The Employment and Support Allowance Regulations (Northern Ireland) 2008

CHAPTER 4 Self-employed earners

Earnings of self-employed earners

97.—(1) Subject to paragraph (2), “earnings”, in the case of employment as a self-employed earner, means the gross receipts of the employment and includes any allowance paid under sections 2 and 3 of the Disabled Persons (Employment) Act (Northern Ireland) 1945(1), section 1 of the Employment and Training Act(2) or any equivalent allowance payable under Republic of Ireland legislation to the claimant for the purpose of assisting the claimant in carrying on the claimant’s business.

(2) “Earnings” do 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 27 or 28 of Schedule 8 refers (sums to be disregarded in the calculation of income other than earnings);

(c) any sports award.

Calculation of net profit of self-employed earners

98.—(1) For the purposes of regulation 92 (calculation of earnings of self-employed earners), the earnings of a claimant to be taken into account are to be—

(a) in the case of a self-employed earner who is engaged in employment on that self-employed 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 or is that of a share fisherman within the meaning of the Social Security (Mariners’ Benefits) Regulations (Northern Ireland) 1975(3), that self-employed earner’s share of the net profit derived from that employment less—

(i) an amount in respect of income tax and of National Insurance contributions payable under the Contributions and Benefits Act calculated in accordance with regulation 99 (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 92 in respect of a personal pension scheme.

(2) There is to be disregarded from a claimant’s net profit any sum, where applicable, specified in paragraphs 1 to 11 of Schedule 7.

(3) For the purposes of paragraph (1)(a) the net profit of the employment, except where paragraph (9) applies, is to be calculated by taking into account the earnings of the employment over the period determined under regulation 92 less—

(a) subject to paragraphs (5) to (7), 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) National Insurance contributions payable under the Contributions and Benefits Act,

calculated in accordance with regulation 99; and

(c) one half of any premium paid in the period that is relevant under regulation 92 in respect of a personal pension scheme.

(4) 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 period determined under regulation 92 less, subject to paragraphs (5) to (7), any expenses wholly and exclusively defrayed in that period for the purpose of that employment.

(5) Subject to paragraph (6), a deduction is not to be made under paragraph (3)(a) or (4) 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 92;

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

(f) any expenses incurred in providing business entertainment.

(6) A deduction is to be made under paragraph (3)(a) or (4) in respect of the repayment of capital on any loan used for—

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

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

(c) the purchase of land under the Northern Ireland Land Act 1925(4).

(7) The Department will refuse to make a deduction in respect of any expenses under paragraph (3)(a) or (4) where it 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.

(8) For the avoidance of doubt—

(a) a deduction is not to be made under paragraph (3)(a) or (4) in respect of any sum unless it has been expended for the purposes of the business;

(b) a deduction is to be made thereunder in respect of—

(i) the excess of any VAT paid over VAT received in the period determined under regulation 92,

(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.

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

(a) an amount in respect of—

(i) income tax, and

(ii) National Insurance contributions payable under the Contributions and Benefits Act,

calculated in accordance with regulation 99; and

(b) one half of any premium paid in respect of a personal pension scheme.

(10) Notwithstanding regulation 92 and the foregoing paragraphs, the Department may assess any item of a claimant’s income or expenditure over a period other than that determined under regulation 92 as may, in the particular case, enable the weekly amount of that item of income or expenditure to be determined more accurately.

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

(12) Where the claimant is a self-employed earner in the Republic of Ireland the amounts to be deducted for income tax and National Insurance contributions under this regulation are to be such amounts as, in the opinion of the Department, would have been deducted had the claimant been employed in Northern Ireland.

Deduction of tax and contributions for self-employed earners

99.—(1) Subject to paragraph (2), the amount to be deducted in respect of income tax under regulation 98(1)(b)(i), (3)(b)(i) or (9)(a)(i) (calculation of net profit of self-employed earners) is to be calculated on the basis of the amount of chargeable income and as if that income were assessable to income tax at the starting rate or, as the case may be, the starting rate and the basic rate of tax less only the personal allowance to which the claimant is entitled under sections 35 and 38 to 40 of the Income Tax Act 2007(5) (personal allowances) as is appropriate to the claimant’s circumstances.

(2) If the period determined under regulation 92 is less than a year the earnings to which the starting rate of tax is to be applied and the amount of the personal allowance deductible under paragraph (1) is to be calculated on a pro rata basis.

(3) The amount to be deducted in respect of National Insurance contributions under regulation 98(1)(b)(i), (3)(b)(ii) or (9)(a)(ii) is to be the total of—

(a) the amount of Class 2 contributions payable under section 11(1) or, as the case may be, (3) of the Contributions and Benefits Act(6) at the rate applicable at the date of claim except where the claimant’s chargeable income is less than the amount specified in subsection (4) of that section (small earnings exception) for the tax year in which the date of claim falls; but if the assessment period is less than a year, the amount specified for that tax year is to be reduced pro rata; and

(b) the amount of Class 4 contributions (if any) which would be payable under section 15 of that Act(7) (Class 4 contributions recoverable under the Income Taxes 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; but if the assessment period is less than a year, those limits are to be reduced pro rata.

(4) 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 98(3)(a) or (4), as the case may be;

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

(1)

1945 c. 6 (N.I.); sections 2 and 3 were amended by section 1 of the Disabled Persons (Employment) Act (Northern Ireland) 1960 (c. 4 (N.I.)) and Schedule 18 to the Education and Libraries (Northern Ireland) Order 1986 (S.I. 1986/594 (N.I. 3))

(2)

Section 1 was amended by Article 3 of the Employment and Training (Amendment) (Northern Ireland) Order 1988 (S.I. 1988/1087 (N.I. 10)) and Article 5 of the Industrial Training (Northern Ireland) Order 1990 (S.I. 1990/1200 (N.I. 8))

(3)

S.R. 1975 No. 108

(4)

1925 c. 34

(5)

2007 c. 3

(6)

Section 11 was amended by paragraph 13 of Schedule 3 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671) and Article 2 of S.I. 2008/579

(7)

Section 15 was amended by section 13 of the Limited Liability Partnerships Act 2000 (c.12), section 3(2) of the National Insurance Contributions Act 2002 (c. 19), paragraph 424 of Schedule 1 to the Income Tax (Trading and Other Income) Act 2005 (c. 5) and Article 4 of S.I. 2008/579