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PART VIII INCOME AND CAPITAL

Chapter IV Self-Employed Earners

Earnings of self-employed earners

100.—(1) Subject to paragraph (2), “earnings", in the case of employment as a self-employed earner, means the gross receipts of the employment and shall include any allowance paid under any scheme referred to in regulation 19(1)(r) (circumstances in which a person is to be treated as actively seeking employment: schemes for assisting persons to become self-employed earners) to the claimant for the purpose of assisting him in carrying on his business.

(2) “Earnings" shall not include–

(a)where a claimant is involved in providing board and lodging accommodation for which a charge is payable, any payment by way of such a charge;

(b)any payment to which paragraph [F127, 28 or 28A] of Schedule 7 refers (payments in respect of a person accommodated with the claimant under an arrangement made by a local authority or voluntary organisation [F2, payments] made to the claimant by a health authority, local authority or voluntary organisation in respect of persons temporarily in the claimant’s care [F3and any payments made to a claimant under section 73(1)(b) of the Children and Young People (Scotland) Act 2014 (kinship care assistance)]).

[F4(ba)any payment made in accordance with section 26A of the Children (Scotland) Act 1995 (duty to provide continuing care)—

(i)to a claimant; or

(ii)where paragraph (3) applies, to another person (“A”) which A passes on to the claimant;]

[F5(c)any sports award.]

[F6(3) This paragraph applies only where A—

(a)was formerly in the claimant’s care;

(b)is aged 16 or over; and

(c)continues to live with the claimant.]

Textual Amendments

Calculation of net profit of self-employed earners

101.—(1) For the purposes of regulation 95 (calculation of earnings of self-employed earners), the earnings of a claimant to be taken into account shall be—

(a)in the case of a self-employed earner who is engaged in employment on his own account, the net profit derived from that employment;

(b)in the case of a self-employed earner whose employment is carried on in partnership, or is that of a share fisherman within the meaning of regulation 156, his share of the net profit derived from that employment less—

(i)an amount in respect of income tax and of [F7national insurance contributions] payable under the Benefits Act calculated in accordance with regulation 102 (deduction of tax and contributions for self-employed earners); and

(ii)one half of any premium paid in the period that is relevant under regulation 95 in respect of a personal pension scheme.

(2) Subject to paragraph (3), there shall be disregarded from a claimant’s net profit any sum, where applicable, specified in paragraphs 1 to 16 of Schedule 6.

(3) For the purposes of calculating the amount to be deducted in respect of earnings under regulation 80 (contribution-based jobseeker’s allowance: deductions in respect of earnings) the disregards in paragraphs 5 to 8 and 11 of Schedule 6 shall not apply.

(4) For the purposes of paragraph (1)(a) the net profit of the employment shall, except where paragraph (10) applies, be calculated by taking into account the earnings of the employment over the period determined under regulation 95 (calculation of earnings of self-employed earners) less—

(a)subject to paragraphs (6) to (8), any expenses wholly and exclusively defrayed in that period for the purposes of that employment;

(b)an amount in respect of–

(i)income tax; and

(ii)[F8national insurance contributions] payable under the Benefits Act, calculated in accordance with regulation 102 (deductions of tax and contributions for self-employed earners); and

(c)one-half of any premium paid in the period that is relevant under regulation 95 in respect of a personal pension scheme.

(5) For the purposes of paragraph (1)(b), the net profit of the employment shall be calculated by taking into account the earnings of the employment over the period determined under regulation 95 less, subject to paragraphs (6) to (8), any expenses wholly and exclusively defrayed in that period for the purposes of that employment.

(6) Subject to paragraph (7), no deduction shall be made under paragraph (4)(a) or (5) in respect of—

(a)any capital expenditure;

(b)the depreciation of any capital asset;

(c)any sum employed or intended to be employed in the setting up or expansion of the employment;

(d)any loss incurred before the beginning of the period determined under regulation 95;

(e)the repayment of capital on any loan taken out for the purposes of the employment;

(f)any expenses incurred in providing business entertainment.

