SE76004 – Social Security benefits: basis of assessment

Sections 19(1)1 and 617 ICTA 1988 and Section 41 FA 1989

Introduction

Taxable Social Security benefits are chargeable under Schedule E by virtue of Section 19(1)1 (paragraph 5) ICTA 1988 which permits other provisions of the Tax Acts such as Section 617 ICTA 1988 to direct that tax be charged under Schedule E. They rank as earned income.

Arising basis

The normal rule is that Social Security benefits are chargeable for the year in which they arise under Section 41 FA1989. This means that tax is chargeable on the amount of social security benefit payable for the year where this is different from the amount received in the year.

In most cases the amount payable and the amount received will be the same but individuals receiving retirement pension, for instance, may be paid four weekly or even thirteen weekly in arrears (see SE76005).

The amounts may differ in the following circumstances (see SE76005):

• benefit paid in arrears
• overpaid benefits
• non-weekly payment of benefit.

Compensation payments

Where the DSS make compensation payments for the delay in payment of benefit, see AP1056.