Self-employment: Gainful self-employment
A claimant is in gainful self-employment if the Secretary of State has determined that -
- they are carrying on their activity as their main employment
- the earnings from it are self-employed earnings
- it is organised, developed, regular and carried on in expectation of profit.
Whether a claimant is in gainful self-employment for UC purposes is important because it may have an impact on the claimant’s work-related requirements and it also determines whether:
- minimum income floor applies to the claimant’s S/E earnings
(During the coronavirus pandemic, the MIF has been suspended temporarily)
- the claimant is eligible for a start-up period (see below).
The claimant will be asked to provide evidence of their self-employed activities usually at a ‘Gateway’ interview shortly after the UC claim has been made. Note that during the coronavirus pandemic, face to face interviews are suspended.
DWP guidance suggests that the following factors are relevant to the gainful self-employment test:
- Whether the activity is undertaken for financial gain
- The number of hours spent each week on the work
- Any business plan or steps taken to increase income from the activity
- How HMRC regard the activity
- How much work is in the pipeline
- Whether the claimant is actively marketing or advertising for work
There is some recognition in the guidance for new businesses and decision makers are told to consider:
- 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
- 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
- what work has already been done and what income has been received
- whether the claimant is making it known to potential customers that they are available to take on work, for example, marketing and advertising
- whether the claimant has registered as S/E with HMRC (although this will not verify S/E activity for UC purposes)
For businesses receiving little or no income, the guidance states the following should be considered to determine if the claimant is still gainfully self-employed (if they are then the MIF will apply if they are outside of their start-up period and in the all work requirements group):
- if there is a reasonable prospect of work in the near future
- if the business is a going concern and regarded as such by
- the person
- the business’s bankers or
- any creditors or
- if the person is genuinely available for and actively seeking alternative work
- if the person hopes or intends to restart work in the business when economic conditions improve
- if the person is undertaking any activities in connection with the self-employment
- if there is work in the pipeline
- if the person is regarded as S/E by HMRC
- if the person claims to be anxious for work in the trade, profession or vocation. Is the person making it known that the business can take on work? For example by advertising or by visiting potential customers
- if the interruption in question is part of the normal pattern of the person’s work
The guidance directs decision makers to consider periods of sickness that are minor and temporary as part of the normal pattern of self-employment which means the person will still be classed as gainfully self-employed.
ADM Chapter H4020 provides more information about how DWP will determine whether someone is in gainful self-employment. Appendix 2 has further examples of the gainful self-employed test.
Last reviewed/updated 4 June 2020