working tax credits changes for self employed from 6th April 2016

[SXGuy]

Re: working tax credits changes for self employed from 6th April 2016

all new claimants who are using self-employed work to meet the qualifying remunerative work test for WTC, must show that they are trading on a commercial basis and their business is done with a view to achieving profits. The self-employment should also be structured, regular and ongoing.
For example, if their business activity is a hobby it is not likely to be considered commercial or have an expectation of realising a profit.

Self-employed WTC claimants with earnings below a threshold (this will be based on working hours and the National Minimum Wage) will be asked by HMRC to provide evidence that they are in a regular and organised trade, profession or vocation on a commercial basis and with a view to achieving a profit.

The information we ask for should be available as part of normal business activity, for example receipts and expenses, records of sales and purchases. We may also ask for supporting documents such as a business plan, planned work, cash flow and profit projections.

These are the key parts, they are vital to you being accepted for WTC. Forget about the minimum wage criteria for now, that's for HMRC to assess once they are all the relevant information. This isn't for you to worry about, and in my opinion is NOT a key factor on whether you would be granted WTC or not.

What HMRC firstly will want to establish, is that you have a business, which "seeks" to make a profit. By this, they mean, that you are not simply just someone who has avoided claiming Job Seekers, by starting up an ebay shop, and selling your 2nd hand clothes. We have to remember, there is two different types of benefits, Job Seekers for those who are out of work, and WTC for those in work. Someone could in theory be refused Job Seekers, and apply for WTC instead, this legislation, trys to stop it from happening.

So, regardless of whether your business runs at a profit, or at a loss, WTC would be awarded based on other criteria.

Firstly, they will want to establish, you have a commercial business like I say, 2ndly, proof of this, by way of showing an income and showing expenses.

My Guess is, if you are a registered Self Employed person who submits a Tax Return each year, this will be all they need to establish whether you meet the criteria for WTC.

Other than that, a simple bank statement showing earnings in and expenses out will be ok.

Once you have proved to HMRC you are a proper business, they will use the Net profit to establish what you should be awarded.

[Spent2much]

Re: working tax credits changes for self employed from 6th April 2016

Ok.



So, they arnt saying you need to show you earn minimum wage, they are saying, you will need to provide evidence that you operate a business. Simply put, show them your Accounts or Tax Return.

Read more about it here -> https://www.gov.uk/government/public...ing-tax-credit

Our business doesn't make the minimum wage it has been struggling even Christmas week was crap , we paid extra rent to be open and didn't make anything extra , it was a complete waste of time .

i haven't been able to work because i had a mental breakdown last year and still having therapy .

So if this part is right and i am reading it correctly they want the business to be paying minimum wage ?

1. on

1.Introduction

From April to get Working Tax Credit (WTC) self-employed people will need to meet new criteria. This brief provides further details on these changes.
2.Who needs to read this?

Self-employed WTC claimants or advisers who support claimants.
3.The changes

From 6 April 2015, all new claimants who are using self-employed work to meet the qualifying remunerative work test for WTC, must show that they are trading on a commercial basis and their business is done with a view to achieving profits. The self-employment should also be structured, regular and ongoing.
For example, if their business activity is a hobby it is not likely to be considered commercial or have an expectation of realising a profit.
These checks are about ensuring HM Revenue and Customs (HMRC) only pay tax credits to those who are entitled. WTC will continue to support those who are carrying on a genuine business activity. These changes will not affect the rules for claiming Child Tax Credit.
4.How the changes will apply

Self-employed WTC claimants with earnings below a threshold (this will be based on working hours and the National Minimum Wage) will be asked by HMRC to provide evidence that they are in a regular and organised trade, profession or vocation on a commercial basis and with a view to achieving a profit.
The information we ask for should be available as part of normal business activity, for example receipts and expenses, records of sales and purchases. We may also ask for supporting documents such as a business plan, planned work, cash flow and profit projections.
During the early stages of self-employment it may prove difficult to make a profit. If someone in this situation claims WTC they may be asked to show that they have a commercial approach and how their business would become profitable. This could be demonstrated in a business plan.
HMRC will use the information provided to reach a decision about the claimants’ currentWTC award.
Claimants may lose their WTC if they cannot provide the evidence we ask for and may have to repay any tax credits they are not entitled to.
Claimants who disagree with our decision can ask for us to look at the decision again.

