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HMRC internal manual

Enquiry Manual

Recalculating profits: private side - means tests: method - one year

A means test uses the figure for declared income and takes away from it any money estimated to have been saved and known items of expenditure during the same period. The resulting figure represents what was available to meet living expenses. Usually, the test will cover the period of accounts. Unless there is information about capital sales and acquisitions, details of saving will have to be assumed from returned figures of interest.

A typical means test might look something like this.

Drawings 9500    
Spouse’s wages 1750    
Building Society interest 450   11700
Mortgage 3500    
Income Tax 1500   (5000)
PY interest 350 @ say 7% on capital 5000    
+ interest  350  5350  
CY interest 450 @ say 7.5% on capital 6000    
+ interest  450  6450  
Increase in Savings     (1100)
‘Available’     5600