PART 6Income and capital
CHAPTER 1General
Calculation of income and capital of members of applicant's family and of a polygamous marriageF124.
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Circumstances in which capital and income of non-dependant is to be treated as applicant'sF125.
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CHAPTER 2Income and capital where there is an award of universal credit
Calculation of income and capital: persons who have an award of universal creditF126.
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CHAPTER 3Income
Calculation of income on a weekly basisF127.
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Treatment of child care chargesF128.
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Average weekly earnings of employed earnersF129.
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Average weekly earnings of self-employed earnersF130.
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Average weekly income other than earningsF131.
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Calculation of average weekly income from ... tax creditsF132.
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Calculation of weekly incomeF133.
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CHAPTER 4Employed earners
Earnings of employed earnersF134.
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Calculation of net earnings of employed earnersF135.
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CHAPTER 5Self-employed earners
Earnings of self-employed earnersF136.
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Calculation of net profit of self-employed earners37.
(1)
For the purposes of regulation 30 (average weekly earnings of self-employed earners) 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 or is that of a share fisherman within the meaning of the Social Security (Mariners' Benefits) Regulations 1975 M1, that earner's share of the net profit derived from that employment, less—
(i)
an amount in respect of income tax and social security contributions payable under the 1992 Act calculated in accordance with regulation 38 (deduction of tax and contributions for self-employed earners); and
(ii)
one-half of the amount calculated in accordance with paragraph (11) in respect of any qualifying premium.
(2)
Any sum, where applicable, specified in Schedule 3 is to be disregarded when calculating a self-employed earner's net profit.
(3)
For the purposes of paragraph (1)(a) the net profit of the employment is, except where paragraph (9) applies, to be calculated by taking into account the earnings of the employment over the assessment period less—
(a)
subject to paragraphs (5) to (8), 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; and
(c)
one-half of the amount calculated in accordance with paragraph (11) in respect of any qualifying premium.
(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 assessment period less, subject to paragraphs (5) to (8), any expenses wholly and exclusively incurred in that period for the purposes of the employment.
(5)
Subject to paragraph (6), no deduction is 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 assessment period;
(e)
the repayment of capital on any loan taken out for the purposes of the employment;
(f)
any expenses incurred in providing business entertainment; or
(g)
any debts, except bad debts proved to be bad, but this sub-paragraph does not apply to any expenses incurred in the recovery of a debt.
(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; 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.
(7)
The relevant authority is to refuse to make a deduction in respect of any expenses under paragraph (3)(a) or (4) where it is not satisfied given the nature and the amount of the expense 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 employment;
(b)
a deduction is to be made under paragraph (3)(a) or (4) 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.
(9)
Where an applicant 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)
social security contributions payable under the 1992 Act;
calculated in accordance with regulation 38 (deduction of tax and contributions of self-employed earners); and
(b)
one-half of the amount calculated in accordance with paragraph (11) in respect of any qualifying premium.
(10)
For the avoidance of doubt where an applicant is engaged in employment as a self-employed earner and is also engaged in one or more other employments as a self-employed or employed earner any loss incurred in any one of those employments is not to be offset against earnings in any other of the applicant's employments.
(11)
The amount in respect of any qualifying premium is to be calculated by multiplying the daily amount of the qualifying premium by the number equal to the number of days in the assessment period, and for the purposes of this regulation the daily amount of the qualifying premium is to 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 equal to the number of days in the period to which the qualifying premium relates.
(12)
In this regulation “” means any premium which is payable periodically in respect of a personal pension scheme and is payable on or after the date of the application.
Deduction of tax and contributions of self-employed earners38.
(1)
The amount to be deducted in respect of income tax under regulation 37(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 was assessable to income tax at the basic rate of tax applicable to the assessment period less only the personal relief to which the applicant is entitled under section 35(1) of the Income Tax Act 2007 (personal allowance for those aged under 65) as is appropriate to the applicant's circumstances, but, if the assessment period is less than one year the earnings to which the basic rate of tax is to be applied and the amount of the personal reliefs deductible under this paragraph are to be calculated on a pro rata basis.
(2)
The amount to be deducted in respect of social security contributions under regulation 37(1)(b)(i), (3)(b)(ii) or (9)(a)(ii) is the total of—
F2(a)
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(b)
the amount of Class 4 contributions (if any) which would be payable under section 15 of the 1992 Act M2 (Class 4 contributions recoverable under the Income Tax Acts) at the percentage rate applicable to the assessment period 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 applicable to the assessment period, but if the assessment period is less than one year those limits are to be reduced pro rata.
(3)
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 37(3)(a) or, as the case may be, (4); and
(b)
in the case of employment as a child minder, one-third of the earnings of that employment.
CHAPTER 6Other income
Calculation of income other than earningsF139.
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Capital treated as incomeF140.
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Notional incomeF141.
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CHAPTER 7Capital
Capital limitF142.
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Calculation of capitalF143.
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Disregard of capital of child and young personF144.
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Income treated as capitalF145.
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Calculation of capital in the United KingdomF146.
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Calculation of capital outside the United KingdomF147.
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Notional capitalF148.
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Diminishing notional capitalF149.
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Capital jointly heldF150.
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Calculation of tariff income from capitalF151.
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