This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Taxable Benefits - ITEPA or ITTOIA

Taxo
Posts:21
Joined:Sat Nov 07, 2015 2:32 pm
Re: Taxable Benefits - ITEPA or ITTOIA

Postby Taxo » Wed Apr 20, 2016 4:30 pm

... might not mean the same kind of "benefit"
Good point! Under Social Security Contributions and Benefits Act 1992
lawvolumes.dwp.gov.uk/docs/a2-2501.pdf

Part I CONTRIBUTIONS (S4) (1)-(6) Payments treated as remuneration and earnings. Page 2.2521/2.2522

Refers to ITEPA 2003. I'm fairly sure that a persons tax code is not reduced by any spell on welfare benefits because of the £30,000 limit.

Not sure whether NI is deductable?

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby bd6759 » Wed Apr 20, 2016 6:41 pm

Indeed! The civil legislation I mentioned is not making a distinction about the nature of the earnings and I feel it should.

Part 10 is helpful:

Income Tax (Earnings and Pensions) Act 2003
http://www.legislation.gov.uk/ukpga/2003/1/section/403
Nonsense. That section has nothing to do with social security benefits. s403 is within Part 6 of ITEPA, so it is not helpful at all.

Part 10 begins with s655, and it sets out very clearly which social security benefits are taxable, and confirms Parliaments intention for some benefits to be exempt.
655 Structure of the social security income Part

655(1) The structure of this Part is as follows–

Chapter 2–

(a)imposes the charge to tax on social security income, and
(b)provides for deductions to be made from the amount of income chargeable;

Chapter 3 sets out the UK social security benefits which are charged to tax under this Part and identifies–
(a)the amount of income chargeable to tax for a tax year, and
(b)the person liable to pay any tax charged;

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

Chapters 6 and 7 make provision about foreign benefits.

Chapter 8 makes provision for the high income child benefit charge.

655(2) For other provisions about the taxation of social security benefits see–
section 151 of FA 1996 (power for the Treasury to make orders about the taxation of benefits payable under Government pilot schemes);
section 781 of ITTOIA 2005 (exemption from income tax for payments under New Deal 50plus);
section 782 of ITTOIA 2005 (exemption from income tax for payments under employment zone programmes).

655(3) For the charge to tax on social security pensions, see Part 9 (pension income).

Taxo
Posts:21
Joined:Sat Nov 07, 2015 2:32 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby Taxo » Thu Apr 21, 2016 9:38 am

Nonsense.
If 403 with its £30,000 limit did not exist then then benefits would be taxable income form the first penny received over the tax free threshold of £11,000.

Is it not the case that an individuals cumulative benefit income is tax free under £30,000 and only attaches itself to ITEPA as employment earnings when the amount exceeds £30,000. Will you agree that benefit earnings under £30,000 do not qualify as ITEPA employment income.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby section 44 » Thu Apr 21, 2016 9:46 am

Whether or not state benefits are taxable depends on the nature of the benefit, not the quantum.

There is no £30k exemption for otherwise taxable state benefits.

Taxo
Posts:21
Joined:Sat Nov 07, 2015 2:32 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby Taxo » Thu Apr 21, 2016 10:57 am

There is no £30k exemption for otherwise taxable state benefits.
On that basis somebody on SSP for six months would see their tax code fall by the amount earned in the following tax year. If this episode was followed by six months on JSA then the tax free pay would be wiped out all together placing the individual on a BR code. Hardly an incentive to find paid work. As far as I know these earnings do not affect ones tax code. Can you confirm?

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby section 44 » Thu Apr 21, 2016 11:00 am

Tax codes don't determine tax liability, merely what tax has to be withheld from payments.

Taxo
Posts:21
Joined:Sat Nov 07, 2015 2:32 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby Taxo » Thu Apr 21, 2016 11:08 am

Tax codes don't determine tax liability, merely what tax has to be withheld from payments.
Maybe so but its how tax is recouped in the following tax year. Would episodes of JSA or SSP see tax on this income recovered in the following year by a reduction of the individuals tax code? There is plenty out there on what income can be expected from these benefits but nothing on just how the tax is to be actually recovered.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby section 44 » Thu Apr 21, 2016 11:11 am

They're separate points. You don't have to pay tax through an adjustment to your tax code. If that is how you choose to pay your debt, then income against which it is effectively offset seems irrelevant.

Taxo
Posts:21
Joined:Sat Nov 07, 2015 2:32 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby Taxo » Thu Apr 21, 2016 11:14 am

They're separate points. You don't have to pay tax through an adjustment to your tax code. If that is how you choose to pay your debt, then income against which it is effectively offset seems irrelevant.
I think we can agree that this benefit income is taxable. The question of how the tax on this income is recovered remains unanswered.

Taxo
Posts:21
Joined:Sat Nov 07, 2015 2:32 pm

Re: Taxable Benefits - ITEPA or ITTOIA

Postby Taxo » Thu Apr 21, 2016 11:17 am

You don't have to pay tax through an adjustment to your tax code.
Under PAYE I don't think you have a choice?


Return to “HMRC Administration, Practices & Methods”