(7) A deduction shall be made under paragraph (4)(a) or (5) in respect of the repayment of capital on any loan used for—

(a)the replacement in the course of business of equipment or machinery; and

(b)the repair of an existing business asset except to the extent that any sum is payable under an insurance policy for its repair.

(8) [F9The Secretary of State] shall refuse to make a deduction under paragraph (4)(a) or (5) in respect of any expenses where he is not satisfied that the expense has been defrayed or, having regard to the nature of the expense and its amount, that it has been reasonably incurred.

(9) For the avoidance of doubt–

(a)a deduction shall not be made under paragraph (4)(a) or (5) in respect of any sum unless it has been expended for the purposes of the business;

(b)a deduction shall be made thereunder in respect of–

(i)the excess of any VAT paid over VAT received in the period determined under regulation 95;

(ii)any income expended in the repair of an existing asset except to the extent that any sum is payable under an insurance policy for its repair;

(iii)any payment of interest on a loan taken out for the purposes of the employment.

(10) Where a claimant is engaged in employment as a child-minder the net profit of the employment shall be one-third of the earnings of that employment, less—

(a)an amount in respect of–

(i)income tax; and

(ii)[F10national insurance contributions] payable under the Benefits Act, calculated in accordance with regulation 102 (deductions of tax and contributions for self-employed earners); and

(b)one half of any premium paid in the period that is relevant under regulation 95 in respect of a personal pension scheme.

(11) Notwithstanding regulation 95 and the foregoing paragraphs, [F11the Secretary of State] may assess any item of a claimant’s income or expenditure over a period other than that determined under regulation 95 such as may, in the particular case, enable the weekly amount of that item of income or expenditure to be determined more accurately.

(12) For the avoidance of doubt where a claimant is engaged in employment as a self-employed earner and he is engaged in one or more other employments as a self-employed or employed earner, any loss incurred in any one of his employments shall not be offset against his earnings in any other of his employments.

Textual Amendments

[F12Deduction of tax and contributions for self-employed earners

102.—(1) Subject to paragraph (2), the amount to be deducted in respect of income tax under regulation 101(1)(b)(i), (4)(b)(i) or (10)(a)(i) (calculation of net profit of self-employed earners) is to be calculated—

(a)on the basis of the amount of chargeable income; and

(b)[F13as if that income were assessable to income tax at the basic rate, or in the case of a Scottish taxpayer, the Scottish basic rate, of tax less only the personal reliefs to which the claimant is entitled under Chapters 2, 3 and 3A of Part 3 of the Income Tax Act 2007 as are appropriate to their circumstances.]

(2) If the period determined under regulation 95 is less than a year, the earnings to which the basic rate[F14, or the Scottish basic rate,] of tax is to be applied and the amount of the [F15personal reliefs deductible under paragraph (1) are] to be calculated on a pro rata basis.

(3) Subject to paragraph (4), the amount to be deducted in respect of national insurance contributions under regulation 101(1)(b)(i), (4)(b)(ii) or (10)(a)(ii) is to be the total of—

(a)the amount of Class 2 contributions payable under section [F1611(2)] or, as the case may be, [F1711(8)] of the Benefits Act at the rate applicable at the date of claim except where the claimant’s chargeable income is less than the amount specified in section 11(4) of that Act ([F18small profits threshold]) for the tax year in which the date of claim falls; and

(b)the amount of Class 4 contributions (if any) which would be payable under section 15 of that Act (Class 4 contributions recoverable under the Income Tax Acts) at the percentage rate applicable at the date of claim on so much of the chargeable income as exceeds the lower limit but does not exceed the upper limit of profits and gains applicable for the tax year in which the date of claim falls.

(4) If the period determined under regulation 95 is less than a year—

(a)the amount specified for the tax year referred to in paragraph (3)(a) is to be reduced pro rata; and

(b)the limits referred to in paragraph (3)(b) are to be reduced pro rata.

(5) In this regulation “chargeable income” means—

(a)except where sub-paragraph (b) applies, the earnings derived from the employment less any expenses deducted under regulation 101(4)(a) or, as the case may be, (5); and

(b)in the case of employment as a child minder, one-third of the earnings of that employment.]

Textual Amendments