Universal Credits - Self Employed

MissMoneypenny

Icequeen99 wrote: »

They also use the same test for self-employed in child maintenance where people don't return figures. For that they use a database, which i presume is what they would use here.

Slightly different I suppose though, as people can use accountants to lower their declared income, to avoid paying; so it is their interest to declare a (low) fiqure to the CSA if they are that sort of parent. This is how Tax Credits seems to be working too at the moment; but the big difference is that the latter are claiming welfare.

I assume this is another reason why the Tax Credit loophole is closing as it stops this too (as well as the people who are using Tax Credits to avoid having to go through the things jobs seekers go through; by declaring themselves to be self employed but they really earn very little income).

Icequeen99

MissMoneypenny wrote: »

Slightly different I suppose though, as people can use accountants to lower their declared income, to avoid paying; so it is their interest to declare a (low) fiqure to the CSA if they are that sort of parent. This is how Tax Credits seems to be working too at the moment; but the big difference is that the latter are claiming welfare.

I assume this is another reason why the Tax Credit loophole is closing as it stops this too (as well as the people who are using Tax Credits to avoid having to go through the things jobs seekers go through; by declaring themselves to be self employed but they really earn very little income).

Yes, sorry I was referring to the 'similar circumstance test'. Basically for child maintenance, if you are self-employed and don't give any figures they look on their database for similar employed earnings for your occupation. Which is similar to the test proposed during the passage of the bill in relation to UC self-employment.

IQ

dktreesea

Icequeen99 wrote: »

But what you say isn't entirely correct. Firstly, losses are recognised in the tax credits system. If you make a loss, you can offset it against your partner's employment income.

But they are not recognised in the housing and council tax benefit calculations. I thought the current plan with UC was for this method to prevail, so business losses are treated as zero income and not able to be offset against other streams of income?

Icequeen99 wrote: »

Secondly, re UC and the self-employed. The Government initially though the minimum income floor would be based on NMW x 35 hours, however during the Bill debates they said it would be whatever a similar person in similar circs employed would earn. They haven't confirmed where they will set it.

They have also very clearly confirmed (again during the debates) that if you make a loss or very low profit, you either have your income treated as equal to the minimum income floor (whatever it is set at) or you can CHOSE not to accept the MIF and have your UC based on your actual income (be it zero or a small amount) but you will then have to accept conditionality regime.

In terms of whether the support will be the same, clearly it won't. people in this situation will get far less in UC than with tax credits. That is evident if you run a few calculations of UC vs tax Credits.

IQ

Yes, for sure, if your household is treated as having £20k net profit (approx 2 x full time NMW) as opposed to, say, a £2k net profit for benefits calculations then the benefit under UC will be less than the household's current entitlement.

But I also note, while the government has said "Where, in any assessment period, a claimant is in gainful self-employment and their earned income in respect of that period is below £... [amount/s to be determined], the claimant is assumed to have earned income equal to that amount", they also say transitional protection will "not be offered to self-employed claimants against the effects of the Minimum Income Floor. In these cases, the Transitional Protection calculation will be carried out prior to the Minimum Income Floor being applied. Once the Minimum Income Floor is applied the household will retain their Transitional Protection amount, but no further protection will be provided. This will ensure that claimants' circumstances other than those related to earnings are protected. "

That sounds to me like if you would be entitled to, say, £400 a week under the current benefits regime, but, with the minimum floor applied, this would drop to £200 a week, assuming everything else remains the same, and provided you have a genuine business ,you would continue to get £400 a week right up to the end of the transition period, (2017?)

dktreesea

MissMoneypenny wrote: »

I'm guessing that if UC is anything like the new immigration rules; the government will tell you how much they expect you to earn each week in that job for UC calculations? If you don't earn that money, then you have the choice of finding a job that does pay the set rate; claiming UC as if you are are earning the set rate; or be subject to Universal Credit conditions (as job seekers are now).

I think the idea is to close the loophole of people who avoid the conditions job seekers have to comply with for their benefits; by just claiming they are 'self employed but earn very little' and therefore they claim benefits anyway and avoid job seeker conditions.

I think they are also interested in the self employed people who do have quite reasonable incomes, but do things like leasing brand new vehicles, have the fastest broadband, the most expensive mobile phone contracts, the latest computers, claiming some of the costs of running their households, leasing premises that are better than they would be able to afford if they didn't have such generous taxpayer subsidies for their business. Or even employing people that strictly speaking they could do without, just so they don't have to work too hard.

