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Forum Home  →  Discussion  →  Income support, JSA and tax credits  →  Thread

service users’ payments

Glenys
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Housing Systems, Leeds

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Unless I’m wrong,  it seems fairly clear that for HB and UC payments to service users are disregarded.
But other benefit rules aren’t so clear.

There’s the general rule about disregarded expenses ” wholly, exclusively and necessarily incurred in the performance of the duties of the employment”  but
a) is a payment to a service user ‘employment’?
b) what if it’s not particularly calculated in reference to expenses?
c) what if it’s paid as an annual lump sum? from my understanding of the distinction between capital and income, if it’s paid regularly, even an annual payment could be “income”

I’ve been reading round and studying the regs but still not come to any conclusion.

The HA in question is thinking of paying £600 per annum, undecided whether as a one-off or a monthly payment, to a small group of tenants to do things like job shadowing in order to give some input into the service they provide.

They are a mixed group, some on legacy benefits, some on UC.

Charles
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Accountant, Haffner Hoff Ltd, Manchester

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I don’t understand why you say it’d be excluded for HB/UC? Only payments for the expenses of service users are excluded. This payment doesn’t sound like it’s to cover expenses, but to cover the time spent.

They could be held to be employees, but it may also be classed as “miscellaneous income”.

Such income would not be considered to be “annual payments”, as that only includes “pure income profit” - i.e. if it comes to the recipient without he or she having to do anything in return. See here.

They would likely be charged to tax under Chapter 8 of Part 5 of ITTOIA 2005. See here. This means no NI contribs, and also the recipients could use the trading allowance on the income, and not be charged to tax on the payments.

It would then be included as income for HB under Reg 31 and calculated under Reg 40 of the HB Regs.

For UC, it could possibly* count as unearned income, and would then be deducted £-for-£ from their benefit.


*I think the Regs are badly drafted: such income would seem to fall to be counted as earned income under Reg 52(a)(iii) - with no prescribed method for calculating such income! - but also unearned income under Reg 66(1)(m).

[ Edited: 29 Jan 2021 at 08:57 am by Charles ]
Glenys
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Housing Systems, Leeds

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Thanks for this.

So in a nutshell, although service users’ expenses are specifically mentioned in UC reg 55 and HB schedule 5, these regs apply ONLY where the payments are ‘earnings’ and the payment is definitely for expenses

  HB Schedule 5 (Sums to be disregarded in the calculation of income other than earnings)
“2A.  Any payment in respect of expenses arising out of the claimant participating as a service user “

UC reg 55
(3) In the calculation of employed earnings the following are to be disregarded—
(a)expenses that are allowed to be deducted under Chapter 2 of Part 5 of ITEPA; and
(b)expenses arising from participation as a service user (see regulation 53(2)).”

BUT what I don’t quite understand is why such payments would count as miscellaneous income rather than as earnings? Reading between the lines, if the regs specifically talk about service users’ expenses disregarded as earnings, can we not infer that such payments to service users are always earnings? Or am I reading too much into this?

Because if it is earnings and these particular regs don’t specify they have to be “wholly and exclusively” etc, isn’t there some wiggle room?

It just seems a shame that tenants on benefits are unable to be paid a small sum in recognition of their time and trouble without it affecting them. Maybe I am being too optimistic

Charles
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Yes, the Regs and the examples in the guidance (both ADM and DMG) definitely suggest DWP would normally consider such payments to be employed earnings. That’s why I wrote above “They could be held to be employees…”.

For HB (and other legacy benefits), it may be easier to argue that they fall within the definition of “employed earnings”.

For UC, it is more difficult, as employed earnings are specifically defined by reference to tax law. For tax purposes, this would only be considered to be employment income if there is held to be a ‘contract of service’, which I think is unlikely to be the case here. Furthermore, they would then be entitled to employment rights, such as minimum wage etc.

If it is held to be employed earnings, I still think there would have to be a specific expense the money was coming to reimburse. Yes, it wouldn’t have to be “wholly and exclusively”, so an expense such as reimbursing the cost of a lunch would be fine, but I don’t think you could get away without relating it to a specific expense.

Glenys
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Housing Systems, Leeds

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Thank you
That makes perfect sense.

Gareth Morgan
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CEO, Ferret, Cardiff

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This is a problem for social landlords who want to have tenants on their boards.  Many are now paying these people for attending meetings and associated activities.  I’ve assumed that they are treated as directors for income purposes.

Anna S
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Turn2Us

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SCIE have published some (slightly old) info on this. It is quite helpful in bringing together how these payments impact different benefits. https://www.scie.org.uk/co-production/supporting/paying-people-who-receive-benefits

Glenys
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Housing Systems, Leeds

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Thanks Anna
That’s really useful