Assessment of earnings

Supporting information

Operational guidance on supporting information can be found at About supporting information requests for Carer Support Payment | Social Security Scotland.

Clients may be asked to provide supporting information in order to:

verify earnings if they are employed client and HMRC data is not available
verify deductions that could be taken off their gross earnings
verify end of employment if they report a change of circumstance that they have stopped working
calculate notional earnings if they have started a new job or business
calculate average net weekly profits if they are self-employed.

Supporting information | Social Security Scotland. For more details see Social Security (Scotland) Act 2018, Regulation 54

Supporting information to verify earnings and deductions

If HMRC data was not available to verify an employed client’s earnings or supporting information was required to verify deductions, the following could be requested:

payslips to verify earnings from employment, income tax, National Insurance contributions and contributions to a workplace pension
a recent statement for a private pension
any receipts or invoices for work-related expenses

any receipts or statements for childcare or replacement care for the cared for person
bank statements clearly showing regular amounts paid for childcare, replacement care or work-related expenses

When supporting information is received, the decision maker should be reasonably satisfied that it is more likely than not (on the balance of probabilities) that:

the childcare or replacement care for the cared for person actually took place (if relevant)
the work-related expense was paid for by the client (if relevant)
the childcare or replacement care for the cared for person was necessary to allow them to work (if relevant)
the work-related expense was directly related to and necessary for the client’s work (if relevant)

Where the deduction is for childcare, supporting information is also required to evidence that the client or their partner are getting Child Benefit for the child. This applies if the child is not the cared for person. This could be evidenced by:

Child Benefit letters
Bank statements showing regular Child Benefit payments
Screenshots of the client or partner’s online Child Benefit account

Supporting information for clients who have ended employment

If a client reports a change of circumstances that they have stopped working, the client advisor should request evidence of this which could include confirmation from their employer of their notice period and/or final date of employment. A final pay slip would be required in order to calculate the client’s net weekly earnings following overlapping payment rules guidance at End employment during the Carer Support Payment entitlement | Social Security Scotland

Supporting information for clients with a new job or business

If a client has recently started a new job or business, they may not have enough evidence or HMRC data to calculate their average weekly earnings. A reasonable estimate of their ‘notional earnings’ should be calculated instead.

The decision maker should also contact the client to discuss and request any evidence they may have available to help estimate notional earnings. This could include:

an employment contract setting out how the client would be paid
an employment contract setting out occupational pension contributions
any evidence of relevant deductions e.g. private pension statement or statements for childcare or replacement care for the cared for person

Supporting information for self-employed clients

The Carer Support Payment application form and change of circumstances form capture basic information about the self-employed client’s business or businesses.

Client advisors should review this information before contacting the client to ask further questions about their business following guidance at New applications and the self-employment questionnaire | Social Security Scotland. This is to identify the period that the client’s earnings should be averaged over.

To evidence their earnings, self-employed clients may:

send or upload copies of their Self-Assessment Tax Return
send or upload copies of their most recent finalised accounts
send or complete an online Self-Employment questionnaire

If a client provides their most recent finalised accounts or Self-assessment Tax Return forms, they do not need to cover earnings for the year immediately before their application. It just needs to be their most recent evidence.

The client must tell us if their normal pattern of business has changed since the period covered this information if they are earning more or less on average than the information would show.

Evidence should show:

the total amount of business received for goods and services – this can be cash, cheque, credit or debit card, or bank transfer
how much was spent on allowable business expenses for the day-to-day running of the business such as travel costs, stock, equipment and tools
how much income tax and National Insurance the client paid
any money paid into a private pension
any money paid for childcare or replacement care for the cared for person because the client was working

Individual receipts or invoices are not needed for each expense for running the client’s business, these can be listed in a document such as a Microsoft Excel spreadsheet or Microsoft Word document.

