Earned income – self-employed earnings

Introduction

SE001	This Chapter deals with the calculation and treatment of the S/E earnings with regard to UC.

SE002

Meaning of claimant

SE003	Claimant means1 either

1.	a single claimant for UC or

2.	each of joint claimants for UC.

1WR Act 12, s 40

Earned income

SE004	Earned income means1

1.	the remuneration or profit derived from

1.1	employment under a contract of service or in an office (including elective office) or

1.2	a trade, profession or vocation or

1.3	any other paid work or

2.	any income treated as earned income for the purposes of UC.

1 UC Regs, reg 52

SE005	The words “derived from” mean having their origins in1. Payments for past, present and future work should be treated as earnings unless specifically excluded.

1 R(SB) 21/86

SE006	A S/E earner will derive earned income from a

1.	trade

2.	profession or

3.	vocation.

These are known as S/E earnings1. See SE012 et seq for guidance on trades, professions and vocations.

1 UC Regs, reg 57(1)

Guidance in this chapter covers

1.	what S/E earnings are

2.	determining gainful self-employment

3.	the minimum income floor

4.	the start-up period

5.	calculating S/E earnings.

SE007 – SE009

Characteristics of self-employed earnings

SE010	Self-employed earnings consist of income that a person derives from carrying on a trade, profession or vocation, other than income which is “employed earnings”1.

SE011	The identification of whether the claimant is in receipt of self-employed earnings forms part of the test for gainful self-employment. SE019 et seq provides guidance on the gainful self-employment test.

Note: Employed earnings are earnings derived from employment under a contract of service or as the holder of an office (including elective office)2. Chapter H3 provides guidance on employed earnings.

1 UC Regs, reg 57(1) ;2 reg 55(1)

Trade, profession or vocation

SE012	The concept of trade, profession or vocation has its origins in tax legislation. A trade, profession or vocation may be carried on by a person

1.	on a sole trader basis or

2.	in partnership with others.

A trade

SE013	In order to recognise whether a person is engaged in a trade, the DM should have regard to

1.	whether there is a profit seeking motive (regardless of whether or not a profit is actually made)

2.	the frequency and number of similar transactions. The more frequent that a transaction is carried out, the more likely that this is trading

3.	whether assets are modified in order to make them more attractive for a person to buy. If this is the case then this is likely to point towards a trade

4.	the nature of the asset. Was the asset bought simply to sell on for a profit?

5.	whether there is a connection with an existing trade. If a person sells something unconnected with what they normally do by way of work then this may point towards a person not trading

6.	the financing arrangements. Where an asset is bought with a short-term loan which is to be funded by selling the asset again then this would point towards trading

7.	the length of ownership. The longer that an asset is owned, the more unlikely that the sale of it constitutes trading

8.	the reason for the acquisition and sale.

In some circumstances the existence of just one of the above may be enough to show that a person is trading. In other cases, a combination of the above may show that a person is trading.

Example 1

Bridget buys some gold and silver in order to sell on using a short-term loan. Bridget cannot afford to pay the interest on the loan from her own resources. However, once she sells the gold and silver then she repays the loan and also makes a profit. The DM determines that Bridget is engaged in a trade because she has a profit seeking motive. The assets were bought to sell on for a profit with the aid of the short-term loan.

The DM will then need to consider whether the self-employment activity is gainful self-employment Please see SE019 et seq for guidance on gainful S/E for UC.

Example 2

Mark has had a long interest in classic cars. He owns two and has had them both for a number of years. After losing his job, Mark decides to sell both of the cars because he can no longer afford the upkeep on them. The DM determines that Mark is not engaged in a trade and that he has just sold personal possessions of which he has had ownership for a number of years in a one off transaction.

Example 3

Warren buys 10,000 toilet rolls from a wholesaler with the intention to sell them for profit. He sells these in a single transaction to a restaurant chain for a profit. The DM determines Warren is engaged in a trade because his motive was profit seeking and the number of the toilet rolls he bought suggests they were bought to sell on for profit, not for his own use.

The DM will then need to consider whether the self-employment activity is gainful self-employment Please see SE019 et seq for guidance on gainful S/E for UC.

