of universal credit to be taken into account for the purposes of sub-paragraph (3)(a) is to be determined by multiplying the amount of the award of universal credit by 12 and dividing the product by 52.

(5) Paragraph 31 (income and capital of non-dependant to be treated as applicant’s) applies for the purpose of determining any adjustments which fall to be made to the figure for income under sub-paragraph (3).

(6) In determining the capital of an applicant—

(a) who has, or

(b) who (jointly with a partner) has,

an award of universal credit, the authority must use the calculation or estimate of the capital of the applicant, or the applicant and the applicant’s partner jointly (as the case may be), made by the Secretary of State for the purpose of determining the award of universal credit¹¹².

CHAPTER 4 — Income: other pensioners

Calculation of income and capital where state pension credit is not payable: pensioners

35

Where neither paragraph 32 (pensioner in receipt of guarantee credit) nor 33 (applicant in receipt of savings credit only: pensioners) applies in the applicant’s case, the applicant’s income and capital is to be calculated or estimated in accordance with paragraphs 36 to 43, and 54 to 59 (calculations of income) and Chapter 7 of this Part (calculation of capital).

Meaning of “income”: pensioners

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(1) For the purposes of classes A and B in this scheme, “income” (“incwm”) means income of any of the following descriptions—

(a) earnings;

(b) working tax credit;

(d) income from annuity contracts (other than retirement pension income);

(e) a war disablement pension or war widow’s or widower’s pension;

(f) a foreign war disablement pension or war widow’s or widower’s pension;

(g) a guaranteed income payment;

(h) a payment made under article 29(1)(c) of the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011¹¹³, in any case where article 31(2)(c) applies;

(i) income from capital other than capital disregarded under Part 1 of Schedule 8;

(j) social security benefits, other than retirement pension income or any of the following benefits—

(i) disability living allowance;

(ii) personal independence payment;

(iii) an AFIP;

(iv) attendance allowance payable under section 64 of the SSCBA (entitlement to attendance allowance);

(v) an increase of disablement pension under section 104 (increase for constant attendance) or 105 of the SSCBA (increase for exceptionally severe disablement);

(vi) child benefit;

(vii) any guardian’s allowance payable under section 77 of the SSCBA (guardian’s allowance);

(viii) any increase for a dependant, other than the applicant’s partner, payable in accordance with Part 4 of the SSCBA (increases for dependants);

(ix) any—

(aa) social fund payment made under Part 8 of the SSCBA (the social fund); or

(bb) occasional assistance;

(x) Christmas bonus payable under Part 10 of the SSCBA (Christmas bonus for pensioners);

(xi) housing benefit;

(xii) council tax benefit;

(xiii) bereavement support payment under section 30 of the Pensions Act 2014;

(xiv) statutory sick pay;

(xv) statutory maternity pay;

(xvi) ... statutory paternity pay payable under Part 12ZA of the SSCBA (statutory paternity pay)¹¹⁴;

(xvia) statutory shared parental pay payable under Part 12ZC of the SSCBA;

(xvib) statutory parental bereavement pay under Part 12ZD of SSCBA;

(xvic) statutory neonatal care pay;

(xvii) additional statutory paternity pay payable under Part 12ZA of the SSCBA;

(xviii) statutory adoption pay payable under Part 12ZB of the SSCBA (statutory adoption pay);

(xix) any benefit similar to those mentioned in the preceding provisions of this paragraph payable under legislation having effect in Northern Ireland;

(xx) universal credit;

(k) all foreign social security benefits which are similar to the social security benefits prescribed above;

(l) a payment made—

(i) under article 30 of the Naval, Military and Air Forces Etc (Disablement and Death) Service Pensions Order 2006¹¹⁵, in any case where article 30(1)(b) applies; or

(ii) under article 12(8) of that Order (unemployability allowances: children who have reached the child’s age limit), in any case where sub-paragraph (b) of article 12(8) applies;

(m) a pension paid by a government to victims of National Socialist persecution;

(n) payments under a scheme made under the Pneumoconiosis etc (Worker’s Compensation) Act 1979¹¹⁶;

(o) payments made towards the maintenance of the applicant by the applicant’s spouse, civil partner, former spouse or former civil partner or towards the maintenance of the applicant’s partner by that person’s spouse, civil partner, former spouse or former civil partner, including payments made—

(i) under a court order;

(ii) under an agreement for maintenance; or

(iii) voluntarily;

(p) payments due from any person in respect of board and lodging accommodation provided by the applicant;

(q) royalties or other sums paid as a consideration for the use of, or the right to use, any copyright, design, patent or trade mark;

(r) any payment in respect of any—

(i) book registered under the Public Lending Right Scheme 1982¹¹⁷; or

(ii) work made under any international public lending right scheme that is analogous to the Public Lending Right Scheme 1982;

(s) any payment, other than a payment ordered by a court or made in settlement of a claim, made by or on behalf of a former employer of a person on account of the early retirement of that person on grounds of ill-health or disability;

(t) any sum payable by way of pension out of money provided under—

(i) the Civil List Act 1837¹¹⁸;

(ii) the Civil List Act 1937¹¹⁹;

(iii) the Civil List Act 1952¹²⁰;

(iv) the Civil List Act 1972¹²¹; or

(v) the Civil List Act 1975¹²²;

(u) any income in lieu of that specified in paragraphs (a) to (r);

(v) any payment of rent made to an applicant who—

(i) owns the freehold or leasehold interest in any property or is a tenant of any property;

(ii) occupies part of the property; and

(iii) has an agreement with another person allowing that person to occupy that property on payment of rent;

(w) any payment made at regular intervals under an equity release scheme;

(x) PPF periodic payments within the meaning of section 17(1) of the State Pension Credit Act 2002.

(2) Where the payment of any social security benefit referred to in sub-paragraph (1) is subject to any deduction (other than an adjustment specified in sub-paragraph (4)) the amount to be taken into account under sub-paragraph (1) is to be the amount before the deduction is made.

(3) Where an award of any working tax credit or child tax credit is subject to a deduction by way of recovery of an overpayment of working tax credit or child tax credit which arose in a previous tax year the amount to be taken into account under sub-paragraph (1) is to be the amount of working tax credit or child tax credit awarded less the amount of that deduction.

(4) The adjustments specified in this sub-paragraph are those made in accordance with—

(a) the Social Security (Overlapping Benefits) Regulations 1979¹²³;

(b) the Social Security (Hospital In-Patients) Regulations 2005¹²⁴;

(c) section 30DD or section 30E of the SSCBA¹²⁵ (reductions in incapacity benefit in respect of pensions and councillor’s allowances);

(d) section 3 of the Welfare Reform Act 2007 (deductions from contributory employment and support allowance in respect of pensions and councillor’s allowances) and regulations made under it.

