The Disability Working Allowance (General) Regulations (Northern Ireland) 1992

CHAPTER IV: SELF-EMPLOYED EARNERS

Earnings of self-employed earners

24.—(1) Subject to paragraph (2), “earnings”, in the case of employment as a self-employed earner, means the gross receipts of the employment and shall include any allowance payable pursuant to provision or arrangements made by the Department of Economic Development(1) under sections 2 and 3 of the Disabled Persons (Employment) Act (Northern Ireland) 1945(2) or section 1(1) of the Employment and Training Act (Northern Ireland) 1950(3) or any equivalent allowance payable under the Republic of Ireland legislation 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 3 other than under paragraph 39 of that Schedule.

Calculation of net profit of self-employed earners

25.—(1) For the purposes of regulation 17 (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 (Northern Ireland) 1975(4), 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 principal Act calculated in accordance with regulation 26 (deduction of tax and contributions for self-employed earners), and

(ii) one half of any qualifying premium payable.

(2) There shall be disregarded from a claimant’s net profit any sum, where applicable, specified in Schedule 2.

(3) For the purposes of paragraph (1)(a) the net profit of the employment shall, except where paragraph (4), (11) or (12) applies, be calculated by taking into account the earnings of the employment received in the assessment period less—

(a) subject to paragraphs (7) to (9), 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 principal Act, calculated in accordance with regulation 26; and

(c) one half of any qualifying premium payable.

(4) For the purposes of paragraph (1)(a), in the case where the assessment period is determined under regulation 17(1)(b), the net profit of the employment shall, except where paragraph (11) 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 (7) to (9), 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 principal Act, calculated in accordance with regulation 26; and

(c) one half of any qualifying premium payable.

(5) For the purposes of paragraph (1)(b) the net profit of the employment shall, except where paragraph (6), (11) or (12) applies, be calculated by taking into account the earnings of the employment received in the assessment period less, subject to paragraphs (7) to (9), any expenses wholly and exclusively defrayed in that period for the purposes of that employment.

(6) For the purposes of paragraph (1)(b), in a case where the assessment period is determined under regulation 17(1)(b), the net profit of the employment shall, except where paragraph (11) 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 (7) to (9), 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.

(7) Subject to paragraph (8), no deduction shall be made under paragraph (3)(a), (4)(a), (5) or (6), 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; or

(f) any expenses incurred in providing business entertainment.

(8) A deduction shall be made under paragraph (3)(a), (4)(a), (5) or (6), 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;

(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(5).

(9) An adjudication officer shall refuse to make a deduction in respect of any expenses under paragraph (3)(a), (4)(a), (5) or (6), 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.

(10) For the avoidance of doubt—

(a) a deduction shall not be made under paragraph (3)(a), (4)(a), (5) or (6), 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 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,

(iii) any payment of interest on a loan taken out for the purposes of the employment.

(11) 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 principal Act, calculated in accordance with regulation 26; and

(b) one half of any qualifying premium payable.

(12) Where regulation 17(3) 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 paragraph (3)(a) to (c);

(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 (5); 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 and, where appropriate, actual earnings from that employment, less the amount of the deductions likely to be made and, where appropriate, made under paragraph (11)(a) and (b).

(13) 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.

(14) In this regulation “qualifying premium” means any premium or other consideration payable under an annuity contract for the time being approved by the Board of Inland Revenue as having for its main object the provision for the claimant of a life annuity in old age or the provision of an annuity for his partner or for any one or more of his dependants and in respect of which relief from income tax may be given.

(15) Where the claimant is a self-employed earner in the Republic of Ireland the amounts to be deducted for income tax and social security contributions under this regulation shall be such amounts as, in the opinion of the adjudication officer, would have been deducted had the claimant been employed in Northern Ireland.

Deduction of tax and contributions for self-employed earners

26.—(1) The amount to be deducted in respect of income tax under regulation 25(1)(b)(i), (3)(b)(i), (4)(b)(i) or (11)(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 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 257(1), (6) and (7) and 259 of the Income and Corporation Taxes Act 1988 (personal relief) as is appropriate to his circumstances; but, if the assessment period is less than a year, 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 25(1)(b)(i), (3)(b)(ii), (4)(b)(ii) or (11)(a)(ii) shall be the total of—

(a) the amount of Class 2 contributions payable under section 7(1) or, as the case may be, (4) of the principal Act(6) (Class 2 contributions) at the rate applicable at the date of claim except where a claimant’s chargeable income is less than the amount specified in section 7(5) of that Act(7) 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 section 9(2) of that Act(8) (Class 4 contributions recoverable under Tax 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 shall be calculated on a pro rata basis.

(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 regulation 25(3)(a), (4)(a), (5) or (6), as the case may be;

(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 17(3) (normal weekly earnings of self-employed earners) applies—

(i) in the case of a self-employed earner who is engaged in employment on his own account, the claimant’s estimated earnings from the employment, less the amount of the deductions likely to be made and, where appropriate, made under regulation 25(3)(a),

(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 (Northern Ireland) 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 regulation 25(5), or

(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.

(1)

See S.R. & O. (N.I.) 1964 No. 205, Article 3 for change in style of Ministry of Labour and National Insurance to Ministry of Health and Social Services; S.R. & O. (N.I.) 1973 No. 504, Article 6 for transfer of functions from Ministry of Health and Social Services to Department of Manpower Services and S.I. 1982/846 (N.I. 11), Article 3 for renaming the Department of Manpower Services the Department of Economic Development

(2)

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))

(3)

1950 c. 29 (N.I.); 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 by Article 5 of the Industrial Training (Northern Ireland) Order 1990 (S.I. 1990/1200 (N.I. 8))

(4)

S.R. 1975 No. 108; to which there are amendments not relevant to these regulations

(5)

1925 c. 34

(6)

Section 7(1) was amended by Article 3 of the Social Security and Family Allowances (Northern Ireland) Order 1976, Article 11(1) of the Health and Social Security (Northern Ireland) Order 1984 (S.I. 1984/1158 (N.I. 8)) and Article 3(a) of S.R. 1991 No. 542

(7)

Section 7(5) was amended by Article 3(b) of S.R. 1991 No. 542

(8)

Section 9(2) was amended by Article 5 of S.R. 1982 No. 413 and Article 5 of S.R. 1991 No. 542