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HMRC internal manual

Tax Credits Technical Manual

Notional income: Claimants treated has having income under the Income Tax Acts

The Tax Credits (Definition and Calculation of Income) Regulations 2002, Reg. 14

This provides that if an amount is treated for any purpose as the claimant’s income under any income tax provision mentioned below, then he is to be treated as having that amount of income for tax credit purposes too.

The provisions are:

  • the following provisions of the Taxes Act:
    • section 714 (transfers of securities: treatment of deemed sums and relief’s) or 716 (transfer of unrealised interest) subject to amendments;
    • section 730 (transfers of income arising from securities);
    • section 761 (charge to income tax of offshore income gain); and


  • the following provisions of ITA;
    • chapter 5 of Part 11 (price differences under repos);
    • chapter 2 of Part 13 (transfer of assets abroad); and
    • chapter 3 of Part 13 (transactions in land).


  • the following provisions of ITTOIA;
    • sections 277 to 283 (amounts treated as receipts: leases);
    • chapter 5 of Part 4 (stock dividends from UK resident companies);
    • chapter 6 of Part 4 (release of loan to participator in close company);
    • section 427 (charge to tax on profits from deeply discounted securities);
    • chapter 11 of Part 4 (transactions in deposits);
    • sections 624 to 628 (income treated as income of settlor: retained interests);
    • sections 629 to 632 (income treated as income of settlor: unmarried children);
    • section 633 (capital sums paid to settlor by trustees of settlement);
    • section 641 (capital sums paid to settlor by body connected with settlement);
    • section 652 (estate income: absolute interests in residue); and
    • sections 654 to 655 (estate income: interests in residue); and


  • section 84 and Schedule 15 to the Finance Act 2004 (charge to income tax by reference to enjoyment of property previously owned - the pre-owned assets charge).

Note: When calculating income in respect of section 652 and sections 654 to 655 of ITTOIA, section 272A of ITTOIA does not apply for the purposes of tax credits.  For further details, see TCTM04006 under “Calculating Property Income”.