(5) In sub-paragraph (1)(w), “equity release scheme” (“cynllun rhyddhau ecwiti”) means a loan—

(a) made between a person (“the lender”) and the applicant;

(b) by means of which a sum of money is advanced by the lender to the applicant by way of payments at regular intervals; and

(c) which is secured on a dwelling in which the applicant owns an estate or interest and which the applicant occupies as the applicant’s home.

Calculation of weekly income: pensioners

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(1) Except in a case where sub-paragraph (2), (3A), (4A) or (5) applies, for the purposes of calculating the weekly income of an applicant who is a pensioner, where the period in respect of which a payment is made—

(a) does not exceed a week, the whole of that payment is to be included in the applicant’s weekly income;

(b) exceeds a week, the amount to be included in the applicant’s weekly income is to 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 three 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 of days in the period in respect of which it is made.

(2) Sub-paragraph (3) applies where—

(a) the applicant’s regular pattern of work is such that the applicant does not work the same hours every week; or

(b) the amount of the applicant’s income fluctuates and has changed more than once.

(3) The weekly amount of that applicant’s income is to be determined—

(a) if, in a case to which sub-paragraph (2)(a) applies, there is a recognised cycle of work, by reference to the applicant’s average weekly income over the period of the complete cycle (including, where the cycle involves periods in which the applicant does no work, those periods but disregarding any other absences); or

(b) in any other case, on the basis of—

(i) the last two payments if those payments are one month or more apart;

(ii) the last four payments if the last two payments are less than one month apart; or

(iii) calculating or estimating such other payments as may, in the particular circumstances of the case, enable the applicant’s average weekly income to be determined more accurately.

(3A) Income calculated pursuant to sub-paragraphs (2) and (3) must be taken into account—

(a) in the case of an application, on the date on which the application was made or treated as made, and the first day of each reduction week thereafter, regardless of when those earnings were actually received;

(b) in the case of an application or a reduction under a scheme where the applicant commences employment, the day on which the applicant commences that employment, and the first day of each reduction week thereafter, regardless of when those earnings were actually received; or

(c) in the case of an application or a reduction under a scheme where the applicant’s average weekly earnings from employment change, the day on which the applicant’s earnings from employment change, so as to require recalculation under this paragraph, and the first day of each reduction week thereafter, regardless of when those earnings were actually received.

(4) For the purposes of sub-paragraph (3)(b) the last payments are the last payments before the date the application was made or treated as made.

(4A) An applicant’s earnings from employment as an employed earner not calculated pursuant to sub-paragraphs (2) and (3) must be taken into account—

(a) in the case of an application, on the date on which the application was made or treated as made, and the first day of each reduction week thereafter, regardless of when those earnings were actually received;

(b) in the case of an application or a reduction under a scheme where the applicant commences employment, the day on which the applicant commences that employment, and the first day of each reduction week thereafter, regardless of when those earnings were actually received; or

(c) in the case of an application or a reduction under a scheme where the applicant’s average weekly earnings from employment change, the day on which the applicant’s earnings from employment change and the first day of each reduction week thereafter, regardless of when those earnings were actually received.

(5) If the applicant is entitled to receive a payment to which sub-paragraph (6) applies, the amount of that payment is to be treated as if made in respect of a period of a year.

(6) This sub-paragraph applies to—

(a) royalties or other sums paid as a consideration for the use of, or the right to use, any copyright, design, patent or trade mark;

(b) any payment in respect of any—

(i) book registered under the Public Lending Right Scheme 1982; or

(ii) work made under any international public lending right scheme that is analogous to the Public Lending Right Scheme 1982; and

(7) The period under which any benefit under the benefit Acts is to be taken into account is to be the period in respect of which that benefit is payable.

(8) Where payments are made in a currency other than Sterling, the value of the payment is to be determined by taking the Sterling equivalent on the date the payment is made.

(9) The sums specified in Schedule 4 are to be disregarded in calculating—

(a) the applicant’s earnings; and

(b) any amount to which sub-paragraph (6) applies where the applicant is the first owner of the copyright, design, patent or trademark, or an original contributor to the book or work referred to in sub-paragraph (6)(b).

(10) For the purposes of sub-paragraph (9)(b), and for that purpose only, the amounts specified in sub-paragraph (6) are to be treated as though they were earnings.

(11) Income specified in Schedule 5 is to be disregarded in the calculation of the applicant’s income.

(12) Schedule 8 (capital disregards: pensioners) has effect so that—

(a) the capital specified in Part 1 is disregarded for the purpose of determining an applicant’s income; and

(b) the capital specified in Part 2 is disregarded for the purpose of determining an applicant’s income under paragraph 68 (calculation of tariff income from capital: pensioners).

(13) In the case of any income taken into account for the purpose of calculating a person’s income any amount payable by way of tax is disregarded.

Earnings of employed earners: pensioners

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

(a) any bonus or commission;

(b) any payment in lieu of remuneration except any periodic sum paid to an applicant on account of the termination of that applicant’s employment by reason of redundancy;

(d) any holiday pay;

(e) any payment by way of a retainer;

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

(i) travelling expenses incurred by the applicant between the applicant’s home and place of employment;

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

(g) 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 Part 5 of Schedule 3 to the Social Security (Contributions) Regulations 2001¹²⁶;

(h) statutory sick pay and statutory maternity pay payable by the employer under the SSCBA;

(i) statutory paternity pay payable under Part 12ZA of the SSCBA;

(j) statutory adoption pay payable under Part 12ZB of the SSCBA;

(ja) statutory shared parental pay payable under Part 12ZC of the SSCBA;

(jb) statutory parental bereavement pay under Part 12ZD of SSCBA;

(jc) statutory neonatal care pay;

(k) any sums payable under a contract of service—

(i) for incapacity for work due to sickness or injury; or

(ii) by reason of pregnancy or confinement.

(2) Earnings does not include—

(a) subject to sub-paragraph (3), 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 lump sum payment made under the Iron and Steel Re-adaptation Benefits Scheme;

(e) any payment of compensation made pursuant to an award by an employment tribunal established under the Employment Tribunals Act 1996¹²⁷ in respect of unfair dismissal or unlawful discrimination;

(f) any payment in respect of expenses arising out of the applicant’s participation in a service user group.

