21.—(1) Subject to [F1paragraphs (2) and (3)], “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 section 2 of the Employment and Training Act 1973 M1 [F2or section 2 of the Enterprise and New Towns (Scotland) Act 1990] to the claimant for the purpose of assisting him in carrying on his business unless at the date of claim the allowance has been terminated.
(2) Where a claimant is employed in providing board and lodging accommodation for which a charge is payable, any income consisting of payments of such a charge shall only be taken into account under this Chapter as earnings if it forms a major part of the total of the claimant's weekly income less any sums disregarded under Schedule 2 [F3other than under paragraph 40 of that Schedule.]
[F4(3) “Earnings” shall not include any payments to which paragraph 24 of Schedule 2 refers (sums to be disregarded in the calculation of income other than earnings) [F5nor shall it include any sports award].]
[F6(4) A self-employed earner shall not be treated as being in receipt of earnings in any assessment period as long as she is entitled to maternity allowance at the date of the claim.]
Textual Amendments
F1Words in reg. 21(1) substituted (4.10.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No.5) Regulations 1994 (S.I. 1994/2139), regs. 1(1)(b), 17(a)
F2Words in reg. 21(1) inserted (1.4.1991) by The Enterprise (Scotland) Consequential Amendments Order 1991 (S.I. 1991/387), arts. 1, 2, Sch.
F3Words in reg. 21(2) added (10.4.1990) by Family Credit (General) Amendment Regulations 1990 (S.I. 1990/574), reg. 1(1), 9
F4Reg. 21(3) inserted (4.10.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No.5) Regulations 1994 (S.I. 1994/2139), regs. 1(1)(b), 17(b)
F5Words in reg. 21(3) added (with effect in accordance with reg. 1(2) of the amending S.I.) by The Social Security Amendment (Sports Awards) Regulations 1999 (S.I. 1999/2165), regs. 1(1), 4(3)
F6Reg. 21(4) added (with effect in accordance with reg. 1(4) of the amending S.I.) by The Tax Credits (Miscellaneous Amendments No. 3) Regulations 2001 (S.I. 2001/892), regs. 1(2), 16(2)
Marginal Citations
M11973 c. 50; section 2 was amended by sections 9 and 11 and Schedule 2, Part II, paragraph 9 and Schedule 3 of the Employment and Training Act 1981 (c. 57).
22.—(1) For the purposes of regulation 15 (normal weekly 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 the Social Security (Mariners' Benefits) Regulations 1975 M2, his 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 Social Security Act calculated in accordance with regulation 23 (deduction of tax and contributions for self-employed earners); and
(ii)[F7one-half of the amount in respect of any qualifying premium calculated in accordance with paragraph (13)].
(2) There shall be disregarded from a claimant's net profit any sum, where applicable, specified in Schedule 1.
(3) For the purposes of paragraph (1)(a) the net profit of the employment shall, except where paragraph [F8(3A),] (9) or (10) applies, be calculated by taking into account the earnings of the employment [F9received in the assessment period], 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)social security contributions payable under the Social Security Act, calculated in accordance with regulation 23 (deduction of tax and contributions for self-employed earners); and
(c)[F10one-half of the amount in respect of any qualifying premium calculated in accordance with paragraph (13)].
[F11(3A) For the purposes of paragraph (1)(a), in a case where the assessment period is determined under regulation 15(1)(b), the net profit of the employment shall, except where paragraph (9) applies, be calculated by taking into account the earnings of the employment relevant to that period (whether or not received in that period), less—
(a)subject to paragraphs (5) to (7), any expenses relevant to that period (whether or not defrayed in that period) and which were wholly and exclusively incurred for the purposes of that employment;
(b)an amount in respect of—
(i)income tax; and
(ii)social security contributions payable under the Social Security Act,
calculated in accordance with regulation 23; and
(c)[F12one-half of the amount in respect of any qualifying premium calculated in accordance with paragraph (13)].]
(4) For the purposes of paragraph (1)(b) the net profit of the employment shall, except where paragraph [F13(4A), (9) or] (10) applies, be calculated by taking into account the earnings of the employment [F14received in the assessment period] less, subject to paragraphs (5) to (7), any expenses wholly and exclusively defrayed in that period for the purposes of that employment.
