The Housing Grants (Assessment of Contributions) (Scotland) Regulations 2003

CHAPTER V: SELF-EMPLOYED EARNERS

Earnings of self employed earners

12.  “Earnings” means, in the case of employment as a self employed earner, the gross income of that employment and includes any allowance paid under section 2 of the Employment and Training Act 1973(1) or section 2 of the Enterprise and New Towns (Scotland) Act 1990(2) to the relevant person for the purposes of assisting that person in carrying on that business.

Determination of net profit of self-employed earners

13.—(1) The net earnings of a relevant person derived from profit as a self employed earner shall, for the purposes of regulation 6, be determined in accordance with the following paragraphs (2) to (10).

(2) 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.

(3) 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(3), his share of the net profit derived from that employment, less an amount in respect of income tax and of social security contributions payable under the 1992 Act determined in accordance with regulation 14.

(4) For the purposes of paragraph (2) the net profit of the employment shall, except where paragraph (9) applies, be determined by taking into account the earnings of the employment over the assessment period less–

(a) subject to paragraphs (6) 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,

determined in accordance with regulation 14; and

(c) one-half of any sum payable in respect of a retirement annuity contract or a personal pension scheme paid by the relevant person.

(5) For the purposes of paragraph (2) the net profit of the employment shall be determined by taking into account the earnings of the employment over the assessment period less, subject to paragraphs (6) to (8), any expenses wholly and exclusively incurred 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) any 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; and

(g) any debts, except bad debts proved to be such, but this sub paragraph shall not apply to any expenses incurred in the recovery of a debt.

(7) A deduction shall be made under paragraph (4)(a) or (5) in respect of

(a) the repayment of capital on any loan used for–

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

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

(b) the excess of any value added tax paid by the relevant person in respect of taxable supplies made to that relevant person, over any such tax received by that relevant person in respect of taxable supplies made by that relevant person, calculated with reference to the assessment period;

(c) 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

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

(8) No deduction shall be made in respect of any expenses under paragraph (4)(a) or (5) where, given the nature and the amount of the expense, it has been unreasonably incurred.

(9) Where a relevant person is engaged in employment as a child minder the net profit of the employment shall be determined by taking into account one third of the earnings of that employment over the assessment period, less–

(a) an amount in respect of–

(i) income tax; and

(ii) social security contributions payable under the 1992 Act,

determined in accordance with regulation 14; and

(b) one-half of any sum payable as a contribution in respect of a retirement annuity contract or a personal pension scheme paid by the relevant person.

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

Deduction of tax and contributions for self-employed earners

14.—(1) The amount to be deducted in respect of income tax under regulation 13(3), (4) or (9) shall be determined on the basis of the amount of chargeable income and as if that income were assessable to income tax at the lower rate or, as the case may be, the lower rate and the basic rate or the basic rate and higher rate of tax in the year of assessment in which the application was made less only the personal relief to which the relevant person is entitled under sections 257(1), (6) and (7) and 259(1)(a) and (2) of the Income and Corporation Taxes Act 1988(4) as is appropriate to that relevant person’s circumstances; but, if the assessment period is less than a year, the earnings to which the lower rate and, if appropriate, the basic rate and the higher rate 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 13(3), (4) or (9) shall be the total of–

(a) the amount of Class 2 contributions payable under subsection (1) or, as the case may be, subsection (3) of section 11 of the 1992 Act at the rate applicable at the date of the application except where the relevant person’s chargeable income is less than the amount for the time being specified in subsection (4) of that section for the tax year in which the date of the application falls; but if the assessment period is less than a year, the amount specified for that tax year shall be reduced pro rata; and

(b) the amount of Class 4 contributions, if any, which would be payable under section 15 of that Act as the percentage rate applicable at the date of the application 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 the application falls; but if the assessment period is less than a year, those limits shall 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 paragraph (4)(a) or, as the case may be, (5) of regulation 13;

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

(1)

1973 c. 50; section 2 was substituted by the Employment Act 1988 (c. 19), section 25, and repealed in part by the Employment Act 1989 (c. 38), section 29 and Schedule 7. Section 2(3A) was inserted in relation to Scotland only by the Trade Union Reform and Employment Rights Act 1993 (c. 19), section 47.

(2)

1990 c. 35; section 2 was amended by the Trade Union Reform and Employment Rights Act 1993 (c. 19), section 51 and Schedule 10.

(3)

S.I. 1975/529.

(4)

1988 c. 1.