Working Tax Credit "Review"

polymorphe

Last thursday I received a letter from the HMRC telling me they have selected my claim for review and to provide self employment details for the past 6 months including:

- Type of work I do and the nature of my business.
- Summary/diary of bookings/appointments.
- Copies of advertisements placed.
- A breakdown of the hours I've worked per week.
- Invoices for any work done

I've been running an online record store for about 7 years now from my bedroom at my parents house. The music retail market is difficult now and I've made less and less money and I basically need tax credits to survive. As of October last year I've been diversifying into web development and have had a small amount of interest. However, these things take time to become sustainable. Just 2 weeks ago I got in touch with my Prince's Trust mentor who helped me set up my site to ask for advice and he's encouraged me to set up other websites for web marketing purposes.

Is there any particular reason why they'd send me this letter or is it random? They didn't actually use the word "investigation". Only that I've been selected for review. How can I breakdown my hours when it's an online business and most of it is conducted as and when through the internet? Would it help if I sent bank statements etc or told them about my diversifying into other areas (the web marketing sites, my web development skills, looking for web design work etc)?

By the way, my Prince's Trust mentor can't help me as he's on holiday until the first week of June and they want a reply by the end of this month. Any advice or opinions would be appreciated.

pipscot

polymorphe wrote: »

Last thursday I received a letter from the HMRC telling me they have selected my claim for review and to provide self employment details for the past 6 months including:

- Type of work I do and the nature of my business.
- Summary/diary of bookings/appointments.
- Copies of advertisements placed.
- A breakdown of the hours I've worked per week.
- Invoices for any work done

I've been running an online record store for about 7 years now from my bedroom at my parents house. I've made less and less money (actually a loss the last 2 years!!) and I basically need tax credits to survive. As of October last year I set up a free website and facebook group to advertise my web development skills, but haven't had any work from that. Just 2 weeks ago I got in touch with my Prince's Trust mentor who helped me set up my site to ask for advice and he's encouraged me to set up another website for web marketing purposes (I'm hoping to set a few of these up!).

Is there any particular reason why they'd send me this letter or is it random? They didn't actually use the word "investigation". Only that I've been selected for review. How can I breakdown my hours when it's an online business and I basically spend most of the day waiting for orders or editing my site (actually, often doing very little :embarasse )? Would it help if I sent bank statements etc or told them about my other proposed ideas (the web marketing sites, my web development skills, looking for web design work etc)?

By the way, my Prince's Trust mentor can't help me as he's on holiday until the first week of June and they want a reply by the end of this month. Any advice or opinions would be appreciated. Worried, to be honest!! =(

Lots of small self-employed businesses are being selected for review this year. This is because HMRC are concerned that some self-employed people are claiming that they work 16 hours a week (or even 30 hours) but are actually working far fewer hours than that.

They want to check that you are actually running a business and not just a hobby that takes up just a few hours of your time. By your own admission you are spending time "waiting for orders" or "doing very little" and this is what they are concerned about.

If you are certain that you qualify for working tax credits then you need to be able to justify that with proof of your working hours - hence the asking for diaries etc.

MrsManda

In order to receive Working Tax Credit you need to be in paid work for either 16 hours or 30 hours a week depending on your circumstances.
As you are self-employed this means any work you do for payment or profit

If you're self-employed, paid work means any work you do for payment (or would expect to be paid) or profit.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCredits/Gettingstarted/whoqualifies/WorkingTaxCreditthebasics/DG_172728

As pipscot said, you need to be able to prove that you are doing this in order to continue receiving WTC. If you can then you're entitled and there's nothing to worry about.

DaisyFlower

How many hours are you declaring you work to them? They wont accept periods where you are awaiting orders and doing nothing so you may have a huge overpayment.

Perhaps its time to gain employment and run the s.e side at night/weekends as or close it altogether if you cant earn enough to make a living.

The planned changes to self employed tax credits will mean they will assume you earn at least min wage per hour which sounds like you dont so worth changing now.

polymorphe

Thanks for the replies. I guess I'll just have to be honest and see what they say. Im aware selling records isn't going anywhere anyway.

musicbloke

polymorphe,

I had the same letter as you, and I'm a self-employed musician. I've sent them as much evidence as I can, but it is a worrying situation because it will be hard to prove the hours I've worked at home. I also made a loss last year.

Let me/us know how you get on!

polymorphe

Hi musicbloke,
I've been in touch with various knowledgeable people about this and I believe that the general advice I received on here was wrong. I'm lucky enough to have gotten help from my mate's general manager and she says anything that you do whilst you're self employed that can be construed as beneficial to your work is work.

For example, creating, building and maintaining a portfolio, meeting potential contacts and clients, promoting my work on forums/blogs, practicing my web development skills.

I could even put some gigs I've been to down if I wished as I used those opportunities to promote my business. I easily do more than 30 hours a week and I'm sure you do too. Just think about the time you spend writing music, promoting it, promoting your website/gigs, writing plans, meeting fans/promoters (this includes going out to gigs/pubs etc if it aided your work), performing and practicing.

To be honest, even if you don't feel you work as much as you could, the government would rather we were on tax credits than claiming JSA. For starters, they give us less money and we don't get free prescriptions etc etc. Secondly, it keeps the unemployment figures down.

