Prevent children from receiving negative Marriage Allowance (#1666) (#1667)

Children in a married benefit unit are assigned MaritalStatus.MARRIED and have
tax_band == NONE, so they passed the Marriage Allowance eligibility checks. The
transferable amount calculation then produced a negative value (their full PA
minus zero adult-summed unused PA), which flowed into earned_taxable_income and
generated phantom basic-rate income tax of 20% × £12,570 per child.

Guard marriage_allowance with is_adult, clamp the eligible amount at zero, and
fix partners_unused_personal_allowance to subtract the person's own unused PA
only when they are an adult (mirrors the inclusion in the benunit sum).

Co-authored-by: Claude Opus 4.7 (1M context) <noreply@anthropic.com>

Author: vahid-ahmadi

changelog.d/1666.md

@@ -0,0 +1 @@
+- Prevent children in a married benefit unit from being assigned (negative) Marriage Allowance and being taxed on phantom income.

policyengine_uk/tests/policy/baseline/gov/hmrc/income_tax/allowances/marriage_allowance.yaml

@@ -39,3 +39,26 @@
       is_married: true
   output:
     marriage_allowance: [0, 0]
+
+# Regression test for issue #1666: children in a married benefit unit must not
+# receive (negative) Marriage Allowance and must not be taxed on phantom income.
+- name: Children in married benunit do not transfer Marriage Allowance
+  period: 2026
+  input:
+    people:
+      adult1:
+        age: 42
+        employment_income: 55_000
+      adult2:
+        age: 40
+        employment_income: 35_000
+      child1:
+        age: 8
+      child2:
+        age: 3
+    benunit:
+      members: [adult1, adult2, child1, child2]
+      is_married: true
+  output:
+    marriage_allowance: [0, 0, 0, 0]
+    income_tax: [9_432, 4_486, 0, 0]

policyengine_uk/variables/gov/hmrc/income_tax/allowances/marriage_allowance.py

@@ -27,14 +27,17 @@ class marriage_allowance(Variable):
     def formula(person, period, parameters):
         marital = person("marital_status", period)
         married = marital == marital.possible_values.MARRIED
-        eligible = married & person(
-            "meets_marriage_allowance_income_conditions", period
+        is_adult = person("is_adult", period)
+        eligible = (
+            married
+            & is_adult
+            & person("meets_marriage_allowance_income_conditions", period)
         )
         transferable_amount = person("partners_unused_personal_allowance", period)
         allowances = parameters(period).gov.hmrc.income_tax.allowances
         capped_percentage = allowances.marriage_allowance.max
         max_amount = allowances.personal_allowance.amount * capped_percentage
-        amount_if_eligible_pre_rounding = min_(transferable_amount, max_amount)
+        amount_if_eligible_pre_rounding = max_(min_(transferable_amount, max_amount), 0)
         # Round up.
         rounding_increment = allowances.marriage_allowance.rounding_increment
         amount_if_eligible = (

policyengine_uk/variables/gov/hmrc/income_tax/allowances/partners_unused_personal_allowance.py

@@ -15,4 +15,7 @@ class partners_unused_personal_allowance(Variable):
     def formula(person, period, parameters):
         is_adult = person("is_adult", period)
         pa = person("unused_personal_allowance", period)
-        return person.benunit.sum(is_adult * pa) - pa
+        # Subtract this person's own unused PA only if they are an adult, so
+        # non-adults (whose PA isn't part of the adult-summed pool) cannot
+        # produce a negative transferable amount.
+        return person.benunit.sum(is_adult * pa) - is_adult * pa