Example 4

Roy is a plasterer. He has been working as a plasterer for the past year but has not made a profit from the work. Roy wants to make a profit but is running at a loss. The DM determines that Roy is engaged in a trade notwithstanding the loss he is making because his motivation is to make a profit.

The DM will then need to consider whether the self-employment activity is gainful self-employment Please see SE019 et seq for guidance on gainful S/E for UC.

A profession

SE014	Examples of professions include

1.	accountancy

2.	the law

3.	consultancy.

Whilst it may be clear that a person is engaged in a profession, in order for the earnings from a profession to be S/E earnings then the profession has to be carried out in a capacity other than as an employed earner.

Example 1

Ros is a solicitor and works for a government department. Ros is employed as a civil servant and is subject to a contract of service. Whilst Ros’ work as a solicitor is classed as a profession, the earnings received from her profession are not self-employed earnings.

Example 2

Jeremy is an accountant. He works for himself and completes accounts for a number of clients. The earnings that Jeremy receives are from his profession as an accountant and are earnings from self-employment.

The DM will then need to consider whether the self-employment activity is gainful self-employment Please see SE019 et seq for guidance on gainful S/E for UC.

A vocation

SE015	Examples of vocations include

1.	sport

2.	music

3.	acting.

In order for the earnings from a vocation to be self-employed earnings then the vocation has to be carried out in a capacity other than as an employed earner.

Example

Keith is a darts player. He plays in tournaments around the country and competes for prize money on his own account. The DM determines that Keith’s dart playing is a vocation and the income derived from this vocation is self-employed earnings.

The DM will then need to consider whether the self-employment activity is gainful self-employment Please see SE019 et seq for guidance on gainful S/E for UC.

Assessing if earnings are from self-employed activity

SE016	To assess if a claimant’s earnings are S/E earnings for the purposes of UC, regard should be had to a number of factors and weighing up the answers to the following

1.	In what form does remuneration take? Where tax is deducted at source, this may suggest that the employment is not S/E.

2. Is the claimant’s work supervised? If they have control over agreeing to conduct work, fixing the price of work or how long the job may take this may point towards self-employment. If the claimant has own control over their costs, this may point towards self-employment.

3.	Does the claimant have the powers of appointment and dismissal and can they employ a substitute, for example to cover holidays or sickness? A power to appoint a substitute may point towards self-employment.

4.	How long in duration are the contracts of work? Short contracts may point towards self-employment.

5.	Does the claimant provide their own investment, for example, equipment? Provision of own equipment and tools may point towards self-employment.

6.	Where does the claimant work? If they work from home, or at a workshop or office they own or rent, this may point towards self-employment.

7.	Is the person who engages the claimant for work obliged to provide work? If there is no obligation then this may point towards self-employment.

8.	Does the claimant have discretion over the hours they work? The greater the discretion, the more likely that the work is self-employment.

Note: A determination that a person has earnings from self-employment does not necessarily mean that for the purposes of UC, they are gainfully S/E. Please see SE019 et seq for guidance on gainful S/E for UC.

Example 1

Leo works as a steward at race courses throughout the country. The work depends on the frequency of race meetings at the race courses to which he is prepared to travel. Leo only works when a race meeting is on and then only for the duration of each meeting. Some meetings last for five days whilst others just for one. The race courses differ on how they calculate remuneration. Some of the courses pay per hour, whilst some calculate a daily rate. The frequency of payment varies too with some courses paying monthly whilst others pay after each period of work. When at work, Leo is instructed as to his duties by a supervisor and any payment of tax and NI is deducted at source. Leo sometimes provides his own clothing for work but at some courses a uniform is provided. Leo has no discretion to the hours that he works but he is not obliged to accept employment from race courses and can decide which meetings to attend.

After considering the evidence, the DM determines that, for UC purposes Leo’s earnings are not from self-employed activity but rather they are from employed activity.

Example 2

Polly is a proof reader. She does work for various publishing houses. The frequency of the work varies and is difficult to predict. When she has work, Polly works from home and for the hours which suit her within the deadlines set by the publishing houses. Polly provides her own dictionaries and reference books for her own use. She is paid for each completed piece of proof reading. Tax is not deducted when she is paid for her work and Polly completes a self-assessment calculation for HMRC.

