The Council Tax Reduction (State Pension Credit) (Scotland) Regulations 2012

Calculation of net profit of self-employed earners

36.—(1) For the purposes of regulation 28 (calculation of income on a weekly basis) the earnings of an applicant to be taken into account are—

(a) in the case of a self-employed earner who is engaged in employment on that earner’s 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, that earner’s share of the net profit derived from that employment, less—

(i) an amount in respect of income tax and of social security contributions payable under the 1992 Act calculated in accordance with regulation 37 (deduction of tax and contributions of self-employed earners); and

(ii) one-half of the amount calculated in accordance with paragraph (10) in respect of any qualifying premium.

(2) For the purposes of paragraph (1)(a) the net profit of the employment is, except where paragraph (8) applies, to be calculated by taking into account the earnings of the employment over the assessment period less—

(a) subject to paragraphs (4) to (7), any expenses wholly and exclusively incurred in that period for the purposes of that employment;

(b) an amount in respect of—

(i) income tax; and

(ii) social security contributions payable under the 1992 Act,

calculated in accordance with regulation 37 (deduction of tax and contributions of self-employed earners); and

(c) one-half of the amount calculated in accordance with paragraph (10) in respect of any qualifying premium.

(3) For the purposes of paragraph (1)(b), the net profit of the employment is to be calculated by taking into account the earnings of the employment over the assessment period less, subject to paragraphs (4) to (7), any expenses wholly and exclusively incurred in that period for the purposes of the employment.

(4) Subject to paragraph (5), no deduction is to be made under paragraph (2)(a) or (3), 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 assessment period;

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

(f) any expenses incurred in providing business entertainment.

(5) A deduction is to be made under paragraph (2)(a) or (3) in respect of the repayment of capital on any loan used for—

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

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

(6) A deduction in respect of any expenses under paragraph (2)(a) or (3) must not be made unless the relevant authority is satisfied, given the nature and the amount of the expense, that it has been reasonably incurred.

(7) For the avoidance of doubt—

(a) a deduction must not be made under paragraph (2)(a) or (3) in respect of any sum unless it has been expended for the purposes of the employment;

(b) a deduction must be made under paragraph (2)(a) or (3) in respect of—

(i) the excess of any value added tax paid over value added tax received in the assessment period;

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

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

(8) Where an applicant is engaged in employment as a child minder the net profit of the employment is one-third of the earnings of that employment, less—

(a) an amount in respect of—

(i) income tax; and

(ii) social security contributions payable under the 1992 Act,

calculated in accordance with regulation 37 (deduction of tax and contributions of self-employed earners); and

(b) one-half of the amount calculated in accordance with paragraph (10) in respect of any qualifying premium.

(9) For the avoidance of doubt where an applicant is engaged in employment as a self-employed earner and the applicant is also engaged in one or more other employments as a self-employed or employed earner any loss incurred in any one of the applicant’s employments must not be offset against the applicant’s earnings in any other of the applicant’s employments.

(10) The amount in respect of any qualifying premium must be calculated by multiplying the daily amount of the qualifying premium by the number of days in the assessment period, and for the purposes of this regulation the daily amount of the qualifying premium must be determined—

(a) where the qualifying premium is payable monthly, by multiplying the amount of the qualifying premium by 12 and dividing the product by 365; and

(b) in any other case, by dividing the amount of the qualifying premium by the number of days in the period to which the qualifying premium relates.

(11) In this regulation, “qualifying premium” means any premium which is payable periodically in respect of a personal pension scheme and which is payable on or after the date of the application.