Terms & Conditions

[Beard]

Claimant receives an annuity in a one off lump sum in April every year.

We take this into account as income of £20 a week or so.

Because the lump sum is still in his bank account a month later at intervention visit, we take it in as capital as well.

Seems a bit unfair, but is there any way around it ?

[Carol Meredith]

Regular payments of income into a bank account are not treated as capital for the perod that they cover, so in your case you should not treat the annuity as capital in the same 12 monthly period that you are treating it as income. After the 12 months anything left over is capital.

[David]

Beard,
I don’t understand why you are taking a capital sum into account as a weekly income – the way round would be not do this!

[Anonymous]

I agree with Carol. The annuity is income as it consists of regular, i.e. annual, payments fixed to a particular period, i.e that year.

Money can be income or capital both not both. There’s an old IS Commissioner’s decision about this: R(IS) 3/93 (or CIS 654 1991), which states:

“The metamorphosis [i.e the point at which income turns into capital] occurs in relation to each item of income after payment of any tax liability and after the period in respect of which the item falls to be attributed has expired.”

Which basically means that if the annuity is treated as income it cannot also count as capital until the period which it covers is over. In this case at the end of the year.

[Author]

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