[F15(4A) For the purposes of paragraph (1)(b), in a case where the assessment period is determined under regulation 15(1)(b), the net profit of the employment shall, except where paragraph (9) applies, be calculated by taking into account the earnings of the employment relevant to that period (whether or not received in that period) less, subject to paragraphs (5) to (7), any expenses relevant to that period (whether or not defrayed in that period) and which were wholly and exclusively incurred for the purposes of that employment.]
(5) Subject to paragraph (6), no deduction shall be made under [F16paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be,] 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.
(6) A deduction shall be made under [F17paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be,] 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) An [F18appropriate officer] shall refuse to make a deduction in respect of any expenses under [F19paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be,] where he is not satisfied that the expense has been defrayed or given the nature and the amount of the expense that it has been reasonably incurred.
(8) For the avoidance of doubt—
(a)a deduction shall not be made under [F20paragraphs (3)(a), (3A)(a), (4) or (4A), as the case may be,] 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 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;
(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 shall 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 Social Security Act,
calculated in accordance with regulation 23 (deduction of tax and contributions for self-employed earners); and
(b)[F21one-half of the amount in respect of any qualifying premium calculated in accordance with paragraph (13)].
[F22(10) Where regulation 15(2) (normal weekly earnings of self-employed earners) applies—
(a)for the purposes of paragraph (1)(a), the net profit derived from the employment shall be calculated by taking into account the claimant’s estimated and, where appropriate, actual earnings from the employment less the amount of the deductions likely to be made and, where appropriate, made under sub-paragraphs (a) to (c) of paragraph (3); or
(b)for the purposes of paragraph (1)(b), his share of the net profit of the employment shall be calculated by taking into account the claimant’s estimated and, where appropriate, his share of the actual earnings from the employment less the amount of his share of the expenses likely to be deducted and, where appropriate, deducted under paragraph (4); or
(c)in the case of employment as a child-minder, the net profit of the employment shall be calculated by taking into account one-third of the claimant’s estimated earnings and, where appropriate, actual earnings from that employment less the amount of the deductions likely to be made and, where appropriate, made under sub-paragraphs (a) and (b) of paragraph (9).]
(11) For the avoidance of doubt where a claimant is engaged in employment as a self-employed earner and he is also 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.
[F23(12) In this regulation—
(a)“qualifying premium” means any premium which at the date of claim is payable periodically in respect of a retirement annuity contract or a personal pension scheme;]
F24(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[F25(13) The amount in respect of any qualifying premium shall 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 shall 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;
(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.]
Textual Amendments
F7Words in reg. 22(1)(b)(ii) substituted (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 19(2)
F8Words in reg. 22(3) inserted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(a)
F9Words in reg. 22(3) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(a)
F10Words in reg. 22(3)(c) substituted (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 19(2)
F11Reg. 22(3A) inserted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(b)
F12Words in reg. 22(3A)(c) substituted (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 19(2)
F13Words in reg. 22(4) inserted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(c)
F14Words in reg. 22(4) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(c)
F15Reg. 22(4A) inserted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(d)
F16Words in reg. 22(5) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(e)
F17Words in reg. 22(6) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(e)
F18Words in reg. 22(7) substituted (5.10.1999) by The Tax Credits Schemes (Miscellaneous Amendments) Regulations 1999 (S.I. 1999/2487), regs. 1(1), 26(5), (6)(a)
F19Words in reg. 22(7) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(e)
F20Words in reg. 22(8) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(e)
F21Words in reg. 22(9)(b) substituted (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 19(2)
F22Reg. 22(10) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 6(f)
F23Words in reg. 22(12) substituted (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 19(3)
F24Words in reg. 22(12) omitted (with effect in accordance with reg. 1(3) of the amending S.I.) by virtue of The Income-related Benefits Schemes and Social Security (Claims and Payments) (Miscellaneous Amendments) Regulations 1995 (S.I. 1995/2303), regs. 1(1)(b), 4(3)
F25Reg. 22(13) added (12.4.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) Regulations 1994 (S.I. 1994/527), regs. 1(1)(c), 19(4)
Marginal Citations
23.—(1) The amount to be deducted in respect of income tax under regulation 22(1)(b)(i), (3)(b)(i) [F26, (3A)(b)(i)] or (9)(a)(i) (calculation of net profit of self-employed earners) shall be calculated on the basis of the amount of chargeable income, and as if that income were assessable to income tax at [F27the lower rate or, as the case may be, the lower rate and the basic rate of tax] in the year of assessment in which the claim was made, less only the personal relief to which the claimant is entitled under sections 8(1) and (2) and 14(1)(a) and (2) of the Income and Corporation Taxes Act 1970 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year [F28the earnings to which the lower rate F29... of tax is to be applied and] the amount of the personal relief deductible under this paragraph shall be calculated on a pro rata basis.