These are all the kind of expenses, with the exception of the business premises, that an employee would have to pay for out of after tax income.

I'm not sure the government have fully thought the consequences of their plans to impose a minimum income floor on the self employed through. I agree with the principle that if people opt out of the "working for someone else" workforce but still want other taxpayers to subsidise them, then that subsidy shouldn't go beyond the income that would potentially be available to them if they chose to be employed by others rather than self employed. But the government seem to be under the impression that if, say, a self employed person has revenues of £12k and a net income of £2k, treating them as having a net income of, say, £10k will somehow force the person to earn the resulting shortfall in benefits.

What if instead the self employed person decides to cut their costs, so gives up their part time employee/premises/ brand new leased car/ go for a much cheaper broadband/mobile phone package once the renewal comes up? The multiplier effect of that through the economy could be huge, far outweighing the savings made from the lower benefits payouts.

What happens to commercial landlords if their tenants have to give up their offices/storage places? I don't mean high street shops either. There are plenty of off the high street premises that are not customer facing. Their mortgages still have to be paid. Do they go bankrupt because their self employed tenants don't feel they can afford to pay rent anymore, due to the deeming rules.

coffeelover65

The reason for these rules in respect of the self employed is due to abuse of the system by so many people. I can't speak about how SE affects tax credits, but from a housing benefit / council tax benefit aspect there are certain people and dodgy accounting firms who routinely make a net profit of less than the personal tax allowance year after year. This is people who routinely work 30 hours a week (which just so happens to increase the amount of money you can claim via WTC), but yet earn the equivalent of a a few pounds per hour.

This is a good thing as it will end the abuse as why would anyone go through the hassle of SE if it pays less than the minimum wage. No honest person would routinely work hour after hour and come out with less than the minimum wage if they didn't have the taxpayer topping up their income.

[Deleted User]

So from what I have read, could it be that I remain on Tax Credits until 2017, as they won't transfer everyone onto UC until that date, by that I mean everyone won't be, clearly lots will.

So is there a chance for next year at least that my process remains unchanged? Or have I misunderstood someone elses post ? :cool:

coffeelover65

Only people making a new claim will go through the Universal Credit process from April 2013 in 11 areas, everyone else will making a new claim from October 2013 will go through the UC process.

For everyone with an existing claim such as yourself will be moved across in stages between 2013 - 2017 but the DWP haven't said how they'll do that yet.

[Deleted User]

coffeelover65 wrote: »

Only people making a new claim will go through the Universal Credit process from April 2013 in 11 areas, everyone else will making a new claim from October 2013 will go through the UC process.

For everyone with an existing claim such as yourself will be moved across in stages between 2013 - 2017 but the DWP haven't said how they'll do that yet.

So would that mean, if they don't move me across (which I know they could) I could still offset my losses again my income using the same model as Tax Credits use currently...

Or does something change to stop this before I am moved across. If I am moved across midway what happens then?

Sorry I may sound really stupid! :cool::cool:

coffeelover65

Losses are not taken into account for HB/CTB purposes, if you're making a loss then its assumed you have no self employed earnings, which is different to the way tax credits work.

The regulations are still in draft at present so nobody knows exactly how its all going to work even though 11 councils have to plan a service to go live in 8 months time, and all UK councils need to have a replacement Council Tax Support scheme in place in that time.

For people on tax credits, unless you have a significant change such as a new child, you/your partner start a new job etc, then you'll move to universal credit at some point from April 2014 onwards. If you have a significant change between Oct 2013 to April 2014, you'll move across straight away.

This is all "expected" at the minute, but the current plans for UC are all listed on the DWP's site - http://www.dwp.gov.uk/policy/welfare-reform/universal-credit/

[Deleted User]

Thanks for the reply.

Unfortunately I don't get CTB or HB because I work full time and earn quite a lot over 16K.

It's only tax credits and working credits that we were concerned about, because our "new ish" business had made a loss last year and will this as I can see at the moment, this was why I wanted to offset loss against income and then claim Tax Credits on this amount, hopeing that UC does not come to me during the next year.

Seems like we will still be able to do this, at least for a year because we won't be moved yet