Dutch WIA-IVA disability benefit – ITEPA ss678/681 exemption, SDA comparator?

[AmsterdamLondon2026]

I would be very grateful for views from anyone familiar with ITEPA 2003 ss678/681 and the UK tax treatment of foreign social-security benefits.

I am a Dutch national with UK Settled Status and intend to return permanently to England in 2027. I receive a Dutch statutory disability benefit called WIA-IVA.

A key point is that WIA is only the umbrella scheme. I receive IVA, not WGA.

WGA broadly covers partial incapacity or cases where recovery/return to work remains possible. IVA is the separate branch for full and durable incapacity. My award followed detailed medical and occupational assessment and was confirmed through a formal legal appeal procedure by a UWV jurist under Dutch social-security law.

IVA is compulsory employee social insurance, non-means-tested, and normally continues to Dutch state-pension age while the statutory conditions remain satisfied.

The rate is 75% of the relevant insured WIA wage, but that wage is subject to a statutory maximum earnings ceiling. This matters significantly in my case: my former gross salary was approximately €17,000 per month, whereas my IVA is only around €5,050 gross per month including holiday allowance because I was well above the statutory cap.

My understanding of HMRC EIM76009 is that a foreign benefit is a taxable foreign benefit under s678 if it is “substantially similar in character” to a taxable Table A benefit. Under s681(2), a foreign benefit can instead be exempt where it is substantially similar in character to an exempt Table B benefit.

The obvious taxable comparator is New Style ESA. However, I am unsure whether that should end the analysis.

In particular, the former Severe Disablement Allowance (SDA) was itself an incapacity/disability benefit but was not taxable. HMRC expressly records that ESA replaced both SDA, which was not taxable, and Incapacity Benefit, which normally was taxable.

That seems relevant because inability to work cannot, by itself, have determined the historic tax character of a UK incapacity benefit.

I would therefore particularly welcome views on:

How should “substantially similar in character” be approached in practice — economic income-replacement function, statutory purpose, insured contingency, permanence/severity of disability, contribution structure, duration, or a combination?
Could IVA be properly compared with SDA, IIDB or another exempt Table B disability benefit, rather than automatically with ESA?
Does s681(1) leave any genuine scope for partial exemption/apportionment, or is that effectively limited to identifiable components of the corresponding UK benefit?

I appreciate that IVA is not identical to SDA or IIDB: it is earnings-linked and does not require occupational causation. I am trying to understand which differences are legally decisive.

Any case law, HMRC material, practitioner experience or technical commentary would be particularly welcome.