[SXGuy]

Re: working tax credits changes for self employed from 6th April 2016

Ok.

Self-employed WTC claimants with earnings below a threshold (this will be based on working hours and the National Minimum Wage) will be asked by HMRC to provide evidence that they are in a regular and organised trade, profession or vocation on a commercial basis and with a view to achieving a profit.

So, they arnt saying you need to show you earn minimum wage, they are saying, you will need to provide evidence that you operate a business. Simply put, show them your Accounts or Tax Return.

Read more about it here -> https://www.gov.uk/government/public...ing-tax-credit

[SXGuy]

Re: working tax credits changes for self employed from 6th April 2016

Sadly, we dont deal with Working Tax Credits so ive not be given any information surrounding this, but i'll do some digging and get back to you.

[Spent2much]

Re: working tax credits changes for self employed from 6th April 2016

jadex, i suggest you telephone HMRC to clarify a few things.

Firstly, if you are self employed, you can not possibly calculate your income based on what you earn per hour, minimum wage or not, it simply just doesnt work that way.

And i could be wrong, but i have never, come across a situation where someone whos self employed has been asked to work out their hourly rate. Daily rate, perhaps, but never hourly.

If these are the new rules then it is making people lie and that;s just wrong .

[SXGuy]

Re: working tax credits changes for self employed from 6th April 2016

jadex, i suggest you telephone HMRC to clarify a few things.

Firstly, if you are self employed, you can not possibly calculate your income based on what you earn per hour, minimum wage or not, it simply just doesnt work that way.

And i could be wrong, but i have never, come across a situation where someone whos self employed has been asked to work out their hourly rate. Daily rate, perhaps, but never hourly.

[Spent2much]

Re: working tax credits changes for self employed from 6th April 2016

I think you misunderstood it.
There is no requirement to make equivalent of MNW.
However, HMRC will take it as a basis to calculate your benefits.
So, if you make £15p/h they will use £15 p/h, but if you make say £3 p/h then they will use £6.70 p/h (or current MNW rather than your real income).
If you make less than NMW they will then still use NMW to calculate your benefits - it won't stop, just be calculated on assumption that there is no sense to run a business if you cannot make at least NWM (why gave up holidays, sickies, etc., to be on your own and make less? that's their rationale behind it).

Our business does not pay my husband minimum wage so if they work it out on minimum wage then when we apply for council tax benefit we will have to give them the true figures because on the turn2us website it says there is is no help for council tax on their calculations and we need help with council tax .

[jadex]

Re: working tax credits changes for self employed from 6th April 2016

I think you misunderstood it.
There is no requirement to make equivalent of MNW.
However, HMRC will take it as a basis to calculate your benefits.
So, if you make £15p/h they will use £15 p/h, but if you make say £3 p/h then they will use £6.70 p/h (or current MNW rather than your real income).
If you make less than NMW they will then still use NMW to calculate your benefits - it won't stop, just be calculated on assumption that there is no sense to run a business if you cannot make at least NWM (why gave up holidays, sickies, etc., to be on your own and make less? that's their rationale behind it).

[Spent2much]

We received a letter yesterday telling us about the changes that will happen next year .

Basically as we can understand self employed people need to be earning the minimum wage which is £6.70 per hour , for us this is just not possible as business is very slow right now , my husband made a loss over the Christmas period and he had to pay for extra days to open and hardly any of the other traders turned up on those days .

I think our help will stop in April as the business just doesn't make enough to pay minimum wage .

I don't work right now as I had a break down in January of this year and still suffer agoraphobia , I attend Open Minds once a fortnight and they want me to apply for PIP which is a benefit that might help if awarded it , but i don't think I will qualify . If by any miracle i do qualify it will at least help when the working tax credits is taken away from us .

We're up to date with our mortgage and sometimes that has been by miracle and got paid last thing on the last working day of the month, but we pay it and we will do our best to keep paying it .

Has anyone else received the same letter and what are your thoughts please ?

Such a pleasant Christmas present