After considering the evidence, the DM determines that, for UC purposes Polly is S/E and her earnings are from S/E activity. The DM will then need to consider whether the self-employment activity is gainful self-employment. See SE019 et seq for guidance on gainful S/E for UC.

SE017	A determination that a person has earnings from self-employment for UC is not decisive for other purposes and nor is the DM bound by a determination made by a DM in another government department.

SE018	If the S/E earner has ceased self-employment the DM should consider if

1.	there are any capital assets from the business and

2.	any capital assets from the business should be disregarded (see ADM Chapter H2 for guidance on the treatment of the business assets)1.

1 UC Regs, Sch 10, para 8

Gainful self-employment

SE019	The determination as to whether a claimant is in gainful self-employment for UC purposes is important for UC. This is because it determines whether the

1.	minimum income floor applies to the claimant’s S/E earnings1 and

2.	claimant is eligible for a start-up period2.

1 UC Regs, reg 62(1) & 63(1)

SE020	It is for the Secretary of State to determine who is in gainful self-employment for the purposes of UC. This determination should be made after information has been gathered from the claimant. This will take place at a Gateway Interview shortly after a claim for UC has been made1.

1 UC Regs, reg 93(f)

SE021	A claimant is in gainful self-employment where1 for the purposes of UC the Secretary of State has determined that

1.	the claimant is carrying on a trade, profession or vocation as their main employment and

2.	their earnings from that trade, profession or vocation are S/E earnings (see SE010 et seq) and

3.	the trade, profession or vocation is organised, developed, regular and carried on in expectation of profit.

In order to be in gainful self-employment for the purposes of UC, 1, 2 and 3 have to be satisfied.

1 UC Regs, reg 64

The gainful self-employment test part 1: main employment

SE022	In order to determine if a claimant is gainfully S/E, the DM needs to decide if the trade, profession or vocation is their main employment. This includes claimants who are

1.	only undertaking S/E activity but on a part time or low paid basis or

2.	both S/E and working as an employed earner.

In determining whether self-employment is the person’s main employment, the DM should consider whether self-employment is the main employment activity (in terms of hours undertaken and earnings received) and whether self-employment is the claimant’s main employment goal.

SE023 To assess whether the S/E activity is the main employment, the DM needs to consider the amount of available work hours spent on the S/E activity.

The S/E activity is likely to be the claimant’s main employment where

the claimant undertakes only S/E activity and it occupies a significant proportion of their expected number of hours per week. For example where S/E activity accounts for more than half the expected number of hours, it is very likely that S/E will be the main employment;

the claimant undertakes S/E and employed activity and the S/E activity takes up more of their time than the employed activity (but also have regard to SE023 2.b. below)

if the claimant is starting a new business and the type of activities outlined in SE029 take up most of their expected number of hours per week.

The S/E activity is unlikely to be the claimant’s main employment where:

the claimant undertakes only S/E activity and the S/E activity occupies significantly less than half the expected hours;

the claimant undertakes S/E and employed activities and even if the S/E activity takes up more time than the employed activity, if the S/E activity still only represents a small proportion of the expected hours of work (but also have regard to SE023 4.a below regarding earnings).

Other factors to consider

Whilst hours are a good indicator of someone’s main employment goal, it is not the only factor a DM should consider in reaching a determination. The DM should consider other factors, such as the amount of income received from each employment and whether S/E activity is the claimant’s main employment goal.

For example, self-employment may be the main employment if:

a claimant undertakes S/E activity for a small number of hours, but is receiving a high hourly return on this activity; or

a claimant works more hours on employed work, but receives a greater proportion of their income from S/E activity.

And self-employment may not be the main employment if:

a claimant spends marginally over half the expected hours engaged in self-employed activity, but receives only limited income from the activity and/or has very limited opportunity to expand the business activity.

a claimant spends marginally more hours on self-employed activity than employed activity but receives a significantly larger proportion of their earnings form the employed activity.

SE024	Evidence at the gateway interview which may indicate whether the trade, profession or vocation is the main employment include

1.	a statement of the number of hours spent on the activity

2.	the claimants intention as to which activity is their main form of employment and

3.	the amount of earnings from the S/E activity.

The gainful self-employment test part 2: earnings that are derived from a trade, profession or vocation are self-employed earnings

SE025	SE010 – SE018 set out what is meant by self-employed earnings. Please refer to that section when considering this part of the test.

