Income Tax (Earnings and Pensions) Act 2003 section 663

Long-term incapacity benefit: previous entitlement to invalidity benefit

Section 663 provides a tax exemption for long-term incapacity benefit where the claimant's period of incapacity began before 13 April 1995 and they were previously entitled to invalidity benefit during that earlier period.

• Long-term incapacity benefit is normally taxable, but this section exempts it from income tax in specific circumstances linked to the replacement of the old invalidity benefit system
• The exemption applies where the claimant's period of incapacity for work is treated as having begun before 13 April 1995 — the date on which incapacity benefit replaced sickness benefit and invalidity benefit
• The claimant must also have been entitled to invalidity benefit (which itself was not taxable) for at least one day in the part of the incapacity period falling before 13 April 1995
• This exemption has a limited lifespan as no new claimants can qualify, but a significant number of existing claimants continue to benefit from it