(3) Sub-paragraph (2)(a) does not apply in respect of any non-cash voucher referred to in sub-paragraph (1)(g).

Calculation of net earnings of employed earners: pensioners

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(1) For the purposes of paragraph 54 (calculation of income on a weekly basis), the earnings of an applicant derived or likely to be derived from employment as an employed earner to be taken into account must, subject to paragraph 37(4) (calculation of weekly income: pensioners) and Schedule 4, be that applicant’s net earnings.

(2) For the purposes of sub-paragraph (1) net earnings must, except where sub-paragraph (5) applies, be calculated by taking into account the gross earnings of the applicant from that employment over the assessment period, less—

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

(i) income tax;

(ii) primary Class 1 contributions under the SSCBA;

(b) one-half of any sum paid by the applicant by way of a contribution towards an occupational pension scheme;

(c) one-half of the amount calculated in accordance with sub-paragraph (4) in respect of any qualifying contribution payable by the applicant; and

(d) where those earnings include a payment which is payable under any enactment having effect in Northern Ireland and which corresponds to statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay, , statutory shared parental pay , statutory parental bereavement pay , statutory neonatal care pay or statutory adoption pay, any amount deducted from those earnings by way of any contributions which correspond to primary Class 1 contributions under the SSCBA.

(3) In this paragraph “qualifying contribution” (“cyfraniad cymwys”)means any sum which is payable periodically as a contribution towards a personal pension scheme.

(4) The amount in respect of any qualifying contribution is to be calculated by multiplying the daily amount of the qualifying contribution by the number equal to the number of days in the assessment period; and for the purposes of this paragraph the daily amount of the qualifying contribution is to be determined—

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

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

(5) Where the earnings of an applicant are determined under paragraph 37(2)(b) (calculation of weekly income: pensioners) that applicant’s net earnings are to be calculated by taking into account those earnings over the assessment period, less—

(a) an amount in respect of income tax equivalent to an amount calculated by applying to those earnings the basic rate of tax applicable to the assessment period less only the personal reliefs to which the applicant is entitled under Chapters 2, 3 and 3A of Part 3 of the Income Tax Act 2007 ... as is appropriate to the applicant’s circumstances but, if the assessment period is less than a year, the earnings to which the basic rate of tax is to be applied and the amount of the personal reliefs deductible under this sub-paragraph is to be calculated on a pro rata basis;

(b) an amount equivalent to the amount of the primary Class 1 contributions that would be payable by the applicant under the SSCBA in respect of those earnings if such contributions were payable; and

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

Calculation of earnings of self-employed earners: pensioners

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(1) Where the earnings of an applicant who is a pensioner consist of earnings from employment as a self-employed earner, the weekly amount of that applicant’s earnings is to be determined by reference to the applicant’s average weekly earnings from that employment—

(a) over a period of one year; or

(b) where the applicant has recently become engaged in that employment or there has been a change which is likely to affect the normal pattern of business, over such other period (“computation period”) as may, in the particular case, enable the weekly amount of the applicant’s earnings to be determined more accurately.

(2) For the purposes of determining the weekly amount of earnings of an applicant to whom sub-paragraph (1)(b) applies, the applicant’s earnings over the computation period are to be divided by the number equal to the number of days in that period and the product multiplied by 7.

(3) The period over which the weekly amount of an applicant’s earnings is calculated in accordance with this paragraph is to be the applicant’s assessment period.

Earnings of self-employed earners: pensioners

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(1) Subject to sub-paragraph (2), “earnings” (“enillion”), in the case of employment as a self-employed earner who is a pensioner, means the gross income of the employment.

(2) “Earnings” in the case of employment as a self-employed earner does not include—

(a) where an applicant occupies a dwelling as the applicant’s home and the applicant provides in that dwelling board and lodging accommodation for which payment is made, those payments;

(b) any payment made by a local authority to an applicant—

(i) with whom a person is accommodated by virtue of arrangements made under section 22C or 23(2)(a) of the Children Act 1989¹²⁸ (provision of accommodation and maintenance for a child whom they are looking after) or, as the case may be, section 26(1) of the Children (Scotland) Act 1995¹²⁹ , or section 81 of the Social Services and Well-being (Wales) Act 2014; or

(ii) with whom a local authority fosters a child under the Looked After Children (Scotland) Regulations 2009¹³⁰ or who is a kinship carer under those Regulations;

(c) any payment made by a voluntary organisation in accordance with section 59(1)(a) of the Children Act 1989 (provision of accommodation by voluntary organisations);

(d) any payment made to the applicant or the applicant’s partner for a person (“the person concerned”) who is not normally a member of the applicant’s household but is temporarily in the applicant’s care, by—

(i) a local authority but excluding payments of housing benefit made in respect of the person concerned;

(ii) a voluntary organisation;

(iii) the person concerned pursuant to section 26(3A) of the National Assistance Act 1948¹³¹;

(iv) NHS England or an integrated care board established under Chapter A3 of Part 2 of the National Health Service Act 2006¹³²; ...

(v) a Local Health Board established under section 11 of the National Health Service (Wales) Act 2006¹³³;

(vi) the person concerned where the payment is for the provision of accommodation to meet that person’s needs for care and support arranged pursuant to section 35 or 36 of the Social Services and Well-being (Wales) Act 2014; or

(vii) the person concerned where the payment is for the provision of accommodation to meet that person’s needs for care and support arranged pursuant to section 18 or 19 of the Care Act 2014;

(e) any sports award.

Notional income: pensioners

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(1) An applicant who is a pensioner is to be treated as possessing—

(a) subject to sub-paragraph (2), the amount of any retirement pension income—

(i) for which no claim has been made; and

(ii) to which that applicant might expect to be entitled if a claim for it were made;

(b) income from an occupational pension scheme which the applicant elected to defer.

(2) Sub-paragraph (1)(a) does not apply to the following where entitlement has been deferred—

(a) a Category A or Category B retirement pension payable under sections 43 to 55 of the SSCBA;

(b) a shared additional pension payable under sections 55A and 55AA of the SSCBA;

(d) a state pension under Part 1 of the Pensions Act 2014.

(3) For the purposes of sub-paragraph (2), entitlement has been deferred—

(a) in the case of a Category A or Category B pension, in the circumstances specified in section 55(3) of the SSCBA;

(b) in the case of a shared additional pension, in the circumstances specified in section 55C(3) of the SSCBA; ...