So yea, I'd take the advice I received previously with a pinch of salt. And don't worry, it should be easy to flesh out 30 odd hours per week as long as you don't sit there watching TV all day. I'm on the PC from 8am til midnight and not all of that is spent on Youtube. Seriously though, my GM mate looked at what I do, and even though it's irregular hours, I actually do about 36 hours a week. Sometimes lots more if I have to build a site for someone.

pipscot

polymorphe wrote: »

Hi musicbloke,
I've been in touch with various knowledgeable people about this and I believe that the general advice I received on here was wrong. I'm lucky enough to have gotten help from my mate's general manager and she says anything that you do whilst you're self employed that can be construed as beneficial to your work is work.

For example, creating, building and maintaining a portfolio, meeting potential contacts and clients, promoting my work on forums/blogs, practicing my web development skills.

I could even put some gigs I've been to down if I wished as I used those opportunities to promote my business. I easily do more than 30 hours a week and I'm sure you do too. Just think about the time you spend writing music, promoting it, promoting your website/gigs, writing plans, meeting fans/promoters (this includes going out to gigs/pubs etc if it aided your work), performing and practicing.

To be honest, even if you don't feel you work as much as you could, the government would rather we were on tax credits than claiming JSA. For starters, they give us less money and we don't get free prescriptions etc etc. Secondly, it keeps the unemployment figures down.

So yea, I'd take the advice I received previously with a pinch of salt. And don't worry, it should be easy to flesh out 30 odd hours per week as long as you don't sit there watching TV all day. I'm on the PC from 8am til midnight and not all of that is spent on Youtube. Seriously though, my GM mate looked at what I do, and even though it's irregular hours, I actually do about 36 hours a week. Sometimes lots more if I have to build a site for someone.

The advice you were given on here was that
1/ if you claim you work 30 hours, you need to be able to prove that if asked
and
2/ you need to expect your business to make a profit
and
3/ any time you spend doing nothing should not be counted towards the 30 hours

I'm slightly confused as to how that advice is considered "wrong"!!!

You should also be aware that under Universal Credit from 2013, the government is planning to assume a national minimum wage for self-employed people. This would mean that if you claim to work 30 hours, your weekly profit will be assumed to be at least £177.90 and your benefit entitlement will be worked out on that basis.

AnxiousMum

polymorphe wrote: »

Hi musicbloke,
I've been in touch with various knowledgeable people about this and I believe that the general advice I received on here was wrong. I'm lucky enough to have gotten help from my mate's general manager and she says anything that you do whilst you're self employed that can be construed as beneficial to your work is work.

For example, creating, building and maintaining a portfolio, meeting potential contacts and clients, promoting my work on forums/blogs, practicing my web development skills.

I could even put some gigs I've been to down if I wished as I used those opportunities to promote my business. I easily do more than 30 hours a week and I'm sure you do too. Just think about the time you spend writing music, promoting it, promoting your website/gigs, writing plans, meeting fans/promoters (this includes going out to gigs/pubs etc if it aided your work), performing and practicing.

To be honest, even if you don't feel you work as much as you could, the government would rather we were on tax credits than claiming JSA. For starters, they give us less money and we don't get free prescriptions etc etc. Secondly, it keeps the unemployment figures down.

So yea, I'd take the advice I received previously with a pinch of salt. And don't worry, it should be easy to flesh out 30 odd hours per week as long as you don't sit there watching TV all day. I'm on the PC from 8am til midnight and not all of that is spent on Youtube. Seriously though, my GM mate looked at what I do, and even though it's irregular hours, I actually do about 36 hours a week. Sometimes lots more if I have to build a site for someone.

It's wrong in what way? You have stated on here yourself that you do very little......Do you see your business as a viable venture able to bring you in an income in the future? If not, then the TC people won't see it that way either. The way you have described your working hours in your original post - you know that you do not have a viable business venture, and that's what TC's are trying to crack down on.

Yes, time spent researching, marketing etc. is all 'employment hours', but as someone else said, HMRC would assume that you are at least receiving minimum hour wages for the hours that you work - on average over a period of time. If this is not the case - business is not viable, and is seen as an alternative to you having to sign on for JSA each week, by just claiming tax credits and sitting at home, as you say 'doing very little' business wise.

toomuchinfo

The notion that under Universal Credits Self Employed people will be assumed to be earning NMW for hours declared hasn't been finalised yet and I am told that the probability will be that if you say that you earn e.g. £35 per week this will be divided by NMW amount and those hours will be used as declared hours, not that the hours you say you have worked will be multiplied by NMW amount.


Also, as discussed in a previous thread, there won't be minimum hours worked requirement for UC so it's a bit puzzling how this will work.

musicbloke

From www(dot)hmrc(dot)gov(dot)uk/taxcredits/start/claiming/income-hours/work-out-hours(dot)htm :

"If you're self-employed

Put down the number of hours you normally spend working in your business, either on work billed to the client or its related activity, for example:

• trips to wholesalers and retailers
• visits to potential clients
• time spent on advertising
• cleaning the business premises
• cleaning a vehicle used as part of the business, for example a taxi
• book-keeping
• research work

If you work from home, include time spent travelling to see customers."




So, obviously there's a lot of room for interpretation of what counts as work, especially as the above states these are only examples. As far as I'm concerned, my claim of 30+ hours is based on a reasonable interpretation of the guidance above, so I will appeal if they aren't satisfied with the case I've put forward.


Polymorphe (thanks for the reply btw), you can get free prescriptions on a low income by obtaining a HC1 form from the NHS. You'll have to include evidence (eg income and expenditure) of earnings (of lack of!).