Where
1) personal consumption and personal drawings are involved
or
2) there are expenses attributable to business and private
use
the decision maker may attribute the personal element to one
or all of the partners. This applies particularly in the case of
couples who are also business partners (DMG36006).
Note Unless the decision maker knows
each partner's share of personal consumption, drawings and
private use the decision maker may incorrectly include the share as
an expense or omit it from the gross receipts, when calculating the
applicant's share of the profit. This will artificially reduce the
applicant's share of the profit.
Calculation A (partner's private use figure not known)
Mrs Smith and Mrs Brown (the applicant) are partners who
divide the profit as 60% Mrs Smith and 40% Mrs Brown.
Gross Profit £10,000
Total expenses £ 3,000
Mrs Smith's private use. Not Known
Mrs Brown's private use £500
Expenses deducted £ 2,500
Net Profit of business £ 7,500
Mrs Smith's share 60% £ 4,500
Mrs Brown's share 40% £ 3,000
Calculation B (partner's private use figure included)
Gross Profit £10,000
Total Expenses £ 3,000
Mrs Smith's private use £300
Mrs Brown's private use £500 £ 800
Expenses deducted £ 2,200
Net profit of business £ 7,800
Mrs Smith's share 60% £ 4,680
Mrs Brown's share 40% £ 3,120
This change in the calculation has a knock-on effect for the
calculation of tax and SS contributions (including Class 2 where
the SEE level may operate in one calculation but not the
other).
