Working Tax Credit Compliance

northwestguy

Seems I'm not alone on this one.

I'm a sole trader and have claimed WTC from April 2010. I turned a profit of £3300 in my first year, and probably will profit around £4.5k this year.

I have been asked to submit as per other people, diary, receipts, ad's etc etc.

I am worried now as others have experienced that they will stop my WTC's, more so they will ask me to pay it back. I'm trying to get my business more profitable and it's going in the right direction, things are just tough out there at the moment

I really don't know what I'll do if they ask me to pay it all back and cut my WTC. Will I have to pay it all back at once (no way I can do that), or will they allow me to pay back what I can when I can?

I think I'll give the business up if this happens and end up on JSA looking for non existent jobs

Dognobs

As long as you prove you have been working and doing everything correctly with the tax man and not just blagging 30 hours like many seem to do you will be fine!

BigAunty

northwestguy wrote: »

Seems I'm not alone on this one.

Yes, yours is the third or fourth post on this topic in the last couple of weeks so it looks like there is a big review of low earners on tax credits to verify they are doing the hours they say for renumerative work.

Focus your energies on providing thorough evidence to support your claim rather than worrying at this stage about the cancellation of it or repayment.

Hopefully you can find those posts and find the constructive advice on providing evidence (and ignore the negative ones that criticise 'hobbies' masquerading as businesses).

northwestguy

Remunerative work? What does that mean?

I read when I first applied everything you do whilst working at your business counts as hours, ie research, looking for things to buy etc.. Otherwise you would be doing other things ie leisure and not working at your business?

Looking for stuff takes up lots of my time. Selling it is the easy part if you buy it at the right price.

I just don't think I can be bothered with it all now - I really feel like throwing in the towel.

Looking at what they want I know I'll be hopeless at putting it all together. And if as it seems they want everyone on WTC to sling their hook- well so be it.

So it would appear I'll be better for the economy on JSA which is actually more money & entitlements & boosting the already bad unemployment figures, chasing non existent jobs, especially at my age with no qualifications.

At least doing this I am actually doing something, earning some money, using services, providing a service, making some money move in the economy. So that is worse then than being on the dole?

Fine. I'm done with it.

That was my last chance at making a go of things and it looks like it's going to be taken away from me.

Congratulations IDS.

Think I'll just go buy a helium bottle.

BigAunty

The tax credits regulations have a stipulation about people doing 'qualifying numerative work' to ensure people are actually doing paid work. That's what I was referring to. This includes things like 'Work done in expectation of payment means more than a mere hope that payment will be made at a future date. There should be a probability rather than just a possibility that a payment will be made.'

http://www.hmrc.gov.uk/manuals/tctmanual/TCTM02400.htm

One of the last similar posts to yours had good info from a poster about how to prepare and respond to the challenge by the HMRC. Hopefully this member will pop up again as I imagine it's a pain trying to do a key word search on this forum.

Edit - here is a link to a website where other self employed people have gone through a HMRC review.

http://edwardrapley.co.uk/Working-Tax-Credits-Rule

Sixer

Hi OP

I've given links to HMRC guidance on what will be considered remunerative work in a couple of threads lately, and I don't have time to look for those now.

The one commonality between several threads with your problems I have noticed is that nobody seems to be keeping proper records. This is a legal requirement. If you had kept comprehensive records, you would very easily be able to prove your case. Do your best with providing the information HMRC are asking for now, and going forwards, check this link for exactly what you should be doing and when in terms of record keeping:

http://www.businesslink.gov.uk/bdotg/action/layer?r.i=1086253204&r.l1=1073858808&r.l2=1073859218&r.l3=1086244520&r.t=RESOURCES&topicId=1085697567

Edited to add links to related threads I've contributed on lately:

https://forums.moneysavingexpert.com/discussion/3733979

https://forums.moneysavingexpert.com/discussion/comment/50245951#Comment_50245951

BigAunty

Sixer wrote: »

...

The one commonality between several threads with your problems I have noticed is that nobody seems to be keeping proper records. This is a legal requirement.

To be honest, until this recent slew of posts from the self employed who get tax credits, I had no idea that they had to provide such detailed records about their time.

Yes, I know that in order to submit accounts and to estimate income for WTC, good records must be kept but didn't realise that claimants had to account for every hour spent.

I wonder how much explicit guidance was given to those setting up their businesses about this type of administration and how much it was expected that they interrogate the lengthy online manuals.

northwestguy

BigAunty wrote: »

The tax credits regulations have a stipulation about people doing 'qualifying numerative work' to ensure people are actually doing paid work. That's what I was referring to. This includes things like 'Work done in expectation of payment means more than a mere hope that payment will be made at a future date. There should be a probability rather than just a possibility that a payment will be made.'

That wasn't the impression I was given when I applied two years ago... I spend hours & hours looking for stuff to buy. Does this qualify as remunerative work? It's being done in expectation of buying something to sell ie getting payment?

Sixer

BigAunty wrote: »

To be honest, until this recent slew of posts from the self employed who get tax credits, I had no idea that they had to provide such detailed records about their time.

Yes, I know that in order to submit accounts and to estimate income for WTC, good records must be kept but didn't realise that claimants had to account for every hour spent.

I wonder how much explicit guidance was given to those setting up their businesses about this type of administration and how much it was expected that they interrogate the lengthy online manuals.

Well, to be honest, it seems like common sense to me, especially if you're the sole income in your household, you know your profits will be below the breadline, and you'll be relying on benefits for a large proportion of your income. Especially if you plan to claim a premium on your benefits for working 30 hours.

Personally, I've always kept way beyond the requirements in terms of records, including a detailed diary, despite my household never having been entitled to more than the family element of CTC (husband always working, etc) and not being entitled to anything now.

Anyone can be subject to an HMRC inspection at any time as they also do random ones, and if you've ever worked anywhere that had one - tax, VAT, whatever - you'd realise what a hole you'd be in if your records were a mess. These people are merciless!

Sixer

OP: the general philosphy for remunerative work is that all business-related activities are counted - but you have to have a business in the first place to start counting them. Does that make sense? So if you are hoping to sell a product or service, but don't have any clients, you're not yet in remunerative work and not yet self-employed. If what you do is more of a hobby (eg you sell a few pots of jam at the occasional WI bake sale) then you're not in remunerative work and you're not self-employed. You see?

BigAunty

Sixer wrote: »

..

Anyone can be subject to an HMRC inspection at any time as they also do random ones, and if you've ever worked anywhere that had one - tax, VAT, whatever - you'd realise what a hole you'd be in if your records were a mess. These people are merciless!

yes, I know they are merciless as my partner and I (non-benefit claimants) had a review and had to get specialist tax consultants to help defend us. They were targetting us under the IR35 regulations and the tax consultants were able to demonstrate to the HMRC that they weren't even following their own regulations. So they couldn't do us for IR35 so they went through all our expenses and discounted the main travel ones which our (now ex) accountant had wrongly approved.