The gainful self-employment test part 3: organised, developed, regular and in expectation of profit

SE026	In order to determine if the activity is organised, developed, regular and carried on in expectation of profit, the DM should take into account

1.	whether the activity is undertaken for financial gain

2.	the number of hours spent each week on the work

3.	any business plan or steps taken to increase income from activity

4.	how HMRC regard the activity

5.	how much work is in the pipeline

6.	whether the claimant is actively marketing or advertises for work.

The above is not exhaustive.

SE027	In addition, the characteristics of gainful self-employment may vary depending on whether the business is

1.	an existing business which has been trading for some time or

2.	a new business or

3.	an existing business receiving little or no income.

Existing business

SE028	An existing business may

1.	have a list of regular customers

2.	be registered with HMRC for Self Assessment and / or VAT

3.	have accounts covering current and previous activity

4.	have evidence of trading and regular income.

The decision, therefore, to determine gainful self-employment for UC purposes may be relatively straightforward. This is because the evidence shows an established business which is organised, developed and regular with S/E earnings from a trade, profession or vocation as the main employment.

New businesses

SE029	For a new business, the DM should consider

1.	the business plan or proposal and whether there is a reasonable prospect of the business being an on-going concern in terms of an expectation of profit

2.	what steps a claimant is already taking to progress their new business activity or towards carrying out work in relation to the business and whether there is work in the pipeline, for example, a list of suppliers, diary of appointments etc

3.	what work has already been done and what income has been received

4.	whether the claimant is making it known to potential customers that they are available to take on work, for example, marketing and advertising

5.	whether the claimant has registered as S/E with HMRC (although this will not verify S/E activity for UC purposes).

Businesses receiving little or no income

SE030	A S/E earner who has already been deemed by the DWP to be in gainful self-employment may well experience times where their business is not generating much by way of an income. However, this does not mean that they are not gainfully S/E for the purposes of UC.

SE031	In order to determine if a claimant is still gainfully S/E, the DM should consider

1.	if there is a reasonable prospect of work in the near future and

2.	if the business is a going concern and regarded as such by

2.1	the person or

2.2	the business’s bankers or

2.3	any creditors or

2.4	others and

3.	if the person is genuinely available for and actively seeking alternative work and

4.	if the person hopes or intends to restart work in the business when economic conditions improve and

5.	if the person is undertaking any activities in connection with the self employment and

6.	if there is work in the pipeline and

7.	if the person is regarded as S/E by HMRC and

8.	if the person claims to be anxious for work in the S/E occupation, trade or business. Is the person making it known that the business can take on work? For example,

8.1	by advertising or

8.2	by visiting potential customers and

9.	if the interruption in question is part of the normal pattern of the

9.1	person’s work or

9.2	work that the person is seeking.

Not all of these questions will be relevant to whether a person is still gainfully S/E. It will depend on the facts of the particular case.

SE032	The DM should make a determination on gainful S/E based on a balanced view of the evidence. These are matters of individual judgement for the DM concerned.

Sickness

SE033	A S/E claimant will experience occasional minor illnesses like anyone else. The DM should regard the periods of minor illness as part of the normal pattern of the self employment.

SE034	Examples of gainful self-employment

Example 1

Outline: Both S/E and PAYE activities being carried out with no significant difference between the time spent on either activity nor in the earnings received.

Ann has claimed UC and the expected number of hours she can work per week are 35. She has both S/E and PAYE work. Ann works for 8 hours a week in a pub and is paid £49.60 weekly by the pub landlord as a PAYE employee. Ann also carries out sewing work from home. This work is carried out on a S/E basis. Ann normally spends about 10 hours a week on this activity and earns about £40 but the earnings vary because the level of work fluctuates. Ann can choose when she does her sewing and the amount of hours she spends doing this can change. She can take on more work and can charge different prices for her work.

Part 1

Ann spends similar amounts of time on both activities and the earnings generated from both are around the same. The DM therefore needs to look at hours, income to make a determination. The DM determines that Ann’s PAYE work is her main employment because she generates most of her income from that activity.

Part 2 & part 3

Although Ann’s sewing is a vocation, and therefore the earnings from this are SE earnings, and Ann’s self employment is organised and developed and carried out in expectation of profit, she has not met the first requirement of the test.

