Paragraph 21 Modifications to the Tax Credits (Definition and Calculation of Income) Regulations 2002

After regulation 6 insert—

“Trading Income: in-year finalisation

6A.

This regulation applies where—

(a)

an award of universal credit is made to a person who was previously entitled to a tax credit;

(b)

the award of that tax credit has terminated;

(c)

the date on which the award terminated falls in the tax year to which that award relates (“the relevant tax year”); and

(d)

the claimant carried on a trade, vocation or profession during the part tax year.

6B.

(1)

Where regulation 6A applies, a claimant’s trading income for the purposes of the first paragraph in Step 4 in regulation 3(1) is the claimant’s actual or estimated taxable profits attributable to the part tax year (“the relevant trading income”).

(2)

The relevant trading income is to be calculated by reference to the basis period ending during the relevant tax year.

(3)

The basis period is to be determined by reference to the rules in Chapter 15 of Part 2 of ITTOIA.

(4)

The relevant trading income is calculated by—

(a)

taking the figure for the actual or estimated taxable income earned in the basis period;

(b)

dividing that figure by the number of days in the basis period to give the daily figure; and

(c)

multiplying the daily figure by the number of days in the part tax year on which the trade, profession or vocation was carried on.”.