Transitional protection with Incapacity benefit to ESA - Tax wise

My client was had transitional protection from Income Tax as he was recieving sickness benefit before being changed to Incapacity Benefit in 1995. Now he has migrated to ESA, is there any transitional protection to keep this tax advantage?

This is not an answer to the enquiry, but would people migrating to cESA from IB who have been in continuous receipt of IB since before 1995 continue to have the benefit disregarded as taxable income for Tax Credit purposes?

Difficult to prove a negative but I think the answer to both questions is ‘no’. You are not on IB at all after migraton, you are on ESA. ESA is taxable. The Tax Credit disregard for pre 1995 IB awards arises solely because they are not taxable and ends with the award of ESA. No trace of any transitional protection and this is very unlikely, given the proposed time limit on CESA - they are not being gentle here.

Richard Atkinson

From page 6 of http://www.dwp.gov.uk/docs/ib-reassessment-information-pack.pdf

Under existing provisions, contributory earnings-replacement benefits like contribution-based Employment and Support Allowance are taxable, but income-related benefits, such as income-related ESA, are not. If, as a result of reassessment, claimants previously in receipt of a benefit that was exempt from tax become entitled to contribution-based Employment and Support Allowance, they may now be liable to pay income tax. How much tax, if any, they have to pay depends upon whether they receive any other income, for example, an occupational pension. In addition, those claimants who already receive tax credits need to notify HM Revenue & Customs of this change as contribution-based Employment and Support Allowance counts as income when working out their tax credits award. This may mean that a claimant’s tax credits may be reduced.