(c) in the case of graduated retirement benefit, in the circumstances specified in section 36(4) and (4A) of the National Insurance Act 1965 ; and

(d) in the case of a state pension under Part 1 of the Pensions Act 2014, in the circumstances specified in section 17(7) and (8) of that Act.

(4) This sub-paragraph applies where a person who has attained the qualifying age for state pension credit—

(a) is entitled to money purchase benefits under an occupational pension scheme or a personal pension scheme;

(b) fails to purchase an annuity with the funds available in that scheme; and

(i) defers in whole or in part the payment of any income which would have been payable to that person by that person’s pension fund holder, or

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

(iii) is a person to whom income withdrawal is not available under that scheme.

(5) Where sub-paragraph (4) applies, the amount of any income foregone is to be treated as possessed by that person, but only from the date on which it could be expected to be acquired were an application for it to be made.

(6) The amount of any income foregone in a case where sub-paragraph (4)(c)(i) or (ii) applies is to be the maximum amount of income which may be withdrawn from the fund and must be determined by the authority, taking account of information provided by the pension fund holder.

(7) The amount of any income foregone in a case where sub-paragraph (4)(c)(iii) applies is to be the income that the applicant could have received without purchasing an annuity had the funds held under the relevant scheme been held under a personal pension scheme or occupational pension scheme where income withdrawal was available and is to be determined in the manner specified in sub-paragraph (6).

(8) In sub-paragraph (4), “money purchase benefits” (“buddion pryniant ariannol”) has the same meaning as in the Pension Schemes Act 1993.

(9) Subject to sub-paragraphs (10) , (11A), (11B) and (12), a person is to be treated as possessing income of which that person has deprived himself or herself for the purpose of securing entitlement to a reduction under this scheme or increasing the amount of the reduction.

(10) Sub-paragraph (9) does not apply in respect of the amount of an increase of pension or benefit where a person, having made an election in favour of that increase of pension or benefit under Schedule 5 or 5A to the SSCBA or under Schedule 1 to the Social Security (Graduated Retirement Benefit) Regulations 2005¹³⁵, changes that election in accordance with regulations made under Schedule 5 or 5A to that Act in favour of a lump sum.

(11) In sub-paragraph (10), “lump sum” (“cyfandaliad”) means a lump sum under Schedule 5 or 5A to the SSCBA or under Schedule 1 to the Social Security (Graduated Retirement Benefit) Regulations 2005.

(11A) Sub-paragraph (9) does not apply in respect of the amount of an increase of pension where a person, having made an election in favour of that increase in pension under section 8(2) of the Pensions Act 2014, changes that election in accordance with regulations made under section 8(7) of that Act in favour of a lump sum.

(11B) Sub-paragraph (9) does not apply in respect of the amount of an increase of pension where a person, having made an election in favour of that increase in pension in accordance with regulations made under section 10 of the Pensions Act 2014, which include provision corresponding or similar to provision made by section 8(2) of that Act, changes that election in favour of a lump sum, in accordance with regulations made under section 10 of that Act which include provision corresponding or similar to provision made by regulations made under section 8(7).

(11C) In sub-paragraph (11A), “lump sum” (“cyfandaliad”) means a lump sum under section 8 of the Pensions Act 2014.

(11D) In sub-paragraph (11B), “lump sum” (“cyfandaliad”) means a lump sum under section 10 of the Pensions Act 2014.

(12) Sub-paragraph (9) does not apply in respect of any amount of income other than earnings, or earnings of an employed earner, arising out of the applicant’s participation in a service user group.

(13) Where an applicant is in receipt of any benefit under the benefit Acts and the rate of that benefit is altered with effect from a date on or after 1 April in any year but not more than 14 days thereafter, the authority must treat the applicant as possessing such benefit at the altered rate from either 1 April or the first Monday in April in that year, whichever date the authority selects to apply, to the date on which the altered rate is to take effect.

(14) In the case of an applicant who has, or whose partner has, an award of state pension credit comprising only the savings credit, where the authority treats the applicant as possessing any benefit at the altered rate in accordance with sub-paragraph (13), the authority must—

(a) determine the income and capital of that applicant in accordance with paragraph 33(1) (calculation of pensioner’s income in savings credit only cases) where the calculation or estimate of that income and capital is altered with effect from a date on or after 1 April in any year but not more than 14 days thereafter; and

(b) treat that applicant as possessing such income and capital at the altered rate by reference to the date selected by the authority to apply in its area, for the purposes of establishing the period referred to in sub-paragraph (13).

(15) For the purposes of sub-paragraph (9), a person is not to be regarded as depriving himself or herself of income where—

(a) that person’s rights to benefits under a registered pension scheme are extinguished and in consequence of this that person receives a payment from the scheme; and

(b) that payment is a trivial commutation lump sum within the meaning given by paragraph 7 of Schedule 29 to the Finance Act 2004.

(16) In sub-paragraph (15), “registered pension scheme” (“cynllun pensiwn cofrestredig”) has the meaning given in section 150(2) of the Finance Act 2004.

Income paid to third parties: pensioners

43

(1) Any payment of income, other than a payment specified in sub-paragraph (2) or (3), to a third party in respect of the applicant is to be treated as possessed by the applicant.

(2) Sub-paragraph (1) does not apply in respect of a payment of income made under an occupational pension scheme, in respect of a pension or other periodical payment made under a personal pension scheme or a payment made by the Board of the Pension Protection Fund where—

(a) a bankruptcy order has been made in respect of the person in respect of whom the payment has been made or, in Scotland, the estate of that person is subject to sequestration or a judicial factor has been appointed on that person’s estate under section 41 of the Solicitors (Scotland) Act 1980¹³⁶;

(b) the payment is made to the trustee in bankruptcy or any other person acting on behalf of the creditors; and

(c) the person referred to in paragraph (a) and that person’s partner does not possess, or is not treated as possessing, any other income apart from that payment.

(3) Sub-paragraph (1) does not apply in respect of any payment of income other than earnings, or earnings derived from employment as an employed earner, arising out of the applicant’s participation in a service user group.

CHAPTER 5 — Income: persons who are not pensioners

Average weekly earnings of employed earners: persons who are not pensioners

44

(1) Where the income of an applicant who is not a pensioner consists of earnings from employment as an employed earner the applicant’s average weekly earnings must be estimated by reference to the applicant’s earnings from that employment—

(a) over a period immediately preceding the reduction week in which the application is made or treated as made and being a period of—

(i) 5 weeks, if the applicant is paid weekly; or

(ii) 2 months, if the applicant is paid monthly; or

(b) whether or not paragraph (a)(i) or (ii) applies, where an applicant’s earnings fluctuate, over such other period preceding the reduction week in which the application is made or treated as made as may, in any particular case, enable the applicant’s average weekly earnings to be estimated more accurately.

(2) Where the applicant has been in employment for less than the period specified in sub-paragraph (1)(a)(i) or (ii)—

(a) if the applicant has received any earnings or expects to receive an amount of earnings for the period that the applicant has been in that employment and those earnings are likely to represent the applicant’s average weekly earnings from that employment the applicant’s average weekly earnings must be estimated by reference to those earnings;

(b) in any other case, the authority must estimate the applicant’s average weekly earnings¹³⁷.

(3) Where the amount of an applicant’s earnings changes the authority must estimate the applicant’s average weekly earnings by reference to the applicant’s likely earnings from the employment over such period as is appropriate in order that the applicant’s average weekly earnings may be estimated accurately but the length of the period must not in any case exceed 52 weeks.

(4) For the purposes of this paragraph the applicant’s earnings are to be calculated in accordance with paragraphs 48 and 49 (earnings of employed earners: persons who are not pensioners).

Average weekly earnings of self-employed earners: persons who are not pensioners

45

(1) Where the income of an applicant who is not a pensioner consists of earnings from employment as a self-employed earner that applicant’s average weekly earnings must be estimated by reference to that applicant’s earnings from that employment over such period as is appropriate in order that that applicant’s average weekly earnings may be estimated accurately but the length of the period must not in any case exceed 52 weeks.

(2) For the purposes of this paragraph the applicant’s earnings must be calculated in accordance with paragraphs 50, 58 and 59 (earnings and net profit of self-employed earners).

Average weekly income other than earnings: persons who are not pensioners

46

(1) The income of an applicant who is not a pensioner which does not consist of earnings must, except where sub-paragraph (2) applies, be estimated over such period as is appropriate in order that that applicant’s average weekly income may be estimated accurately but the length of the period must not in any case exceed 52 weeks; and nothing in this paragraph authorises an authority to disregard any such income other than that specified in Schedule 7 (sums disregarded in the calculation of income other than earnings: persons who are not pensioners).

(2) The period over which any benefit under the benefit Acts is to be taken into account is to be the period in respect of which that benefit is payable.

(3) For the purposes of this paragraph income other than earnings is to be calculated in accordance with paragraph 51 (calculation of income other than earnings: persons who are not pensioners).

Calculation of weekly income of employed earners: persons who are not pensioners

47

(1) For the purposes of paragraphs 44 (average weekly earnings of employed earners), 46 (average weekly income other than earnings) and 56 (calculation of average weekly income from tax credits), where the period in respect of which a payment is made—

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

(b) exceeds a week, the weekly amount is to 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 any other case, by dividing the amount of the payment by the number equal to the number of days in the period to which it relates and multiplying the quotient by 7.

(2) For the purposes of paragraph 45 (average weekly earnings of self-employed earners) the weekly amount of earnings of an applicant is to be determined by dividing the applicant’s earnings over the assessment period by the number equal to the number of days in that period and multiplying the quotient by 7.

Earnings of employed earners: persons who are not pensioners

48

(1) Subject to sub-paragraph (2), “earnings” (“enillion”), in the case of employment as an employed earner of a person who is not a pensioner, means any remuneration or profit derived from that employment and includes—

(a) any bonus or commission;

(b) any payment in lieu of remuneration except any periodic sum paid to an applicant on account of the termination of the applicant’s employment by reason of redundancy;

(c) any payment in lieu of notice or any lump sum payment intended as compensation for the loss of employment but only in so far as it represents loss of income;

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

(e) any payment by way of a retainer;

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

(i) travelling expenses incurred by the applicant between the applicant’s home and place of employment;

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

(g) any award of compensation made under section 112(4) or 117(3)(a) of the Employment Rights Act 1996¹³⁸ (remedies and compensation for unfair dismissal);

(h) any payment or remuneration made under section 28, 34, 64, 68 or 70 of the Employment Rights Act 1996 (right to guarantee payments, remuneration on suspension on medical or maternity grounds, complaints to employment tribunals);

(i) any such sum as is referred to in section 112 of the SSCBA (certain sums to be earnings for social security purposes);

(j) any statutory sick pay, statutory maternity pay, statutory paternity pay , statutory shared parental pay , statutory parental bereavement pay , statutory neonatal care pay or statutory adoption pay, or a corresponding payment under any enactment having effect in Northern Ireland;

(k) any remuneration paid by or on behalf of an employer to the applicant who for the time being is on maternity leave, paternity leave , shared parental leave , parental bereavement leave , neonatal care leave or adoption leave or is absent from work because the applicant is ill;

(l) 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 Part 5 of Schedule 3 to the Social Security (Contributions) Regulations 2001¹³⁹.

(2) Earnings does not include—

(a) subject to sub-paragraph (3), 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 payment in respect of expenses arising out of the applicant’s participation in a service user group.

(3) Sub-paragraph (2)(a) does not apply in respect of any non-cash voucher referred to in sub-paragraph (1)(l).

Calculation of net earnings of employed earners: persons who are not pensioners

49

(1) For the purposes of paragraph 44 (average weekly earnings of employed earners: persons who are not pensioners), the earnings of an applicant derived or likely to be derived from employment as an employed earner to be taken into account must, subject to sub-paragraph (2), be the applicant’s net earnings.

(2) There is to be disregarded from an applicant’s net earnings, any sum, where applicable, specified in paragraphs 1 to 18 of Schedule 6 (sums disregarded in the calculation of earnings: persons who are not pensioners).

(3) For the purposes of sub-paragraph (1) net earnings must, except where sub-paragraph (6) applies, be calculated by taking into account the gross earnings of the applicant from that employment over the assessment period, less—

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

(i) income tax;

(ii) primary Class 1 contributions under the SSCBA;

(b) one-half of any sum paid by the applicant by way of a contribution towards an occupational pension scheme;

(c) one-half of the amount calculated in accordance with sub-paragraph (5) in respect of any qualifying contribution payable by the applicant; and

(d) where those earnings include a payment which is payable under any enactment having effect in Northern Ireland and which corresponds to statutory sick pay, statutory maternity pay, ... statutory paternity pay , statutory shared parental pay , statutory parental bereavement pay , statutory neonatal care pay or statutory adoption pay, any amount deducted from those earnings by way of any contributions which correspond to primary Class 1 contributions under the SSCBA.

