We are often asked by those looking to claim compensation for personal injury whether they can claim for loss of earnings where they were self employed at the time of their accident. The simple answer is yes – but it’s not always easy!
Where an individual is an employee, calculating their loss of earnings for time off work is straightforward. Generally speaking, we look at payslips for thirteen weeks/three months prior to the accident in order to calculate an average income either per week or per month before the accident. We would then look at what they actually received over their period of absence. We deduct that from what we would expect the individual to have received over the same period if they had continued to work, based on their pre-accident average.
The same formula cannot be used for self employed individuals or business owners. This is because the income received is unlikely to be consistent each week or month. Equally, those who are self-employed understandably tend to work more hours once they return to work to try and make up for the lost earnings during their absence, making it difficult to see from their annual accounts and tax returns whether there was a shortfall due to their absence.
If you employ an accountant or book keeper then you should contact them and ask them to provide you with copies of the following –
- your income and expenditure (including any invoices and receipts);
- profit and loss accounts; and
- tax returns.
Ideally your accountant or book keeper will be able to produce these records for three years leading up to the accident. This will make it much easier to evidence to the Insurers the net profits in the years prior to the accident. It’s also important to keep a record or the details of any contracts you were unable to fulfil due to your injuries.
If your business is new or hasn’t been trading for three years then we would stress that it’s still important to provide us with as much evidence as you can to show the income generated by your business since trading commenced. In the case of new businesses, any documents confirming contracts won or offered should also be produced.
As detailed above, it is perfectly possible to make a claim for loss of earnings when you are self-employed but it can be a more complicated process. That’s why we would always encourage you to speak with a lawyer specialising in personal injury law as we know the documentation required to prove your claim and how to carry out the necessary calculations.
If you have suffered an injury and are self-employed, please contact Stephanie Watson on 0131 297 5988 or email@example.com. Alternatively, for more information contact our specialist Personal Injury team on 0800 731 8434 who will be pleased to assist further.