(2) The amount to be deducted in respect of social security contributions under regulation 22(1)(b)(i), (3)(b)(ii) [F30, (3A)(b)(ii)] or (9)(a)(ii) shall be F31...—
[F32(a)[F33an amount in respect of Class 2 contributions calculated by multiplying the weekly rate of such contributions applicable at the date of claim by virtue of section 11(1) or, as the case may be, (3) of the Contributions and Benefits Act by the number of days in the assessment period and dividing the product by 7,] except where a claimant’s chargeable income is less than the amount specified in [F34section 11(4)] of that Act M3 (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 shall be calculated on a pro rata basis; and
(b) the amount of Class 4 contributions (if any) which would be payable under [F35section 15(3)] of that Act M4 (Class 4 contributions) 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 shall be calculated on a pro rata basis. ]
[F36(3) In this regulation “chargeable income” means—
(a)except where sub-paragraph (b) or (c) applies, the earnings derived from the employment, less any expenses deducted under paragraph (3)(a), (3A)(a), (4) or (4A), as the case may be, of regulation 22;
(b)except where sub-paragraph (c)(iii) applies, in the case of employment as a child minder one-third of the earnings of that employment; or
(c)where regulation 15(2) applies (normal weekly earnings of self-employed earners)—
(i)in the case of a self-employed earner who is engaged in employment on his own account, the claimant’s estimated and, where appropriate, actual earnings from the employment less the amount of the deductions likely to be made and, where appropriate, made under sub-paragraph (a) of paragraph (3) of regulation 22;
(ii)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, the claimant’s estimated and, where appropriate, his share of the actual earnings from the employment less the amount of his share of the expenses likely to be deducted and, where appropriate, deducted under paragraph (4) of regulation 22;
(iii)in the case of employment as a child minder, one-third of the claimant’s estimated and, where appropriate, actual earnings from that employment.]
Textual Amendments
F26Words in reg. 23(1) inserted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 7(a)
F27Words in reg. 23(1) substituted (5.10.1992) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No. 3) Regulations 1992 (S.I. 1992/2155), regs. 1(1), 8(a)
F28Words in reg. 23(1) inserted (5.10.1992) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No. 3) Regulations 1992 (S.I. 1992/2155), regs. 1(1), 8(b)
F29Words in reg. 23(1) omitted (4.10.1994) by The Income-related Benefits Schemes (Miscellaneous Amendments) (No.5) Regulations 1994 (S.I. 1994/2139), regs. 1(1)(b), 14
F30Words in reg. 23(2) inserted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 7(b)
F31Words in reg. 23(2) omitted (7.1.1997) by The Disability Working Allowance and Family Credit (General) Amendment Regulations 1996 (S.I. 1996/3137), regs. 1, 3(7)(a)
F32Reg. 23(2)(a)(b) substituted (11.4.1988) by Family Credit (General) Amendment Regulations 1988 (S.I. 1988/660), reg. 1, 7
F33Words in reg. 23(2)(a) substituted (7.1.1997) by The Disability Working Allowance and Family Credit (General) Amendment Regulations 1996 (S.I. 1996/3137), regs. 1, 3(7)(b)(i)
F34Words in reg. 23(2)(a) substituted (7.1.1997) by The Disability Working Allowance and Family Credit (General) Amendment Regulations 1996 (S.I. 1996/3137), regs. 1, 3(7)(b)(ii)
F35Words in reg. 23(2)(b) substituted (7.1.1997) by The Disability Working Allowance and Family Credit (General) Amendment Regulations 1996 (S.I. 1996/3137), regs. 1, 3(7)(c)
F36Reg. 23(3) substituted (5.12.1988) by Family Credit (General) Amendment No. 4 Regulations 1988 (S.I. 1988/1970), reg. 1(1), 7(c)
Marginal Citations
M3Section 7(5) was amended by article 3 of S.I. 1986/25 and S.I. 1987/46.
M4Section 9 was amended by sections 4 and 65 of, and Schedule 5 to, the Social Security Pensions Act 1975 (c. 60), by the Social Security Contributions Act 1982 (c. 2) section 1 and S.I. 1986/25.