One of the concepts relating to income in income tax is the aggregate income. The tax and national insurance contributions due are not calculated on the basis of the aggregate income; this is done on the basis of the taxable income, but it is important as a calculation basis for various schemes. Under income tax, for example, aggregate income is used to calculate the threshold for the charitable donation allowance. However, its use outside the context of income tax may be even more significant. For instance, aggregate income is a key factor in the means-testing for healthcare benefits, housing benefit and childcare allowance.
The Arnhem–Leeuwarden Court of Appeal recently ruled that a loss is not set off against aggregate income. The taxpayer in this case had a taxable income of €27,770 prior to the set-off of the loss from another tax year. The total amount of losses carried forward from previous years was €41,845. After offsetting these losses, the taxable income was therefore €0, meaning that no income tax or social security contributions were due.
The Tax and Customs Administration set the aggregate income at €27,770, thus without taking into account the losses to be set off. The Court of Appeal ruled that this was in accordance with the applicable legislation. Consequently, for benefits such as allowances, this income is used as the basis for calculation, despite the losses to be set off. In a year in which a loss is incurred, the negative aggregate income is, for the purposes of most means-tests, deemed to be zero.