The Council Tax Reduction (Scotland) Regulations 2021

Self-employed earnings S

51.—(1) This regulation applies for the purpose of calculating earned income that is not employed earnings and is derived from carrying on a trade, profession or vocation (“self-employed earnings”).

(2) Where the applicant or the applicant’s partner has, or the partners jointly have, an award of universal credit, an applicant’s self-employed earnings in respect of an assessment period are to be calculated in accordance with the steps in this paragraph, and in accordance with paragraphs (3) and (4)—

Step 1

Calculate the amount of the applicant’s profit or loss in respect of each trade, profession or vocation carried on by the applicant by—

(a) taking the actual receipts in that assessment period, and

(b) deducting any amounts allowed as expenses under regulation 53 or 54.

Where a trade, profession or vocation is carried on in a partnership, take the amount of the profit or loss attributable to the applicant’s share in the partnership.

Step 2

If the applicant has carried on more than one trade, profession or vocation in the assessment period, add together the amounts resulting from step 1 in respect of each trade, profession or vocation.

Step 3

Deduct from the amount resulting from step 1 or (where applicable) step 2 any payment made by the applicant to HMRC in the assessment period by way of national insurance contributions or income tax in respect of any trade, profession or vocation carried on by the applicant.

If the amount resulting from steps 1 to 3 is nil or a negative amount, the amount of the applicant’s self-employed earnings in respect of the assessment period is nil (and ignore the following steps).

Step 4

If the amount resulting from step 3 is greater than nil, deduct from that amount any relievable pension contributions made by the applicant in the assessment period (unless a deduction has been made in respect of those contributions in calculating the applicant’s employed earnings).

If the amount resulting from this step is nil or a negative amount, the applicant’s self-employed earnings in respect of the assessment period are nil (and ignore the following steps).

Step5

Where the amount resulting from step 4 is greater than nil, deduct from that amount any unused losses (see regulation 52), taking the oldest first, and proceed to step 6.

If the amount resulting from this step is nil or a negative amount, the applicant’s self-employed earnings in respect of the assessment period are nil (and ignore the following step).

Step 6

Deduct from the amount any sum, where applicable, specified in schedule 3.

If the amount resulting is greater than nil, that is the amount of the applicant’s self-employed earnings for the assessment period.

If the amount resulting from this step is nil or a negative amount, the amount of the applicant’s self-employed earnings in respect of the assessment period is nil.

(3) The receipts referred to in paragraph (2) include receipts in kind and any refund or repayment of income tax, value added tax or national insurance contributions relating to the trade, profession or vocation.

(4) For the purposes of paragraph (2), where the purchase of an asset has been deducted as an expense in any assessment period and, in a subsequent assessment period, the asset is sold or ceases to be used for the purposes of a trade, profession or vocation carried on by the applicant, the proceeds of sale (or, as the case may be, the amount that would be received for the asset if it were sold at its current market value) are to be treated as a receipt in that subsequent assessment period

(5) If neither the applicant nor the applicant’s partner, nor the partners jointly, have an award of universal credit, the applicant’s self-employed earnings are to be calculated in accordance with [F1 paragraphs (6) to (11)].

(6) For the purpose of paragraph (5) step 1 is to ascertain the gross income of the employment as a self-employed earner, but excluding—

(a) any payment to which paragraph 30 or 31 of schedule 4 of the 2012 Regulations refers (payments in respect of a person accommodated with the applicant under arrangements made by a local authority or voluntary organisation and payments made to the applicant by a health authority, local authority or voluntary organisation in respect of persons temporarily in the applicant’s care),

(b) any sports award within the meaning of regulation 10(9).

(7) This paragraph applies to—

(a) royalties or other sums paid as a consideration for the use of, or the right to use, any copyright, design, patent or trade mark, and

(b) any payment in respect of any—

(i) book registered under the Public Lending Right Scheme 1982(1), or

(ii) work made under any international public lending right scheme that is analogous to the Public Lending Right Scheme 1982, where the applicant is the first owner of the copyright, design, patent or trade mark, or an original contributor to the book or work concerned.

(8) For the purpose of paragraph (6), where the applicant’s earnings consist of any items to which paragraph (7) applies, those earnings are to be taken into account over a period equal to the number of weeks equal to the number obtained (and any fraction is to be treated as a corresponding fraction of a week) by dividing the earnings by the amount of council tax reduction to which the applicant would have been entitled had the payment not been made plus an amount equal to the total of the sums which would fall to be disregarded from the payment under schedule 3 (sums to be disregarded in the calculation of earnings) as appropriate in the applicant’s case.

(9) For the purpose of paragraph (5), steps 2 and 3 in calculating that applicant’s self-employed earnings are to ascertain the net profit of the employment as self-employed earnings, in accordance with regulations 37 and 38 (calculation of net profit, and deduction of tax and contributions) of the 2012 Regulations(2), but—

(a) reading all references in those regulations to—

(i) the “applicant” as referring to the applicant under these Regulations,

(ii) the “assessment period” as referring to the assessment period determined under regulation 44 of these Regulations,

(iii) “earnings” as referring to the gross income ascertained under Step 1 of this regulation,

(iv) the “qualifying premium” as referring to “relievable pension contributions” within the meaning of this Chapter (see regulation 46(1)), and

(b) reading the reference in regulation 37(2) of those Regulations to “Schedule 3” as a reference to schedule 3 of these Regulations.

(10) If the amount resulting from the steps 2 and 3 in paragraph (9) is a nil or negative amount, the amount of the applicant’s self-employed earnings in respect of the assessment period is nil, otherwise those earnings as to be calculated in accordance with step 4 in paragraph (11).

(11) For the purpose of paragraph (5), step 4 is to deduct from the amount obtained from steps 2 and 3 any sum, where applicable, specified in schedule 3, and if the amount resulting from that step—

(a) is greater than nil, that is the amount of the applicant’s self-employed earnings for the assessment period,

(b) is nil or a negative amount, the amount of the applicant’s self-employed earnings in respect of the assessment period is nil.

Textual Amendments

F1 Words in reg. 51(5) substituted (1.4.2023) by The Council Tax Reduction and Council Tax (Discounts) (Miscellaneous Amendment) (Scotland) Regulations 2023 (S.S.I. 2023/38), regs. 1, 13

Commencement Information

I1 Reg. 51 in force at 1.4.2022, see reg. 1

(1)

The Scheme is set out in the appendix to S.I. 1982/719. There are amendments to that appendix that are not relevant to these Regulations.

(2)

Regulation 38 was amended by S.S.I. 2016/81.