In all cases client advisors will need to look at the information that is provided by the client, whether that is annual accounts or a Self-assessment Tax Return and determine whether there is sufficient information to accurately assess income and allowable expenses for the relevant assessment periods.

For more details see Carer Support Payment regulations, Schedule 2.

If there is not sufficient information, then client advisors will need to request further information. Further guidance on how to assess whether information contained in supporting information is sufficient is included in the [link to Assessing Supporting Information section].

Assessing Supporting Information

HMRC Self-assessment Tax Return forms

Self-Assessment is a system HMRC uses to collect Income Tax. Tax is usually deducted automatically from wages and pensions but people and businesses with other income (including COVID-19 grants and support payments) must report it in a tax return. These returns show all taxable income from self-employment and property.

Whether or not the client has used the short or full version of the return will reflect the size and nature of the business (the full form is required for businesses with a turnover of more than £85,000) but this does not impact the suitability of the form for Carer Support Payment.

To assess self-employed earnings for Carer Support Payment, the information provided needs to be on a ‘cash flow’ basis so that it reflects the actual income received and actual expenses paid for in the relevant assessment period.

HMRC Self-assessment Tax Returns may use ‘traditional accounting’ methods which record income when invoices are sent to clients, and expenses when bills are received so these may not reflect what was received and/or paid within the assessment period.

This is not always the case as clients with a company that has less than a £150,000 annual turnover can use ‘cash basis’ accounting in their Self-assessment Tax Returns. Clients whose businesses have an annual turnover of less than £150,000 and would check Box 8 on the Self-assessment Tax Return form if this was the case, indicating that they are using a ‘cash basis’ accounting method.

Therefore, client advisors must first assess whether a ‘traditional accounting’ or ‘cash basis’ method has been used when the Self-assessment Tax Return has been filled out.

If the client has used a ‘traditional accounting’ method, annual accounts may also be required as evidence of earnings during the assessment period.

Overall, if the client advisor cannot clearly decide what the client’s:

Profits
Allowable business expenses
Other deductions

are based on the evidence provided, they should issue a Self-Employment Questionnaire to the client following guidance at About the self-employment questionnaire | Social Security Scotland.

Where a client has provided a Self-assessment Tax Return which has been completed using traditional and not 'cash basis' accounting, this could be used as evidence of earnings where we can confirm with the client that this is representative of what they actually received and paid out in the assessment period.

‘Cash basis’ accounting for HMRC purposes would allow for some capital expenditure to be included in regular business expenses in a way that would not be the case for the earnings assessment for Carer Support Payment. Where a client has provided a Self-assessment Tax Return and Box 8 has been checked to reflect that this has been completed using ‘cash basis’ accounting we would need to ask them for more information on their expenses to identify the allowable expenses for Carer Support Payment. These may be demonstrated through:

annual accounts
receipts and invoices
a completed Self-Employment Questionnaire

Annual accounts

Annual accounts – also known as ‘statutory accounts’ - are prepared from a company’s financial records at the end of the company’s financial year. They record all the incoming and outgoing transactions (earnings and expenses) for the company.

Accounts provide some, but not all, of the information required by client advisors to decide the amount of the gross receipts and expenses paid for calculating earnings for Carer Support Payment.

A set of accounts consists of two main statements:

1. The balance sheet: that is, a statement of the financial position of a business at a given date

2. The profit and loss account: that is, a summary of the results of a business’ transactions for a period ending on the date of the balance sheet

Accounts are generally prepared using ‘traditional accounting’ principles. Accounts done in this way may include anticipated receipts and expenses for the accounting period.

These anticipated amounts are not:

1. Gross receipts, as they have not been received by the business

2. Allowable expenses, as they have not been paid for

Accounts may also be prepared on a ‘cash basis’. This may be the case for small businesses in particular. Accounts done in this way will only include actual receipts and expenses for the period.