Determination

The DM determined that Ann’s SE was not her main form of employment; she therefore failed to meet part 1 of the test. The DM determines that Ann is not gainfully self-employed.

Example 2

Outline: SE activity only being carried out where less than half the available work hours are spent on the activity but receiving comparatively high earnings from activity.

Kendra makes a claim for UC. She is an animal lover and has a small business as a pet walker and pet sitter. She spends about 12 hours a week walking dogs for clients and checking on the pets of owners who have gone on holiday. Kendra charges for these services and earns about £160 a week from them. She has no other employment. She has begun advertising with leaflets and distributing business cards and has plans to increase the locations where she is available to take on work.

Part 1

Kendra spend less than half her available hours on her SE activity, however she receives a relatively high wage from the activity. The DM considers both hours and earnings and decides that the SE activity is the main employment as is pays the most.

Part 2

The activity Kendra is undertaking is a vocation and she has control over the hours she works and the prices she charges, therefore her earnings are from SE.

Part 3

Kendra is advertising her business and is taking active steps to make a profit. Her business is organised, developing and in carried out in expectation of profit

Determination

Kendra has met all parts of the test. The DM determines for the purposes of	her claim to UC, Kendra’s business provides her with gainful self-employment.

Example 3

Outline: S/E activity only being carried out for more than half of available work hours but is not organised, developed or regular or carried out in expectation of profit.

George is a trained hairdresser. He has lost his job at the salon where he worked. George does, however, still cut hair for some private clients. He does this on an ad-hoc basis and charges just a small fee to cover his costs. In the course of a week, George probably spends no more than 18 hours at most on hairdressing and earns on average £80. George has stated that he is not looking to increase his client base or his earnings.

Part 1

George spends more than half of his working hours on self employment. The SE activity is seen as his main form of employment.

Part 2

George’s earning are derived from a vocation.

Part 3

George’s activity is not carried out in expectation of profit and neither is it organised, developed or regular.

Determination

George didn’t meet the part 3 of the test; the DM determines he is not gainfully SE. However, his earnings are earnings from self-employment and George has to report these earnings for the purposes of his award of UC and George will be expected to look for work as an employed earner as well.

Example 4

Outline:	S/E activity being carried out for less than the available work hours and not developed nor carried out in expectation of profit

Ziggy plays guitar and every fortnight performs at his local pub. He plays for about two hours and receives £20 for each performance. The pub where Ziggy plays advertise the nights that Ziggy performs. Ziggy does not play anywhere else and regards the fortnightly performances as a bit of fun.

Part 1

Ziggy only spends a few hours a week on the SE activity and receives a low wage. The DM determines that the SE is not Ziggy’s main form of employment.

Part 2 & part 3

Ziggy’s earnings are from self-employment but the business in not developed nor is it carried out in expectation of profit.

Determination

Ziggy does not met parts 1 and 3 of the test. He is therefore determined by the DM to not be gainfully SE.

Example 5

Outline: Both S/E and PAYE activity being carried out with no significant difference between the hours worked but a difference between the income received and the S/E activity being regular, organised, developed and carried out in expectation of profit.

David has claimed UC and expected number of hours per week he can work are 35. He works for a supermarket for 11 hours a week and is paid £68 a week. David also works as an office cleaner. In a typical week, David earns about £110 from the cleaning business for 10 hours of work.

David is paid in cash from the office manager for cleaning the offices and arranges to pay tax on this income through self-assessment. He is responsible for buying his own equipment and arranging for someone to cover for him when he takes a holiday or falls sick. David advertised his services and is actively marketing his business in order to take on more cleaning work

Part 1

David spends a similar amount of time on both activities. The DM therefore has to look at earnings in order to determine what the main form of employment is. The earnings generated from the office cleaning work are higher than the earnings from the supermarket, so the DM determines that the office cleaning work is David’s main employment.

Part 2

David has a clear profit-seeking motive. He buys his own equipment and is responsible for arranging cover if he goes on holiday or falls sick, The DM determines that the earnings from his office cleaning are SE earnings

Part 3

David has a regular cleaning contract with the office, which is considered significant work in the ‘pipeline’. HMRC consider David’s cleaning work to be self-employment because he does a taxation self-assessment and pays VAT on this income. The DM determines that the cleaning work is organised, regular and in expectation of profit.

