Regulation 13 Calculation of net profit of self-employed earnersC1

England, Wales and Scotland

(1)

For the purposes of regulations 3 (calculation of earnings) and 11 (calculation of 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 his 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 Contributions and Benefits Act calculated in accordance with regulation 14 (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 11 in respect of a retirement annuity contract or a personal pension scheme;

(c)

in paragraph (b) “share fisherman" means any person who—

(i)

is ordinarily employed in the fishing industry otherwise than under a contract of service, as a master or member of the crew of any fishing boat manned by more than one person, and is remunerated in respect of that employment in whole or in part by a share of profits or gross earnings of the fishing boat; or

(ii)

has ordinarily been so employed, but who by reason of age or infirmity permanently ceases to be so employed and becomes ordinarily engaged in employment ashore in Great Britain, otherwise than under a contract of service, making or mending any gear appurtenant to a fishing boat or performing other services ancillary to or in connection with that boat and is remunerated in respect of that employment in whole or in part by a share of the profits or gross earnings of that boat and has not ceased to be ordinarily engaged in such employment.

(2)

Except in a case to which paragraph (3) applies, there shall be disregarded or deducted as appropriate from a claimant’s net profit—

(a)

any sum, where applicable, specified in Schedule 1; and

(b)

any relevant child care charges to which Schedule 2 applies up to a maximum deduction in respect of any claimant of £60 per week.

(3)

In the case of entitlement to F1carer’s allowance under section 70 of the Contributions and Benefits Act M1 there shall be disregarded or deducted as appropriate from a claimant’s net profit—

(a)

any sum where applicable, specified in Schedule 1; and

(b)

any care charges to which Schedule 3 applies up to a maximum deduction, in respect of such care charges incurred by any claimant, of 50% of his net profit less those sums, if any, specified in Schedule 1 which are disregarded.

(4)

For the purposes of paragraph (1)(a), the net profit of the employment shall, except where paragraph (10) applies, be calculated by taking into account the earnings of the employment over the period determined under regulation 11 (calculation of earnings of self-employed earners) less—

(a)

subject to paragraphs (6) to (8), 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 Contributions and Benefits Act, calculated in accordance with regulation 14 (deduction of tax and contributions for self-employed earners); and

(c)

one half of any premium paid in the period that is relevant under regulation 11 in respect of a retirement annuity contract or a personal pension scheme.

(5)

For the purposes of paragraph (1)(b), the net profit of the employment shall be calculated by taking into account the earnings of the employment over the period determined under regulation 11 less, subject to paragraphs (6) to (8), any expenses wholly and exclusively defrayed in that period for the purposes of that employment.

(6)

Subject to paragraph (7), no deduction shall be made under paragraph (4)(a) or (5) 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 11 (calculation of earnings of self-employed earners);

(e)

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

(f)

any expenses incurred in providing business entertainment.

F2(g)

where the claimant provides accommodation to another person in the dwelling the claimant occupies as his home, any expenses defrayed by the claimant in providing the accommodation to that person (including any defrayed in providing board as well as lodging).

(7)

A deduction shall be made under paragraph (4)(a) or (5) 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.

(8)

~~F3The adjudicating authority The Secretary of State shall refuse to make a deductionA deduction shall not be made~~ in respect of any expenses under paragraph (4)(a) or (5) where ~~F4the adjudicating authority~~ ~~the Secretary of State~~ 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.

(9)

For the avoidance of doubt—

(a)

a deduction shall not be made under paragraph (4)(a) or (5) 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 period determined under regulation 11 (calculation of earnings of self-employed earners);

(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.

(10)

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 Contributions and Benefits Act, calculated in accordance with regulation 14 (deduction of tax and contributions for self-employed earners); and

(b)

one half of any premium paid in respect of a retirement annuity contract or a personal pension scheme.

(11)

Notwithstanding regulation 11 (calculation of earnings of self-employed earners) and the foregoing paragraphs, ~~F5an adjudicating authority~~ ~~the Secretary of State~~ may assess any item of a claimant’s earnings or expenditure over a period other than that determined under regulation 11 as may, in the particular case, enable the weekly amount of that item of earnings or expenditure to be determined more accurately.

(12)

For the avoidance of doubt where a claimant is engaged in employment as a self-employed earner and he is 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.

Annotations

Textual amendments

F1: Words in Sch. 3 substituted (1.4.2003) by Social Security Benefit (Computation of Earnings) (Amendment) Regulations 2002 (S.I. 2002/2823), regs. 1(b), 2(4), (5)(c)
F2: Reg. 13(6)(g) added (with effect in accordance with reg. 1(3) of the amending S.I.) by Social Security Benefit (Computation of Earnings) (Amendment) Regulations 2007 (S.I. 2007/2613), regs. 1(3), 2(3)
F3: Words in reg. 13(8) substituted (E.W.) (29.11.1999) by The Social Security Act 1998 (Commencement No. 12 and Consequential and Transitional Provisions) Order 1999 (S.I. 1999/3178), reg. 1, Sch. 16 para. 5
F4: Words in reg. 13(8) substituted (E.W.) (6.9.1999) by The Social Security Act 1998 (Commencement No. 9, and Savings and Consequential and Transitional Provisions) Order 1999 (S.I. 1999/2422), reg. 1, Sch. 13 para. 1
F5: Words in reg. 13(11) substituted (E.W.) (6.9.1999) by The Social Security Act 1998 (Commencement No. 9, and Savings and Consequential and Transitional Provisions) Order 1999 (S.I. 1999/2422), reg. 1, Sch. 13 para. 1

Marginal citations

M1: 1988 c.1; sections 257 to 257F were substituted for section 257 by section 33 of the Finance Act 1988 (c.39); section 259 was amended by sections 30 and 35 of the Finance Act 1988, section 20 of the Finance (No. 2) Act 1992 (c.48), and section 77 and Schedule 8, paragraph 6 of the Finance Act 1994 (c.9).

Modifications

C1: Regs. 11-14 modified by S.I. 2002/1792, reg. 17B (as inserted (6.10.2003) by State Pension Credit (Consequential, Transitional and Miscellaneous Provisions) Regulations 2002 (S.I. 2002/3019), regs. 1(2)(b), 23(i)) (as amended (5.8.2016) by (S.I. 2016/732), arts. 1(1), 4(2))