If accounts are submitted as supporting information, the client should be asked how they have been calculated (if this is not clear from the information). If they have not been done on a ‘cash basis’ we will need them to confirm whether there are receipts and expenses included that haven’t actually been received or paid during this period.

The client can do this by providing

1. Accounts that are calculated on a ‘cash flow basis’ or

2. Evidence of the gross receipts and expenses paid.

These figures should be accepted as accurate unless:

1. There is reason to doubt or

2. They are unrepresentative of the current trading position.

As profit and loss accounts are prepared using traditional accounting principles, they include certain entries that would not be included in an account prepared on a ‘cash flow basis’. For example:

1. The value of stock at the start and end of the accounting period.

2. Money owed to the business by debtors.

3. Money owed by the business to creditors.

4. Depreciation of assets of the business.

As client advisors are considering the client’s cash flow, the above will not be allowable expenses.

Overall, if the client advisor cannot clearly decide what the client’s:

Profits
Allowable business expenses
Other deductions

are based on the evidence provided, they should issue a Self-Employment Questionnaire to the client following guidance at About the self-employment questionnaire | Social Security Scotland.

Supporting evidence of every item of expenditure, or receipt, is not always required. Totals for the assessment period are acceptable provided that each type of expenditure, or receipt is separately detailed and that, as above, there is no reason to doubt the information provided and the expenses are not considered unrepresentative of the current trading position.

Client advisors may be presented with annual accounts that do not go into sufficient detail on expenses for them to determine whether some expenses are allowable for the purposes of Carer Support Payment, or provide accounts for the wrong assessment period. As this is information is essential to decide whether the client’s earnings are under the earnings threshold it will be necessary to ask for further information on those expenses, such as receipts.

The client should be asked any questions that cannot be resolved through the business’ accounts. It may be necessary for the client to provide further supporting evidence, for example:

1. bank receipts

2. purchase receipts

3. expenses for a different assessment period.

Client advisors cannot accept income tax certificates or statements provided by accountants of the total net profit of a business alone as sufficient supporting evidence of self-employed earnings for Carer Support Payment. These statements are only acceptable for tax purposes.

Timescales for requesting supporting information

For new Carer Support Payment applications the deadline for clients to provide supporting information is 42 days. A clerical supporting information request is sent to clients upon their application. A clerical reminder notification is issued after 14 and 28 days.

For earnings reviews the deadline for clients to provide supporting information is 28 days. A clerical supporting information request notification is issued and a clerical reminder is issued after 14 days.

In both scenarios, the client can contact the Agency before the deadline and request an extension of the original deadline of up to 14 days.

Further information about timescales for supporting information can be found at About supporting information requests for Carer Support Payment | Social Security Scotland.

If supporting information is not received by the deadline

In new application cases, if the client does not send the required supporting information by the deadline and they have not contacted the Agency to request more time, their new claim application will be determined on the basis of available information. This will likely mean that their application is denied because we cannot confirm that their earnings from employment are below the earnings threshold for Carer Support Payment.

If the client is already getting Carer Support Payment but does not send supporting information as requested within the timescales, their award may be suspended until they send in the required supporting information.

If supporting information is subsequently received which confirms entitlement and the client’s award can be restarted. The client should be paid any payments they have missed but were entitled to during the period of the suspension.

If the supporting information received confirms that the client’s earnings are over the threshold, we would make a determination without application to end their Carer Support Payment award. The client then enters a period of “temporary stop in entitlement”.. This temporary stop can be for up to 26 weeks The client can contact the Agency if their earnings fall below the threshold within the 26 weeks and their ward may be reinstated. After 26 weeks if the client becomes eligible again, they will need to make a new application for Carer Support Payment.

For more details see Social Security (Scotland) Act 2018, Regulation 54 and the Carer Support Payment regulations, regulation 29”

For more details see Social Security (Scotland) Act 2018, Regulation 54 and the Carer Support Payment regulations, regulation 29

Part of Carer Support Payment decision making guide