(4) In this regulation “qualifying contribution” (“cyfraniad cymwys”) means any sum which is payable periodically as a contribution towards a personal pension scheme.

(5) The amount in respect of any qualifying contribution is to be calculated by multiplying the daily amount of the qualifying contribution by the number equal to the number of days in the assessment period; and for the purposes of this paragraph the daily amount of the qualifying contribution is to be determined—

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

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

(6) Where the earnings of an applicant are estimated under paragraph 44(2)(b) (average weekly earnings of employed earners: persons who are not pensioners), the applicant’s net earnings are to be calculated by taking into account those earnings over the assessment period, less—

(a) an amount in respect of income tax equivalent to an amount calculated by applying to those earnings the basic rate of tax applicable to the assessment period less only the personal reliefs to which the applicant is entitled under Chapters 2, 3 and 3A of Part 3 of the Income Tax Act 2007 ... as is appropriate to the applicant’s circumstances but, if the assessment period is less than a year, the earnings to which the basic rate of tax is to be applied and the amount of the personal reliefs deductible under this sub-paragraph is to be calculated on a pro rata basis;

(b) an amount equivalent to the amount of the primary Class 1 contributions that would be payable by the applicant under the SSCBA in respect of those earnings if such contributions were payable; and

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

Earnings of self-employed earners: persons who are not pensioners

50

(1) Subject to sub-paragraph (2), “earnings” (“enillion”), in the case of employment as a self-employed earner of a person who is not a pensioner, means the gross income of the employment.

(2) “Earnings” does not include any payment to which paragraph 31 or 32 of Schedule 7 refers (payments in respect of a person accommodated with the applicant under arrangements made by a local authority or voluntary organisation and payments made to the applicant by a health authority, local authority or voluntary organisation in respect of persons temporarily in the applicant’s care) nor does it include any sports award.

(3) This paragraph applies to—

(a) royalties or other sums paid as a consideration for the use of, or the right to use, any copyright, design, patent or trade mark; or

(b) any payment in respect of any—

(i) book registered under the Public Lending Right Scheme 1982; or

(ii) work made under any international public lending right scheme that is analogous to the Public Lending Right Scheme 1982,

where the applicant is the first owner of the copyright, design, patent or trade mark, or an original contributor to the book or work concerned.

(4) Where the applicant’s earnings consist of any items to which sub-paragraph (3) applies, those earnings must be taken into account over a period equal to such number of weeks as is equal to the number obtained (and any fraction is to be treated as a corresponding fraction of a week) by dividing the earnings by—

(a) the amount of reduction under this scheme to which the applicant would have been entitled had the payment not been made, plus

(b) an amount equal to the total of the sums which would fall to be disregarded from the payment under Schedule 6 (sums disregarded in the calculation of earnings; persons who are not pensioners) as appropriate in the applicant’s case.

Calculation of income other than earnings: persons who are not pensioners

51

(1) For the purposes of paragraph 46 (average weekly income other than earnings: persons who are not pensioners), the income of an applicant who is not a pensioner which does not consist of earnings to be taken into account must, subject to sub-paragraphs (2) to (6), be that applicant’s gross income and any capital treated as income under paragraph 52 (capital treated as income: persons who are not pensioners).

(2) There is to be disregarded from the calculation of an applicant’s gross income under sub-paragraph (1), any sum, where applicable, specified in Schedule 7.

(3) 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 sub-paragraph (1) must be the gross amount payable.

(4) Where the applicant or, where the applicant is a member of a couple, the applicant’s partner is receiving a contributory employment and support allowance and that benefit has been reduced under regulation 63 of the Employment and Support Allowance Regulations 2008¹⁴⁰ or section 11J of the Welfare Reform Act 2007, the amount of that benefit to be taken into account is the amount as if it had not been reduced.

(5) Where an award of any working tax credit or child tax credit under the Tax Credits Act 2002¹⁴¹ is subject to a deduction by way of recovery of an overpayment of working tax credit or child tax credit which arose in a previous tax year the amount to be taken into account under sub-paragraph (1) is to be the amount of working tax credit or child tax credit awarded less the amount of that deduction.

(6) Sub-paragraphs (7) and (8) apply where—

(a) a relevant payment has been made to a person in an academic year; and

(b) that person abandons, or is dismissed from, that person’s course of study before the payment to that person of the final instalment of the relevant payment.

(7) Where a relevant payment is made quarterly, the amount of a relevant payment to be taken into account for the assessment period for the purposes of sub-paragraph (1) in respect of a person to whom sub-paragraph (6) applies, is to be calculated by applying the formula—

$$(A−(B×C))D$where—A = the total amount of the relevant payment which that person would have received had that person remained a student until the last day of the academic term in which that person abandoned, or was dismissed from, the course, less any deduction under paragraph 78(5) (costs of travel, books and equipment);B = the number of reduction weeks from the reduction week immediately following that which includes the first day of that academic year to the reduction week which includes the day on which the person abandoned, or was dismissed from, the course;C = the weekly amount of the relevant payment, before the application of the £10 disregard, which would have been taken into account as income under paragraph 78(2) (treatment of student loans) had the person not abandoned or been dismissed from, the course and, in the case of a person who was not entitled to a reduction under this scheme immediately before that person abandoned or was dismissed from the course, had that person, at that time, been entitled to housing benefit;D = the number of reduction weeks in the assessment period.$

(8) Where a relevant payment is made by two or more instalments in a quarter, the amount of a relevant payment to be taken into account for the assessment period for the purposes of sub-paragraph (1) in respect of a person to whom sub-paragraph (6) applies, is to be calculated by applying the formula in sub-paragraph (7) but as if—

A = the total amount of relevant payments which that person received, or would have received, from the first day of the academic year to the day the person abandoned the course, or was dismissed from it, less any deduction under paragraph 78(5).

(9) In this paragraph—

“academic year” (“blwyddyn academaidd”) and “student loan” (“benthyciad myfyriwr”) have the same meanings as in Part 10 (students);

“assessment period” (“cyfnod asesu”) means—in a case where a relevant payment is made quarterly, the period beginning with the reduction week which includes the day on which the person abandoned, or was dismissed from, the course and ending with the reduction week which includes the last day of the last quarter for which an instalment of the relevant payment was payable to that person;in a case where the relevant payment is made by two or more instalments in a quarter, the period beginning with the reduction week which includes the day on which the person abandoned, or was dismissed from, the course and ending with the reduction week which includes—the day immediately before the day on which the next instalment of the relevant payment would have been due had the payments continued; orthe last day of the last quarter for which an instalment of the relevant payment was payable to that person,

whichever of those dates is earlier;

“quarter”(“chwarter”) in relation to an assessment period means a period in that year beginning on—1 January and ending on 31 March;1 April and ending on 30 June;1 July and ending on 31 August; or1 September and ending on 31 December;

“relevant payment” (“taliad perthnasol”) means either a student loan or an amount intended for the maintenance of dependants referred to in paragraph 73(7) or both.

