Self-employment: What counts as self-employment for UC?
For UC purposes, earned income includes the remuneration or profit derived from a trade, profession or vocation. This remuneration or profit will be treated as self-employed earnings for UC.
According to the DWP ADM (Chapter H4), the concept of ‘trade, profession or vocation’ is taken from tax law. A person will either be a sole-trader or in a partnership with other(s).
The ADM includes a list of items that should be taken into account when determining if a person is engaged in a trade. No one point is exhaustive. In some circumstances the existence of one point may be enough in others it will be a combination of factors. We have reproduced the factors to be considered below. Paragraph H4013 contains useful examples of how the criteria will be applied:
- whether there is a profit seeking motive (Regardless of whether or not a profit is actually made)
- the frequency and number of similar transactions. The more frequently that a transaction is carried out, the more likely that this is trading
- 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.
- the nature of the asset – was the asset bought simply to sell on for a profit?
- 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
- financial arrangements. Where an asset is bought with a short-term loan which is to be funded by selling the asset again then this points towards trading
- the length of ownership. The longer than an asset is owned, the more unlikely that the sale of it constitutes trading.
- the reason for the acquisition and sale.
Guidance on what constitutes a profession and vocation is less detailed. Examples of a profession include accountancy, the law and consultancy. Examples of a vocation given in the ADM include sport, music and acting.
The profession and vocation must be carried out in a capacity other than an employed earner.
Updated 7 March 2016