Self-employment - WTC terminated due to lack of turnover

vgs

I was self-employed, working from home, and claiming WTC, and I have to admit the business was doing very poorly, with only around £400 profit in the last tax year.

After filing my tax return in April 2011, my WTC claim was selected for review, and I was asked for documents/accounts etc for the period 1st Jan to 31st March 2011.

The result is that my WTC was immediately terminated from the start of the current tax year (meaning that they would seek repayment for April).

In addition, I was told that once I have returned the renewal claim (- still not received the Renewal Pack though), they will terminate it from 1st January 2011, and seek repayment from that date.

Since WTC was the only thing that was allowing me to continue to try to recover the business, I had to sign on straight away instead - and in fact the WTC person advised it.

I went to CAB to see if there were any grounds for appeal, and they said they couldn't find anything about such a situation in their records, and so while there was nothing to support the WTC decision, there was also nothing to support an appeal, and therefore they couldn't advise me one way or the other about anything.

Although I can see in general that after 3 years it might be reasonable to expect greater profit from self-employment, I can't find any current regulations specifying self-employment turnover has to be at a certain level, or even in profit, to qualify for WTC.

e.g. from the TCT Manual, TCTM02411:

"A self-employed earner's expectation of payment must be a reasonable one. The claimant must confirm that the work is done in expectation of payment. It does not matter that a self-employed earner might trade at a loss."

I can try to appeal the WTC decsion, and in the unlikely event of winning it, I'd recover WTC for the months Jan to April - but having had to stop self-employment to become a JobSeeker, I would have in effect disqualified myself from WTC from May onwards.

It has also been suggested that I try to have my JSA claim backdated, but having been in good faith trying to work as self-employed for over 30 hours a week for that period, it seems unlikely to succeed.

I have no idea how I am supposed to fill in the WTC renewal form when it arrives ... I cannot claim to be self-employed for over 30 hours a week and signing as unemployed ... I cannot be appealing against not being classed as self-employed if I am now signing as unemployed.

Tis all very confusing

pipscot

vgs wrote: »

I was self-employed, working from home, and claiming WTC, and I have to admit the business was doing very poorly, with only around £400 profit in the last tax year.

After filing my tax return in April 2011, my WTC claim was selected for review, and I was asked for documents/accounts etc for the period 1st Jan to 31st March 2011.

The result is that my WTC was immediately terminated from the start of the current tax year (meaning that they would seek repayment for April).

In addition, I was told that once I have returned the renewal claim (- still not received the Renewal Pack though), they will terminate it from 1st January 2011, and seek repayment from that date.

Since WTC was the only thing that was allowing me to continue to try to recover the business, I had to sign on straight away instead - and in fact the WTC person advised it.

I went to CAB to see if there were any grounds for appeal, and they said they couldn't find anything about such a situation in their records, and so while there was nothing to support the WTC decision, there was also nothing to support an appeal, and therefore they couldn't advise me one way or the other about anything.

Although I can see in general that after 3 years it might be reasonable to expect greater profit from self-employment, I can't find any current regulations specifying self-employment turnover has to be at a certain level, or even in profit, to qualify for WTC.

e.g. from the TCT Manual, TCTM02411:

"A self-employed earner's expectation of payment must be a reasonable one. The claimant must confirm that the work is done in expectation of payment. It does not matter that a self-employed earner might trade at a loss."

I can try to appeal the WTC decsion, and in the unlikely event of winning it, I'd recover WTC for the months Jan to April - but having had to stop self-employment to become a JobSeeker, I would have in effect disqualified myself from WTC from May onwards.

It has also been suggested that I try to have my JSA claim backdated, but having been in good faith trying to work as self-employed for over 30 hours a week for that period, it seems unlikely to succeed.

I have no idea how I am supposed to fill in the WTC renewal form when it arrives ... I cannot claim to be self-employed for over 30 hours a week and signing as unemployed ... I cannot be appealing against not being classed as self-employed if I am now signing as unemployed.

Tis all very confusing

The title of your thread suggests it is the low turnover (rather than the low profit) which has triggered the refusal. I would imagine the low turnover indicates to Tax Credits that you are not working enough hours in the week to qualify for wtc. Do you have proof that you have been working 30 hours (diaries, appointments with clients, business travel etc)

If you do a search on this forum - you will find that this has been a common theme lately - many small businesses and self-employed people have been targeted for review.

I'm afraid I don't have any suggestions for completing your renewal but looking at the other threads on this subject may help you decide whether or not you have grounds for appealing the decision.

staffsuk

Does anyone know what the thresholds are that trigger such a termination?

I have recently submitted my return and my turnover was £6k with a net profit of just under £3k. I have been working on focussing what I do to earn money (having tried all sorts!), and have found a couple of little niches that I'm hoping to build on to try and at least double my turnover / profit this coming tax year.

I'm worried though now they could terminate my WTC. That would seriously affect me and my business

HappyMJ

It is expected that you charge the client at least minimum wages...i.e £5.93 per hour. If you need 30 hours to get WTC'S then your turnover should be £5.93*30hours*52weeks = £9250 per year. You could have expenses which reduce the profit to NIL but your turnover matches the hours claimed for.

dktreesea

I had a conversation on this topic recently with the VAT people at HMRC, and they were telling me that currently guidelines have come to them asking them to focus on getting people with turnovers of over £70k registered for VAT (even where this could result in a windfall for the self employed person, if they were selling items zero rated for VAT (as opposed to exempt) but their expenses were taxed at the full rate) and to move people who were not making the minimum wage out of self employment and onto the JSA. I got the impression it was based on 16 hours, soon to be 24 hours a week, and wasn't for 52 weeks a year. I think there was a holiday element taken into account.

Oldernotwiser

There has been a crack down on people who have set up "businesses" to enable them to claim WTC rather than JSA. Although unfortunate for any genuine claimants, it's a move that's long overdue.

saving-mad

yes sadly i am one of the innocent ones:(, we have had some tax credits for a long time, my expenses as a childminder outweigh my income but i work 60 hours a week, so now on top of looking after 3 small children all day, having 2 children of my own with additional needs now i have to go through a review.

I am, not too worried as i know its just to weed out the ones that shouldn't be claiming.

Oldernotwiser

saving-mad wrote: »

yes sadly i am one of the innocent ones:(, we have had some tax credits for a long time, my expenses as a childminder outweigh my income but i work 60 hours a week, so now on top of looking after 3 small children all day, having 2 children of my own with additional needs now i have to go through a review.

I am, not too worried as i know its just to weed out the ones that shouldn't be claiming.

How can you look after 3 children for 60 hours per week and not make a profit?

If you are, why do you bother?

MissMoneypenny

saving-mad wrote: »

my expenses as a childminder outweigh my income but i work 60 hours a week, so now on top of looking after 3 small children all day, having 2 children of my own with additional needs now i have to go through a review.

My niece is a childminder, has two young children of her own, works about 40 hours per week and she makes a profit. Perhaps your WTC review is because they can't work out why you say you are losing money when you work 60 hours a week?

saving-mad

there is money in it, but the allowable expenses are such that it doesnt show much on paper, i have a good accountant who knows the rules well,
the reward of seeing the children develop far outweights any money you could earn and i am here for my 2 when they need a day off due to there disabillities, no employer would want to employ me as i would need too much time off.

MissMoneypenny

saving-mad wrote: »

there is money in it, but the allowable expenses are such that it doesnt show much on paper, i have a good accountant who knows the rules well,

So you show a loss on your books so that you can claim maximum welfare? I think you will find they are going to be stopping this practice when Universal Credits come in: although if you have a review now, I assume they are already marking those who do this.