(10) For the avoidance of doubt there must be included as income to be taken into account under sub-paragraph (1)—

(a) any payment to which paragraph 48(2) (payments not earnings) applies; or

(b) in the case of an applicant who is receiving support under section 95 or 98 of the Immigration and Asylum Act 1999¹⁴² including support provided by virtue of regulations made under Schedule 9 to that Act, the amount of such support provided in respect of essential living needs of the applicant and the applicant’s dependants (if any) as is specified in regulations made under paragraph 3 of Schedule 8 to the Immigration and Asylum Act 1999.

Capital treated as income: persons who are not pensioners

52

(1) Any capital payable by instalments which are outstanding at the date on which the application is made or treated as made, or, at the date of any subsequent revision or supersession, must, if the aggregate of the instalments outstanding and the amount of the applicant’s capital otherwise calculated in accordance with Chapter 7 of this Part exceeds £16,000, be treated as income.

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

(3) Any earnings to the extent that they are not a payment of income is to be treated as income.

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

(5) Where an agreement or court order provides that payments must be made to the applicant in consequence of any personal injury to the applicant and that such payments are to be made, wholly or partly, by way of periodic payments, any such periodic payments received by the applicant (but not a payment which is treated as capital by virtue of this Part), is to be treated as income.

Notional income: persons who are not pensioners

53

(1) An applicant who is not a pensioner is to be treated as possessing income of which that applicant has deprived himself or herself for the purpose of securing entitlement to a reduction or increasing the amount of the reduction.

(2) Except in the case of—

(a) a discretionary trust;

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

(c) a personal pension scheme, occupational pension scheme or a payment made by the Board of the Pension Protection Fund where the applicant has not attained the qualifying age for state pension credit;

(d) any sum to which paragraph 48(2)(a) of Schedule 9 (capital disregards: persons who are not pensioners) applies which is administered in the way referred to in paragraph 48(1)(a) of that Schedule;

(e) any sum to which paragraph 49(a) of Schedule 9 refers;

(f) rehabilitation allowance made under section 2 of the Employment and Training Act 1973;

(g) child tax credit;

(h) working tax credit; or

(i) any sum to which sub-paragraph (11) applies,

any income which would become available to the applicant upon application being made, but which has not been acquired by the applicant, is to be treated as possessed by the applicant but only from the date on which it could be expected to be acquired were an application made.

(3) Any payment of income, other than a payment of income specified in sub-paragraph (4), made—

(a) to a third party in respect of a single applicant or a member of the family (but not a member of the third party’s family) must, where that payment is a payment of an occupational pension, a pension or other periodical payment made under a personal pension scheme or a payment made by the Board of the Pension Protection Fund, be treated as possessed by that single applicant or, as the case may be, by that member;

(b) to a third party in respect of a single applicant or in respect of a member of the family (but not a member of the third party’s family) must, where it is not a payment referred to in paragraph (a), be treated as possessed by that single applicant or by that member to the extent that it is used for the food, ordinary clothing or footwear, household fuel or rent of that single applicant or, as the case may be, of any member of that family or is used for any council tax or water charges for which that applicant or member is liable;

(c) to a single applicant or a member of the family in respect of a third party (but not in respect of another member of that family) must be treated as possessed by that single applicant or, as the case may be, that member of the family to the extent that it is kept or used by that single applicant or used by or on behalf of any member of the family.

(4) Sub-paragraph (3) does not apply in respect of a payment of income made—

(a) under or by the Trusts, the Fund, the Eileen Trust, MFET Limited, the Skipton Fund, the Caxton Foundation , an approved blood scheme, the Scottish Infected Blood Support Scheme, the London Emergencies Trust, the We Love Manchester Emergency Fund or the Independent Living Fund (2006);

(b) pursuant to section 19(1)(a) of the Coal Industry Act 1994¹⁴³ (concessionary coal);

(i) in an employment programme specified in regulation 75(1)(a) of the Jobseeker’s Allowance Regulations 1996¹⁴⁴;

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

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

(d) in respect of a person’s participation in the Work for Your Benefit Pilot Scheme;

(e) in respect of a person’s participation in the Mandatory Work Activity Scheme;

(f) in respect of an applicant’s participation in the Employment, Skills and Enterprise Scheme;

(g) under an occupational pension scheme, in respect of a pension or other periodical payment made under a personal pension scheme or a payment made by the Board of the Pension Protection Fund where—

(i) a bankruptcy order has been made in respect of the person in respect of whom the payment has been made or, in Scotland, the estate of that person is subject to sequestration or a judicial factor has been appointed on that person’s estate under section 41 of the Solicitors (Scotland) Act 1980¹⁴⁵;

(ii) the payment is made to the trustee in bankruptcy or any other person acting on behalf of the creditors; and

(iii) the person referred to in sub-paragraph (i) and any member of that person’s family does not possess, or is not treated as possessing, any other income apart from that payment.

(5) Where an applicant is in receipt of any benefit under the benefit Acts and the rate of that benefit is altered with effect from a date on or after 1 April in any year but not more than 14 days thereafter, the authority must treat the applicant as possessing such benefit at the altered rate from either 1 April or the first Monday in April in that year, whichever date the authority selects, to the date on which the altered rate is to take effect.

(6) Subject to sub-paragraph (7), where—

(a) an applicant 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,

the authority must treat the applicant as possessing such earnings (if any) as is reasonable for that employment unless the applicant satisfies the authority that the means of that person are insufficient for that person to pay or to pay more for the service.

(7) Sub-paragraph (6) does not apply—

(a) to an applicant who is engaged by a charitable or voluntary organisation or who is a volunteer if the authority is satisfied in any of those cases that it is reasonable for the applicant to provide those services free of charge; or

(b) in a case where the service is performed in connection with—

(i) the applicant’s participation in an employment or training programme in accordance with regulation 19(1)(q) of the Jobseeker’s Allowance Regulations 1996; or

(ii) the applicant’s or the applicant’s partner’s participation in an employment or training programme as defined in regulation 19(3) of those Regulations for which a training allowance is not payable or, where such an allowance is payable, it is payable for the sole purpose of reimbursement of travelling or meal expenses to the person participating in that programme; or

(c) to an applicant who is participating in a work placement approved by the Secretary of State (or a person providing services to the Secretary of State) before the placement starts.

