Pin benefit cap exemption rules with regression tests and legal references (#1818)

changelog.d/1818.fixed.md

@@ -0,0 +1 @@
+- Added Universal Credit benefit cap earnings exception regression tests (Universal Credit Regulations 2013 reg. 82), including the per-claimant earned income cases (tax on pension income, one partner's pension contributions, contributions after 75), and cited regs. 55 and 57 and Finance Act 2004 s. 188 on `is_uc_benefit_cap_exempt_earnings`.

policyengine_uk/tests/policy/baseline/gov/dwp/benefit_cap/benefit_cap_specified_benefits.yaml

@@ -1106,6 +1106,88 @@
     is_uc_benefit_cap_exempt_specified_benefit: false
     is_housing_benefit_benefit_cap_exempt_specified_benefit: true
 
+- name: A dependent young person's AFIP does not lift the Universal Credit cap, so the award is capped
+  # For Universal Credit, AFIP is within "attendance allowance" (UC Regs
+  # 2013 reg 2), and reg 83(1)(c) excepts only where "a claimant is
+  # receiving" it. The 17-year-old is a qualifying young person, not a
+  # claimant, so the family's Universal Credit is capped at the London
+  # family rate of 25,323 a year. AFIP also earns no disabled child
+  # addition (reg 24(2) lists DLA, PIP and the Scottish equivalents, and
+  # blindness for the higher rate), so the maximum amount is the standard
+  # allowance, three child elements and the 30,000 housing costs element.
+  period: 2026
+  input:
+    people:
+      parent:
+        age: 45
+      young_person:
+        age: 17
+        current_education: UPPER_SECONDARY
+        armed_forces_independence_payment: 5_740
+      child1:
+        age: 10
+      child2:
+        age: 8
+    benunits:
+      benunit:
+        members: [parent, young_person, child1, child2]
+    households:
+      household:
+        members: [parent, young_person, child1, child2]
+        region: LONDON
+        tenure_type: RENT_FROM_COUNCIL
+        rent: 30_000
+  output:
+    is_qualifying_young_person_for_child_benefit: [false, true, false, false]
+    is_uc_assessed_claimant: [true, false, false, false]
+    is_uc_benefit_cap_exempt_specified_benefit: false
+    is_uc_benefit_cap_exempt: false
+    uc_benefit_cap: 25_323
+    uc_disability_elements: 0
+    universal_credit_pre_benefit_cap: 46_615.92
+    uc_benefit_cap_reduction: 24_561.12
+    universal_credit: 22_054.80
+  absolute_error_margin: 1
+
+- name: A dependent young person's AFIP lifts the Housing Benefit cap, so the award is paid in full
+  # HB Regs 2006 reg 75F(1)(ea) names "the claimant, the claimant's partner
+  # or a young person for whom the claimant or the claimant's partner is
+  # responsible". The same family on legacy Housing Benefit (an existing
+  # award, no Universal Credit claim) is outside the cap, so its Housing
+  # Benefit is paid in full.
+  period: 2026
+  input:
+    people:
+      parent:
+        age: 45
+        housing_benefit_reported: 10_000
+      young_person:
+        age: 17
+        current_education: UPPER_SECONDARY
+        armed_forces_independence_payment: 5_740
+      child1:
+        age: 10
+      child2:
+        age: 8
+    benunits:
+      benunit:
+        members: [parent, young_person, child1, child2]
+        would_claim_uc: false
+    households:
+      household:
+        members: [parent, young_person, child1, child2]
+        region: LONDON
+        tenure_type: RENT_FROM_COUNCIL
+        rent: 30_000
+  output:
+    universal_credit_pre_benefit_cap: 0
+    is_housing_benefit_benefit_cap_exempt_specified_benefit: true
+    is_housing_benefit_benefit_cap_exempt: true
+    housing_benefit_benefit_cap_reduction: 0
+    housing_benefit_pre_benefit_cap: 30_000
+    housing_benefit: 30_000
+  absolute_error_margin: 1
+
 - name: A 16-year-old out of education with armed forces independence payment does not lift the cap
   period: 2025
   input:

policyengine_uk/tests/policy/baseline/gov/dwp/benefit_cap/is_uc_benefit_cap_exempt_earnings.yaml