Determination

David met all three parts of the test; he is therefore determined by the DM to be gainfully SE.

Example 6

Outline: Both S/E and PAYE activity being carried out with no significant difference between the hours worked or between the income received and the S/E activity being regular, organised, developed and carried out in expectation of profit.

Paul works as an office manager for a local charity. He works 12 hours a week and is paid £84 a week. He also works at home, typing documents from audio. He can decide the number of hours he works and how much work he undertakes. He uses his own computer and broadband for this and is paid per minute of audio he types up. Paul estimates he spends around 12 hours a week typing and earns around £90 a week on average. Paul says he prefers his office work, but the charity only needs a part-time office manager. Paul says the typing is to supplement his income and that the flexibility it allows means he can arrange to be at home when his children finish school.

Part 1

Paul spends a similar amount of time on both activities. The DM therefore has to look at earnings in order to determine what the main form of employment is. The earnings generated from the two employments prove inconclusive. The DM concludes, on balance, that typing is not Paul’s main employment goal as he has stated that he is not interested in increasing his output from typing. Therefore S/E is not Paul’s main employment.

Part 2

Paul has a clear profit-seeking motive and he uses his own equipment. The DM determines that the earnings from his office cleaning are SE earnings

Part 3

Paul undertakes his typing regularly and a contract with firm supplying his work. The DM determines that the work is organised, regular and in expectation of profit.

Determination

Paul has not met part 1 of the test and he is therefore determined by the DM not to be gainfully SE.

Example 7

Outline: Claimant carries out both S/E and PAYE activities. The S/E activity takes up the majority of available working hours and is organised, developed, regular and carried out in expectation of profit.

Lizzie has claimed UC and her expected hours of work per week are 35. Lizzie is an electrician and works in the construction industry. Some of Lizzie’s work is on a sub-contracting basis and some of her work is as an employee.

Lizzie’s weekly hours of work vary over the year - they depend on the availability of work and the weather. Over the course of a typical year, Lizzie works on average 30 hours a week. She estimates that about a third of her time is on an employed basis and the rest on a S/E basis.

Part 1

Lizzie spends the majority of her time on the S/E activity, so the DM considers this to be her main employment.

Part 2

Lizzie’s work is clearly carried out in the expectation of profit in a recognised vocation/trade. Her sub-contracting income is not employed earnings. The DM determines that her income from sub-contracted work is SE earnings.

Part 3

Lizzie actively promotes her sub-contracted work. She has a list of regular customers and has separate accounts for her sub-contract work, which also contain evidence of regular income. The DM determines that the subcontracted work is organised, developed, regular and in expectation of profit.

Determination

Lizzie met all three parts of the tests, so is therefore determined by the DM to be gainfully SE.

Example 8

Outline: S/E and PAYE activity is undertaken by the claimant and both relate to the same vocation, more time is spent on the job which pays as a PAYE employee however more is earned from the job providing S/E earnings

Jos works as a bouncer in a nightclub. He has a contract of employment with one nightclub and works on a self-employed basis for another establishment. His contract of employment is for 12 hours per week and he is paid £80. He spends on average 6 hours per week on SE, which earns him £140. Jos advertises his business in the local press and actively markets his services on his website.

Part 1

Jos spends more time on his PAYE employment however he earns more from his SE. The DM therefore needs to look at both in order to make a determination. Based on the earnings, the DM determines that Jos’ main employment is his SE work.

Part 2

The SE activity is a vocation and the DM decides that the earnings derived from that part of Jos’ work are SE earnings.

Part 3

Jos advertises his services and is trying to increase his client base to increase his profit from the business and as such the DM decides that the S/E activity is developed, regular, organised and carried out in expectation of profit.

Determination

Jos meets all of the parts of the test and is determined by the DM to be gainfully SE.

Example 9

Outline: S/E activity only is carried out and takes up the majority of available working hours but does not provide much income and there is little scope for expansion.

Jasumati has been a portrait artist for over 3years. She spends around 18hours a week on her SE work and she earns around £60 a week from this activity. Jasumati has a portfolio of work and a website where she shows her work and advertised her services. She has tried various ways of promoting and marketing her work, but demand for her services has remained fairly constant.

