Shares - Income or Capital

Morning All.

I’m dealing with a claimant at the moment who works but is in receipt of Universal Credit.  In the last assessment period their Universal Credit award was reduced because they were awarded shares by their employer which were taken into account as earned income. 

I’m in a quandry about whether it is correct that these count as earned income so am looking for views…..

I can see that arguably they are either income as ‘remuneration or profits derived from employment under a contract of service’
OR possibly notional income as the claimant being deprived by their employer of earned income ‘for the purpose of securing entitlement to universal credit or to an increased amount of universal credit’;

HOWEVER usually shares would count as capital and their value would be calculated taking into account a 10% deduction for the costs attached to selling the shares.

The shares were paid as a sharing success payment so arguably a bonus. 

Any thoughts?

Mairi

On your question about capital, that isn’t really relevant. Most forms of remuneration, including cash, eventually ‘converts’ to capital, as long as the employee still has it at that later date.
For UC purposes, income is generally taken as converting to capital in the following assessment period, meaning that as long as it is still held by the claimant on the last day of the next assessment period, it will be included in their capital. It is irrelevant that it was initially taken into account as income for UC purposes.
I suppose with shares it is just more likely the employee will still have it at the point it converts to capital.

All of this does not change the fact that the employee has received a form of remuneration, and it will therefore simply come down to whether it falls within the definition of “employed earnings” given in Reg 55(2).
And, for completeness, it does fall within that definition, as an award of shares is “money’s worth” (s.62(2)(b) of ITEPA 2003) and therefore falls within s.7(3) of that Act.

Thanks Charles.

Ah boo for my claimant but I was thinking that was probably the case.

Mairi