Self-employment test disadvantages disabled

Did you know? • Self-employed may need to show “commercial and profitable, genuine and effective” businesses to get Working Tax Credits. • Self-employed may need to pay themselves the minimum wage for 16-30 hours per week to get Working Tax Credits.

Following the Chancellor’s 2014 Autumn Statement, I raised the following query with HMRC:

From April 2015, self-employed WTC claimants will need to register with HMRC as self-employed.  Those declaring income less than the equivalent of working 24 hours per week at the national minimum wage will also be required to provide evidence to HMRC that the work they are undertaking is “genuine and effective”.  My concern is around disabled people who are working fewer hours – some will be doing so on “permitted work” and still receiving benefits while others may be getting their businesses started or may never work over 16 hours due to their health

The following response has been recently received:

“The Autumn Statement 2014 announced the introduction of a ‘genuine and effective work test’ to ensure that only people meeting the conditions of tax credit entitlement are able to benefit.  In the 2015 Budget the Government has announced that, after further consideration, a revised test will be applied so that in order to qualify for WTC a self-employed claimant will need to be carrying on an activity which is “commercial” and “profitable” or working towards profitability, and is organised and regular.

The test will be applied to the working hours requirement used to qualify for working tax credit as a self-employed claimant.  The working hours requirement will vary between 16 and 30 hours depending on a claimants circumstances in line with the current working tax credit rules. The hours requirement is 16 hours for those entitled to the disability element of working tax credit.

If earnings from self-employment fall below an amount equivalent to the working hours requirement x National Minimum Wage (NMW) per week, claimants may be asked to provide evidence to HMRC that their work is commercial and profitable, organised and regular.    HMRC may ask to see business records and, or further supporting documents such as a business plan, future cash flow and profit projections, trade specific documents or information on what work there is in the pipeline.”

Newly self- employed will need to demonstrate how they intend to carry on their self-employment on a commercial basis and how their self-employment will become profitable, organised and regular.

The revised test aligns more closely with principles already established in tax case law on whether a person is self-employed and also the self-employment test used for both Tax Free Childcare and Universal Credit.”

Over recent years there has been an exceptional increase in people becoming self-employed – and many may have been claiming WTC.  There is already concern in some areas that these micro-businesses may have limited sustainability due to individuals’ lack of preparedness (inadequate market research, marketing, business planning, ability to manage financial records and more).  This additional requirement for those claiming WTC may increase the pressure – and test how effective New Enterprise Allowance and other business support provision has been in creating sustainable businesses.

Penny Melville-Brown

Disability Dynamics ltd www.disabilitydynamics.co.uk

Helping disabled people to work since 2000

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Social security more difficult than it’s worth

Did you know? Eligible people are still not taking up their benefit entitlements.

I’ve written previously about the large numbers of people who are not working and are not receiving benefits. Now a further report says that others who are working or are retired are not claiming the benefits they could.
For example, “… almost a third of eligible people in the UK in 2009-10 were not claiming the means-tested benefits they were entitled to” resulting in about £5m being unclaimed by working families in the form of Working or Child Tax Credits.
Whether you think that reducing deprivation is best achieved by increasing minimum wage or supplementing low wages with Tax Credits, there seems little doubt that, unless either solution is successful, the consequences are simply moved elsewhere in the State system – for example, to the NHS. So benefit savings that are the result of more poverty rather than better incomes is just a transfer of costs from one Department to another.
Main findings in the report as to the cause of low take-up were “level and accuracy of knowledge about an entitlement and its eligibility rules, linked with the perceived cash value of the benefit when compared to the effort involved in claiming and maintaining entitlement.” Essentially, information isn’t reaching the people who need it and, even where it does, claiming can be more trouble than its worth. Another influence may be the general stigmatisation of people who claim benefits by the media and others influencing public perceptions.
Forthcoming benefit changes that will need effective design to improve take-up include faster roll out of Universal Credit from 2015, the devolution of some benefits to Local Authorities and the new single tier pension from 2016.
Potential solutions are easily recognisable to anyone with a commercial background:
•Make it easy. Simpler benefit systems and claim forms.
•Tailor delivery to customers. Using phone and IT to make claims, avoiding duplication of information needed for different benefits, learning from feedback.
•Target promotion. Using data to identify target groups and key life changes.
•Go local. Using familiar and accessible local intermediary organisations such as the health sector, employment support providers, children’s centres and more but especially those that have trained staff able to give independent and knowledgeable advice.
We might think of the costs of deprivation to the State like one of those squidgy “stress” balls. If the benefits system squeezes people on no/low incomes, the costs simply pop up somewhere else in Government. Instead, we need to shrink the ball with a strong economy with sensible pay rates.
You can read the four pages of the report’s main findings here

Disability Floristry Art

Disability Floristry Art

Bouquet of the week.
Goes to Karen who took me shopping at the Farmers’ Market at the weekend. She was somewhat smug as her jacket was much better than me relying on just a jumper to keep out the rain. But smiles turned to shreiks when the stall awning shifted in the wind to dump a huge amount of water on her head: she was sopping wet from top to bottom, inside and out. A sort of al fresco ice-bucket challenge. It’s times like this when I really wish I could use a camera!

Yours drily,

Penny Melville-Brown

Disability Dynamics ltd www.disabilitydynamics.co.uk

Helping disabled people to work since 2000