Income Tax exemption for financial support payments made to potential victims of modern slavery and human trafficking
Published 3 March 2021
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Who is likely to be affected
Individuals in receipt of financial support payments for potential victims of modern slavery and human trafficking.
General description of the measure
This measure introduces an exemption from Income Tax for financial support payments received by potential victims of modern slavery and human trafficking, made by the UK Government and devolved administrations.
Policy objective
The objective of this measure is to confirm that financial support payments made to potential victims of modern slavery and human trafficking are exempt from Income Tax.
Background to the measure
The UK has an obligation under the Council of Europe Convention on Action against Trafficking in Human Beings to assist victims of modern slavery and human trafficking in their physical, psychological and social recovery, including material assistance.
Modern slavery is defined as human trafficking, slavery, servitude, and forced or compulsory labour.
When a potential victim of modern slavery is identified, they are considered under the National Referral Mechanism (NRM), which assesses whether that individual has been a victim.
While the NRM makes its assessment, the individual is entitled to support through the Victim Care Contract (VCC) which includes financial support payments as well as accommodation and a support worker.
The payments are made under Article 12 of the Council of Europe Convention on Action against Trafficking in Human Beings.
Detailed proposal
Operative date
This measure is wholly relieving with retrospective effect. The exemption from Income Tax will have effect from the 1 April 2009, when the financial support payments started.
Current law
These payments represent annual payments. In the absence of a specific exemption, the payments made by the UK government and devolved administrations are chargeable to tax under 683 of the Income Tax (Trading and Other Income) Act 2005).
Proposed revisions
Legislation will be introduced in Finance Bill 2021 to relieve payments made in connection to modern slavery and human trafficking, from Income Tax under section 683 of the Income Tax (Trading and Other Income) Act 2005.
Summary of impacts
Exchequer impact
| 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 |
|---|---|---|---|---|---|
| Negligible | Negligible | Negligible | Negligible | Negligible | Negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impact.
Impact on individuals, households and families
This measure is expected to have a positive impact on individuals receiving subsistence payments from Home Office, Scottish Government and Northern Ireland Executive for modern slavery and human trafficking. There are no Capital Gains Tax and Inheritance Tax implications from the scheme.
Customer experience is expected to remain broadly the same as this measure doesn’t alter how individuals interact with HMRC. This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure may have a disproportionate positive impact on some groups sharing protected characteristics, reflecting the population receiving the financial support payments.
Impact on business including civil society organisations
This measure is not expected to have any impact on businesses or civil society organisations as it only affects individuals receiving payments for modern slavery and human trafficking.
Operational impact (£m) (HMRC or other)
There will be no operational impacts.
Other impacts
Other impacts have been considered and none has been identified.
Monitoring and evaluation
The measure will be kept under review through regular communication with paying departments.
Further advice
If you have any questions about this change, please email the Income Tax Structure and Earnings Team at: incometaxstructure@hmrc.gov.uk.