@@ -0,0 +1,229 @@
+# Universal Credit benefit cap earnings exception, Universal Credit
+# Regulations 2013 reg. 82.
+# https://www.legislation.gov.uk/uksi/2013/376/regulation/82
+# https://www.gov.uk/benefit-cap/when-youre-not-affected
+
+# --- Earnings exception: only tax on the earnings is deducted (reg. 55(5)) ---
+
+- name: Unearned income does not reduce net earnings for the earnings exception
+  # Regulation 55(5) deducts the income tax paid "in respect of the
+  # employment", not the claimant's whole income tax liability. Property
+  # income of 40,000 pushes total income tax to over 8,000, but the tax
+  # attributable to the 13,000 of earnings is under 100, so net earnings stay
+  # well above the 846/month threshold and the exception applies.
+  period: 2025
+  input:
+    people:
+      person:
+        age: 35
+        employment_income: 13_000
+        property_income: 40_000
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    is_uc_benefit_cap_exempt_earnings: true
+    is_uc_benefit_cap_exempt: true
+
+- name: Earnings below the threshold do not except, even with large unearned income
+  # The same unearned income with earnings of 8,000 leaves net earnings below
+  # 846 x 12 = 10,152, so the exception does not apply.
+  period: 2025
+  input:
+    people:
+      person:
+        age: 35
+        employment_income: 8_000
+        property_income: 40_000
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    is_uc_benefit_cap_exempt_earnings: false
+
+- name: A couple's earnings are combined for the earnings exception
+  # Reg. 82(1)(a) applies to "the claimant's and their partner's combined
+  # earned income". Neither partner alone reaches 10,152; together they do.
+  period: 2025
+  input:
+    people:
+      person1:
+        age: 35
+        employment_income: 6_000
+      person2:
+        age: 35
+        employment_income: 6_000
+    benunits:
+      benunit:
+        members: [person1, person2]
+  output:
+    is_uc_benefit_cap_exempt_earnings: true
+
+- name: Relievable pension contributions reduce earned income
+  # Reg. 55(5)(a) deducts relievable pension contributions from employed
+  # earnings, so a contribution that takes net earnings below the threshold
+  # removes the exception.
+  period: 2025
+  input:
+    people:
+      person:
+        age: 35
+        employment_income: 11_000
+        employee_pension_contributions: 1_500
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    is_uc_benefit_cap_exempt_earnings: false
+
+- name: Tax on private pension income does not reduce earned income for the earnings exception
+  # Reg. 55(5)(b) deducts only income tax paid "in respect of the
+  # employment". The 5,000 private pension uses up the personal allowance,
+  # so earned_income_tax (tax on non-savings, non-dividend income) is 546,
+  # but none of it is in respect of the 10,300 of wages. Earned income is
+  # 10,300, which clears 846 x 12 = 10,152, so the cap does not reduce the
+  # family's Universal Credit.
+  period: 2025
+  input:
+    people:
+      parent:
+        age: 35
+        employment_income: 10_300
+        private_pension_income: 5_000
+      child1:
+        age: 5
+      child2:
+        age: 8
+    benunits:
+      benunit:
+        members: [parent, child1, child2]
+    households:
+      household:
+        members: [parent, child1, child2]
+        region: LONDON
+        tenure_type: RENT_FROM_COUNCIL
+        rent: 30_000
+  output:
+    earned_income_tax: [546, 0, 0]
+    uc_income_tax_on_earnings: [0, 0, 0]
+    is_uc_benefit_cap_exempt_earnings: true
+    benefit_cap_reduction: 0
+    universal_credit: 33_876.72
+  absolute_error_margin: 1
+
+- name: One partner's pension contributions do not reduce the other partner's earnings
+  # Reg. 82(1)(a) adds the couple's earned income, and each person's earned
+  # income is their own earnings less their own deductions. The
+  # self-employed partner's 100 of profit less 3,000 of relievable pension
+  # contributions is nil, not minus 2,900 (reg. 57(2), steps 3 and 4).
+  # Combined earned income is 10,600, which clears 881 x 12 = 10,572.
+  period: 2026
+  input:
+    people:
+      employee:
+        age: 35
+        employment_income: 10_600
+      self_employed:
+        age: 35
+        self_employment_income: 100
+        personal_pension_contributions: 3_000
+      child1:
+        age: 5
+      child2:
+        age: 8
+    benunits:
+      benunit:
+        members: [employee, self_employed, child1, child2]
+    households:
+      household:
+        members: [employee, self_employed, child1, child2]
+        region: LONDON
+        tenure_type: RENT_FROM_COUNCIL
+        rent: 30_000
+  output:
+    uc_individual_earned_income_before_mif: [10_600, 0, 0, 0]
+    is_uc_benefit_cap_exempt_earnings: true
+    benefit_cap_reduction: 0
+    universal_credit: 31_074.08
+  absolute_error_margin: 1
+
+- name: Pension contributions after 75 are not deducted from earned income
+  # Contributions paid after the individual reaches 75 are not relievable
+  # (Finance Act 2004 s. 188(3)(a)), so reg. 55(5)(a) does not deduct them.
+  # The mixed-age couple's Universal Credit award is capped like any other
+  # (reg. 3(2)(a); no age exception reaches it), and the older partner's
+  # 11,000 of earnings clears 881 x 12 = 10,572 before and after the
+  # 1,000 contribution.
+  period: 2026
+  input:
+    people:
+      older_partner:
+        age: 76
+        employment_income: 11_000
+        employee_pension_contributions: 1_000
+      younger_partner:
+        age: 40
+      child1:
+        age: 5
+      child2:
+        age: 8
+    benunits:
+      benunit:
+        members: [older_partner, younger_partner, child1, child2]
+    households:
+      household:
+        members: [older_partner, younger_partner, child1, child2]
+        region: LONDON
+        tenure_type: RENT_FROM_COUNCIL
+        rent: 30_000
+  output:
+    is_uc_assessed_claimant: [true, true, false, false]
+    housing_benefit_pension_age_regulations_apply: false
+    uc_individual_earned_income_before_mif: [11_000, 0, 0, 0]
+    is_uc_benefit_cap_exempt_earnings: true
+    benefit_cap_reduction: 0
+    universal_credit: 42_066.40
+  absolute_error_margin: 1
+
+# --- Earnings threshold follows the national living wage, not a fixed 10,152 ---
+
+- name: The 2025-26 earnings threshold is 846 a month
+  period: 2025
+  input:
+    people:
+      person:
+        age: 35
+        employment_income: 10_300
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    # 10,300 clears 846 x 12 = 10,152.
+    is_uc_benefit_cap_exempt_earnings: true
+
+- name: The 2026-27 earnings threshold rises to 881 a month
+  period: 2026
+  input:
+    people:
+      person:
+        age: 35
+        employment_income: 10_300
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    # The same earnings fall short of 881 x 12 = 10,572.
+    is_uc_benefit_cap_exempt_earnings: false
+
+- name: Earnings above the 2026-27 threshold except from the cap
+  period: 2026
+  input:
+    people:
+      person:
+        age: 35
+        employment_income: 10_600
+    benunits:
+      benunit:
+        members: [person]
+  output:
+    is_uc_benefit_cap_exempt_earnings: true

