DWP agree that tax exists

Published on 23 March 2005

Tax becomes payable on an income of around £91 per week if you are under 65 years of age. Various means-tested benefits administered by the Department for Work and Pensions (DWP) apply at those levels of income. Basically DWP should only assess someone's means after any tax they have paid on related income has been taken into account. After a recent Court case (and a long battle by LITRG), DWP now accepts that tax exists and should be deducted in measuring what people have to live on.

The DWP have changed their instructions to staff informing them that they should now take into account an estimate of the tax payable on income other than earnings in assessing levels of income.

This very often arises when a woman under 65 has a State retirement pension paid to her without deduction of tax by the DWP. Due to the Inland Revenue's inflexible systems, very low income pensioners are forced into the Self Assessment regime and pay tax on their small State retirement pensions some time after they receive them.

The Court case involved the receipt of Income Support and the DWP in their notice to staff extend the instructions to include income based Jobseekers Allowance.

LITRG has been battling the DWP over the same issue in regard to the State Pension Credit and earlier this year we received agreement that tax was deductible in arriving at income for this purpose. We have not yet seen a clear change notified to DWP staff in relation to that Credit.

There must be many thousands of people who have not received their full entitlements up until now, due to this approach by the DWP. The amounts may be small but on the levels of income concerned all small additions are welcome and entitlement to a particular benefit can be a passport to other entitlements.

Individuals in these situations should request estimates of their tax liability from the Revenue to give to the DWP, in order that claims may be adjusted. It is not clear, as yet, how far back claims may be admitted due to this previously incorrect interpretation of the law.

It is also not clear how well equipped the Revenue are to provide the estimates that the DWP now require that claimants should obtain from them.

LITRG are pressing for answers.

[About a week after the article above appeared on our website, the DWP issued new guidance confirming the position as stated above]

(23-03-2005)

Contact Name: John Andrews (Tel: 0844 579 6700, Fax: 0844 579 6701)