(8) In sub-paragraph (7)(c) “work placement” (“lleoliad gwaith”) means practical work experience which is not undertaken in expectation of payment.

(9) Where an applicant is treated as possessing any income under any of sub-paragraphs (1) to (8), the foregoing provisions of this Part 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 that applicant does possess.

(10) Where an applicant is treated as possessing any earnings under sub-paragraph (6) the foregoing provisions of this Part 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 that applicant does possess except that paragraph 39(2) or 49(3) (calculation of net earnings of employed earners: pensioners and persons who are not pensioners, respectively) do not apply and that applicant’s net earnings are to be calculated by taking into account those earnings which that applicant is treated as possessing, less—

(a) an amount in respect of income tax equivalent to an amount calculated by applying to those earnings the basic rate of tax applicable to the assessment period less only the personal reliefs to which the applicant is entitled under Chapters 2, 3 and 3A of Part 3 of the Income Tax Act 2007 ... as is appropriate to the applicant’s circumstances; but, if the assessment period is less than a year, the earnings to which the basic rate of tax is to be applied and the amount of the personal reliefs deductible under this sub-paragraph is to be calculated on a pro rata basis;

(b) an amount equivalent to the amount of the primary Class 1 contributions that would be payable by the applicant under the SSCBA in respect of those earnings if such contributions were payable; and

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

(11) Sub-paragraphs (1), (2), (3) and (6) do not apply in respect of any amount of income other than earnings, or earnings of an employed earner, arising out of the applicant’s participation in a service user group.

CHAPTER 6 — Income: pensioners and persons who are not pensioners

Calculation of income on a weekly basis

54

(1) Subject to paragraph 57 (disregard of changes in tax, contributions etc), the income of an applicant is to be calculated on a weekly basis—

(a) by estimating the amount which is likely to be the applicant’s average weekly income in accordance with this Part;

(b) by adding to that amount the weekly income calculated—

(i) if the applicant is a pensioner, under paragraph 68 (tariff income: pensioners);

(ii) if the applicant is a person who is not a pensioner, under paragraph 69 (tariff income: persons who are not pensioners); and

(c) by then deducting any relevant child care charges to which paragraph 55 (treatment of child care charges) applies from any earnings which form part of the average weekly income or, in a case where the conditions in sub-paragraph (2) are met, from those earnings plus whichever credit specified in paragraph (b) of that sub-paragraph is appropriate, up to a maximum deduction in respect of the applicant’s family of whichever of the sums specified in sub-paragraph (3) applies in the applicant’s case.

(2) The conditions of this paragraph are that—

(a) the applicant’s earnings which form part of the applicant’s average weekly income are less than the lower of either the applicant’s relevant child care charges or whichever of the deductions specified in paragraph (3) otherwise applies in the applicant’s case; and

(b) that applicant or, if the applicant is a member of a couple either the applicant or the applicant’s partner, is in receipt of either working tax credit or child tax credit.

(3) The maximum deduction to which paragraph (1)(c) above refers is to be—

(a) where the applicant’s family includes only one child in respect of whom relevant child care charges are paid, £175 per week;

(b) where the applicant’s family includes more than one child in respect of whom relevant child care charges are paid, £300 per week.

Treatment of child care charges

55

(1) This paragraph applies where an applicant (within the meaning of this paragraph) is incurring relevant child care charges and—

(a) is a lone parent and is engaged in remunerative work;

(b) is a member of a couple both of whom are engaged in remunerative work; or

(i) is incapacitated;

(ii) is an in-patient in hospital; or

(iii) is in prison (whether serving a custodial sentence or remanded in custody awaiting trial or sentence).

(2) For the purposes of sub-paragraph (1) and subject to sub-paragraph (4), a person to whom sub-paragraph (3) applies must be treated as engaged in remunerative work for a period not exceeding 28 weeks during which the person—

(a) is paid statutory sick pay;

(b) is paid short-term incapacity benefit at the lower rate under sections 30A to 30E of the SSCBA;

(d) is paid income support on the grounds of incapacity for work under regulation 4ZA of, and paragraph 7 or 14 of Schedule 1B to, the Income Support (General) Regulations 1987¹⁴⁶; or

(e) is credited with earnings on the grounds of incapacity for work or limited capability for work under regulation 8B of the Social Security (Credits) Regulations 1975¹⁴⁷.

(3) This sub-paragraph applies to a person who was engaged in remunerative work immediately before—

(a) the first day of the period in respect of which the person was first paid statutory sick pay, short-term incapacity benefit, an employment and support allowance or income support on the grounds of incapacity for work; or

(b) the first day of the period in respect of which earnings are credited,

as the case may be.

(4) In a case to which sub-paragraph (2)(d) or (e) applies, the period of 28 weeks begins on the day on which the person is first paid income support or on the first day of the period in respect of which earnings are credited, as the case may be.

(5) Relevant child care charges are those charges for care to which sub-paragraphs (6) and (7) apply, and are to be calculated on a weekly basis in accordance with sub-paragraph (10).

(6) The charges are paid by the applicant for care which is provided—

(a) in the case of any child of the applicant’s family who is not disabled, in respect of the period beginning on that child’s date of birth and ending on the day preceding the first Monday in September following that child’s fifteenth birthday; or

(b) in the case of any child of the applicant’s family who is disabled, in respect of the period beginning on that child’s date of birth and ending on the day preceding the first Monday in September following that child’s sixteenth birthday.

(7) The charges are paid for care which is provided by one or more of the care providers listed in sub-paragraph (8) and are not paid—

(a) in respect of the child’s compulsory education;

(b) by an applicant to a partner or by a partner to an applicant in respect of any child for whom either or any of them is responsible in accordance with paragraph 7 (circumstances in which a person is treated as responsible or not responsible for another); or

(8) The care to which sub-paragraph (7) refers may be provided—

(a) out of school hours, by a school on school premises or by a local authority—

(i) for children who are not disabled in respect of the period beginning on their eighth birthday and ending on the day preceding the first Monday in September following their fifteenth birthday; or

(ii) for children who are disabled in respect of the period beginning on their eighth birthday and ending on the day preceding the first Monday in September following their sixteenth birthday; or

(b) by a child care provider approved in accordance with the Tax Credit (New Category of Child Care Provider) Regulations 1999¹⁴⁸; or

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