Part 1

Jasumati spends over half of her available time on SE activity but it only generates a small income. On balance, looking at both hours and earnings the DM decides that the SE is not the main form of employment.

Part 2

The earnings derived for portrait work are determined by the DM to be S/E earnings as Jasumati’s work is a vocation and she provides her own equipment and can control the hours she works and the prices of her services.

Part 3

The DM decides that Jasumati’s S/E work is developed, regular, organised and whilst providing very little income is carried out in expectation of profit.

Determination

Jasumati has failed to meet Part 1 of the gainful S/E test and the DM determines that she is not gainfully S/E

Example 10

Outline: S/E activity only is carried out and takes up the majority of available working hours but does not provide much income and is not the claimant’s main employment goal.

Ed is an engineer who has had regular employment over the years. He was made redundant 2 months ago and is looking to find employment locally in the engineering industry. Ed also breeds rare-breed ducks and, for many years, has been selling his ducks to local butchers. He estimates that he used to spend around 10 hours a week caring for his ducks but, since he lost his job, he has increased this to around 18 hours a week. Ed’s estimates his income from selling his ducks averages around £80 a week.

Part 1

Ed spends over half of his available time on SE activity but it generates a relatively small income and he is actively looking for work in his previous area of employment. On balance, the DM decides that the SE is not Ed’s main employment goal and not his main form of employment.

Part 2

The earnings derived from his ducks are determined by the DM to be S/E earnings as Ed’s work is a trade, he provides her own equipment and can control the hours he works.

Part 3

The DM decides that Ed’s S/E work is developed, regular, organised and whilst providing limited income is carried out in expectation of profit.

Determination

Ed has failed to meet Part 1 of the gainful S/E test and the DM determines that he is not gainfully S/E.

Example 11

Outline: Claimant is experiencing low to no income from S/E activity due to bad weather. The activity normally takes up her available hours of work and claimant can demonstrate that the business can still provide gainful S/E when weather improves.

Sharonjit is the sole owner of a small roofing firm. Normally Sharonjit spends 40 hours a week running the business but work has stopped temporarily because of the bad weather. The income from the business has recently therefore dropped dramatically to the point now where no income is received from the business. Sharonjit claims UC and brings the following to her gateway interview:

1.	a letter from her bank stating that they regard his business as a going concern

2.	purchase orders for materials relating to significant amounts of work she has in the pipeline, waiting for the weather to improve.

3.	VAT statements from HMRC, evidencing that HMRC regard her as self-employed.

4.	A local newspaper to show that she is advertising to bring in more work.

Part 1

While Sharonjit is currently engaged in a low number of hours work, there is evidence that her SE business is her main employment goal. The DM determines that the roofing firm is Sharonjit’s main employment.

Part 2

Sharonjit is engaged in a trade/vocation in expectation of profit. There is no other employer, so the DM determines that the income is SE earnings.

Part 3

Sharonjit has a clear account of why her business is experiencing difficulty. She is demonstrating concern at the issues facing her business. The bank and HMRC recognise the business as a going concern. Sharonjit also has an expectation of work restarting. The DM has doubts about when Sharonjit will be able to pick up the work she has in the pipeline, but on balance the DM determines that the work is organised, developed, regular and carried out in expectation of profit.

Determination

The DM considers that Sharonjit has met all of the parts of the test and is determined by the DM to be gainfully self-employed.

Example 12

Outline: Claimant’s S/E activity takes up the majority of their available work hours and is organised, regular, developed and carried out in expectation of profit but the claimant cannot currently work due to illness.

Reuben is an Elvis impersonator in Skegness. He is registered with a number of entertainment websites and also has several pubs and restaurants who pass on work and customer recommendations. Reuben’s work tends to fluctuate, with peaks in the summer season and around Christmas when he supplements his Elvis impersonation income, as a singing Father Christmas in the local shopping centre. Reuben works on average 19 hours per week and earns around £210.

In December, Reuben experiences back pains and has to stop working for a brief period.

Part 1

Reuben spends the majority of his time working as an Elvis impersonator and has no other income, so the DM determines this is his main employment.

Part 2

Reuben is engaged in a profitable vocation. He has clients, but not an employer. The DM determines that Reuben’s income is SE income.