policyengine_uk/tests/test_uc_single_claim_properties.py

@@ -118,6 +118,7 @@
     "pip_dl": 0.0,
     "afcs": 0.0,
     "esa_contrib": 0.0,
+    "armed_forces_independence_payment": 0.0,
 }
 
 
@@ -132,6 +133,7 @@ def adult(draw, ages):
         pip_dl=draw(pip),
         afcs=draw(sometimes_paid),
         esa_contrib=draw(sometimes_paid),
+        armed_forces_independence_payment=draw(sometimes_paid),
     )
 
 
@@ -160,6 +162,7 @@ def adult_inputs(age, **inputs):
         pip_dl=0.0,
         afcs=0.0,
         esa_contrib=0.0,
+        armed_forces_independence_payment=0.0,
     )
     values.update(inputs)
     return values
@@ -259,6 +262,16 @@ def example_families():
             tenure="RENT_FROM_COUNCIL",
             region="NORTH_EAST",
         ),
+        # An other member with armed forces independence payment and nothing
+        # else.
+        dict(
+            claimant=adult_inputs(40),
+            partner=adult_inputs(40, armed_forces_independence_payment=5_000.0),
+            children=[],
+            rent=0.0,
+            tenure="RENT_FROM_COUNCIL",
+            region="NORTH_EAST",
+        ),
     ]
 
 
@@ -272,6 +285,7 @@ def example_families():
     afcs_partner=6,
     esa_partner=7,
     afcs_claimant=8,
+    afip_partner=9,
 )
 EXAMPLE_FAMILIES = example_families()
 
@@ -497,12 +511,12 @@ def test_deduction_is_the_joint_claimants(families, year):
 @given(
     families=populations,
     year=st.sampled_from([2021, 2026]),
-    balances=st.lists(st.floats(0, 30_000), min_size=18, max_size=18),
+    balances=st.lists(st.floats(0, 30_000), min_size=20, max_size=20),
 )
 @example(
     families=example_families(),
     year=2026,
-    balances=[8_000.0, 16_000.0, 0.0, 30_000.0, 2_000.0, 0.0] + [5_000.0] * 12,
+    balances=[8_000.0, 16_000.0, 0.0, 30_000.0, 2_000.0, 0.0] + [5_000.0] * 14,
 )
 def test_capital_includes_the_other_members(families, year, balances):
     families = copy.deepcopy(families)
@@ -700,6 +714,13 @@ def test_examples_reach_the_cases():
         assert joint["is_uc_benefit_cap_exempt_specified_benefit"][family]
         assert single["is_housing_benefit_benefit_cap_exempt_specified_benefit"][family]
     assert single["is_uc_benefit_cap_exempt_specified_benefit"][i["afcs_claimant"]]
+    # Reg. 83(1)(c) with reg. 2: armed forces independence payment is
+    # attendance allowance, which lifts the UC cap only for a claimant. HB
+    # reg. 75F(1)(ea): the partner's lifts the HB cap either way.
+    family = i["afip_partner"]
+    assert not single["is_uc_benefit_cap_exempt_specified_benefit"][family]
+    assert joint["is_uc_benefit_cap_exempt_specified_benefit"][family]
+    assert single["is_housing_benefit_benefit_cap_exempt_specified_benefit"][family]
     # Reg. 80A(2) and Sch 4 para 28(2): single rate and shared accommodation.
     # HB regs. 2(1), 13D(2) and 75CA(2): a couple either way.
     family = i["young_renter"]