Help please concerning self employed earnings (not a type of client I get very often).

Have had a comment from an appeals officer saying "the adding back of 33% of motor expenses and 20% of phone charges is customary in HB SEE assessment".

Alarm bells have rung over the use of the word "customary".

Is it true that assessed HMRC figures are not accepted?

Can someone point me to regs or guidance please?

Alarm bells have rung over the use of the word "customary".

It's possible that too much importance is being attached to the LAs use of the word "customary". Perhaps if the phrase "it's not unusual" had been used, it would be a more accurate reflection of how some expenses are assessed in self-employed HB/CTB cases.


Is it true that assessed HMRC figures are not accepted?

Some LAs accept HMRC figures "as is", without any further enquiries. In my view, those LAs are wrong. LAs are required to make their own assessment. There are several reasons for this (e.g. tax figures may be too old; expenses eligible for tax purposes are NOT eligible for HB/CTB purposes (e.g. depreciation)).


Can someone point me to regs or guidance please?

The main regs for dealing with self-employed income are HBRs 37 to 39.


Hope the above helps.

Thanks Kevin - thats a good start.

In my case the LA have simply applied these figures arbitarily and my client can provide evidence to challenge the figures.

There are very few CDs on s/e earnings, but try this one:

http://www.osscsc.gov.uk/judgmentfiles/j2115/ch%203860%202005.doc


Although it deals with apportionment of a car loan for business use, it states pretty clearly from para 19 how apportionment should be done. See also the conclusion at para 25, with reference to R(FC) 1/91. Being as a HB Commissioner's Decision has made reference to a Family Credit one, I don't see why you can't also make reference to this IS decision:

http://www.osscsc.gov.uk/judgmentfiles/j411/IS13_91.doc

Again, it's about apportionment.

The regs themselves, to my mind, are pretty foggy, and if HB departments have guidance on these matters, it's just that. The CDs are the key to overturning any decision.....but your client better have damn good P&L accounts, because the onus is on them to disprove the DM's findings.

Good luck

In my case the LA have simply applied these figures arbitarily and my client can provide evidence to challenge the figures.

Ah! Not a recommended method of assessment where evidence of actual business useage is genuinely available.....

For completeness though, if an LA doesn't have the figures originally, or if they are simply found to be unrealistic, the LA is entitled to make its own findings.

Regards

Theres nothing in the Regs about specific % add backs in respect of expenses.

Theres a basic rule that the only allowable expenses are those solely paid out in respect of business purposes.

Ive found that all LA's have their own procedures about % add backs because it is assumed that theres some personal usuage regards business expenses. Some add back 33% for motor expense, some add back 20% for motor expenses and I've even known 10% add backs for motor expenses for taxi drivers.

If your Client is adament that his expenses are 100% business use then obviously nothing should be added back.

However in cases where the expenses seem unusually high then the LA may ask questions to justify such large expenses and they may also ask for proof of expenditures (receipts).