Part 3

Reuben engaged in full time work and takes steps to maintain a significant amount of work in the pipeline, actively promoting his business through the internet and asking his clients to provide recommendations. He also has a business plan that accommodates the changing demand for his services throughout the year. The DM determines that the work is organised, developed, regular and carried out in expectation of profit.

Determination

The DM considers that Reuben has met all parts of the gainful self-employment tests. Although Reuben is unwell, this period of sickness is minor and temporary and the DM regards this as part of the normal pattern of self-employment.

Example 13

Outline: A claimant has an idea for a new S/E business but has not taken any real steps to formulate a business plan or thought as to how the business will start and progress.

John has recently been given a modest sum of money by family members and is thinking about using this money to start a new small business. In his claim for UC he has declared that he is currently looking at becoming a market trader. He thinks he might put down money for a market stall pitch in the local market next month but hasn’t approached the local market office, is yet to buy any stock or identified any suppliers. He states he has designed some t-shirts himself and has sold five or six to friends and family on an ad hoc basis but has not considered any next steps to extending this activity.

Part 1

John has to date spent only around 6 hours two weeks designing his t-shirts and has not spent any other time on his business idea. The DM determines that his new business is not currently his main form of employment despite the fact it may be his main employment goal in the future.

Part 2

The DM does decide that John’s activity is a trade as John would provide the t-shirts and paints to illustrate the designs on them.

Part 3

The DM determines that John’s activity currently is not developed, regular or organised as no steps have been taken beyond to fully plan or realise the business idea.

Determination

The DM determines that John is not in gainful self-employment for the purposes of his claim to UC. John has failed to demonstrate that time has been spent planning and developing his business idea or that he has taken any substantial steps to progress the business beyond an idea. Whilst it is his main employment goal the DM has doubts that currently it could provide John with gainful self-employment.

Example 14

Outline: A claimant has been gainfully SE for a while but his business is loosing trade. The DM needs to consider if he is still gainfully SE.

Ira is in receipt of UC and has previously been determined to be gainfully S/E. He runs a business that supplies and fits doors and windows. Because of the competition in the area the business has received fewer and fewer orders, until now there are none. As Ira’s earnings have been consistently below the minimum income floor, he is called back in for a gateway interview. Ira states that

1.	he has been unable to pay the rent on his shop and the landlord is threatening eviction

2.	his business has debts and the bank has advised that the business should be wound up

3.	he can not find a way of boosting his trade

4.	there is no work in the pipeline

5.	at present he is still regarded as S/E by HMRC

6.	he still has an advertisement in the Yellow Pages.

Part 1

Ira is still spending most of his time on SE activity

Part 2

His earnings are negligible but they are derived form a trade and they are therefore SE earnings

Part 3

Based on points 1– 6 above, the DM determines that the work is no longer regular and there is no expectation of profit.

Determination

The DM determines that Ira is not gainfully SE as he has not met part 3 of the test.

Example 15

Outline: A claimant is starting a new self-employed activity.

When making her claim for UC, Jenny indicates that she wants to start a new wedding photography business. She has invested in camera equipment and recently completed a two week online photography course. Jenny has a portfolio of photos from two events she covered as part of her course. She has registered a domain name for a business website and engaged a web designer to design a site for her business. Jenny has also drawn up a business plan which includes plans to advertise in local bridal shops, wedding magazines and has approached a number of wedding venues with whom she hopes to establish a business relationship. She has researched wedding photographer hire prices and has developed a pricing structure for her business in line with her research. Whilst Jenny is yet to receive any commissions, the DM determines that Jenny’s plans demonstrate that she is in gainful self-employment for the purposes of her claim to UC and is eligible for a start-up period.

Part 1

Jenny has spent time on planning and taking steps to progress her business idea and the DM decides that on balance Jenny has demonstrated it is her main employment goal.

Part 2

Jenny is providing her own equipment and will control the prices and hours she works. The DM decides that any earnings would be S/E earnings.

Part 3

Jenny has demonstrated that she has put effort into planning, researching and developing her business idea and can show from her pricing structure how she intends to make a profit from the business. The DM decides that based on Jenny’s evidence and steps taken the business will be developed, organised and carried on in expectation of profit

Determination

Jenny has met all three parts of the test and the DM determines her to be gainfully self-employed.