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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5027
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I HAVE BEEN ON INCAPACITY BENEFIT SINCE FEBRUARY 1993 WHICH

Resolved Question:

I HAVE BEEN ON INCAPACITY BENEFIT SINCE FEBRUARY 1993 WHICH CHANGED TO ESA IN DECEMBER 2011.I KNOW MY BENEFIT WAS NONE TAXABLE UNTIL THE CHANGE OVER TO ESA BUT IT IS UNCLEAR WHETHER OR NOT MY BENEFIT IS TAXABLE NOW.ALTHOUGH CITIZENS ADVICE TELL ME IT SHOULD NOT BE AS MY BENEFIT HAS BEEN CONTINUOUS
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Please clarify.... have your circumstances changed from when you were first entitled to incapacity benefit in Feb 1993?

Many thanks



Customer: replied 3 years ago.

NO

Expert:  taxadvisor.uk replied 3 years ago.
Paul, thank you for your reply..

Incapacity benefit remains untaxable and I quote this from HMRC manual EIM76180 - Social Security Benefits - incapacity benefit: summary

  • where IB is payable to a person who was entitled to invalidity benefit prior to 13 April 1995 (when incapacity benefit replaced invalidity benefit) provided the benefit is in respect of the same period of incapacity. (However, if the person was entitled to Sickness Benefit prior to 13 April 1995 then the IB became taxable when that person started to receive the short-term higher rate of IB.) The DWP may ignore short periods of work when determining a period of incapacity, but if a period of work is not ignored, so a recipient who had a period of incapacity before 13 April 1995 starts a new period of incapacity after that date, the IB will be taxable after 6 months under the normal rules.

HMRC manual EIM76186 - Social Security Benefits: Employment & Support Allowance states this in relation to income stated ESA

Income related ESA

If a person satisfies the generic conditions for entitlement to ESA but is not entitled to received ESA(C) then they may be entitled to receive income related ESA (ESA(IR)).

ESA(IR) is not taxable.

If It is deemed to be a contribution based ESA then the position is as follows:

Contribution based ESA

To qualify for contribution based ESA (ESA(C)) the recipient must have paid sufficient National Insurance contributions in specified tax years, known as Relevant Income Tax Years.

ESA(C) is known as a contributory benefit because unless sufficient contributions have been paid there will be no entitlement.

ESA(C) is chargeable to tax as social security income. It is paid by the DWP subject to a modified system of Pay As You Earn.

I hope this is helpful and answers your question.

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Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes