Universal Credits - Self Employed

MissMoneypenny

samasama wrote: »

Online reporting will be mandatory. This is unfair and discriminatory. Those businesses which do not have access to a computer or broadband will be discouraged from claiming.

Are there any people of working age who also claim welfare, who don't have access to the internet? How can a business manage without the internet, these days?

samasama wrote: »

The calculation of income for UC is not the same as for income tax.

Why should it be? UC is taking (welfare) from the state as you aren't supporting yourself or your family: income tax is giving to the state. As different as apples and pears; but under tax credits, they got mixed up and that is now being corrected.

samasama wrote: »

A business will be required to keep detailed records of the hours spent working from home and the activity then being undertaken.

Whenever a person asks for welfare from the state, the government has a duty to ensure they really need welfare. The government also needs to ensure the claimant is doing more to work towards supporting themselves and their family, so that they don't continue to be a burden to the country. Once they make their business viable there will be no need to jump though these welfare hoops, as they won't need to claim UC anymore.

The welfare state will no longer support:-

• A failed/ing business.
• Those who do not work enough hours to ensure their business is a success, but simply use it to avoid job seeker requirements.
• Those who have a good business but use their books to show little income in order to claim welfare.

A bitter pill for those that did one or more of the above, but there are now too many doing it and the country can't afford the welfare bill.
I suppose you could say these people are a victim of their own success (in claiming welfare) and the internet has spread the word of how to do this.

Therefore it appears that the self employed who also claim welfare, do have internet access after all. If they didn't, how did they learn how to scam the welfare state too?

Pedent

MissMoneypenny wrote: »

Once they make their business viable there will be no need to jump though these welfare hoops, as they won't need to claim UC anymore.

The welfare state will no longer support:-

• A failed/ing business.
• Those who do not work enough hours to ensure their business is a success, but simply use it to avoid job seeker requirements.
• Those who have a good business but use their books to show little income in order to claim welfare.

A bitter pill for those that did one or more of the above, but there are now too many doing it and the country can't afford the welfare bill...

... it appears that the self employed who also claim welfare, do have internet access after all. If they didn't, how did they learn how to scam the welfare state too?

Do you really think that all self-employed welfare recipients either have failing businesses or are "scamming the welfare state"?

If you have children, then you can have pretty decent earnings (much more than minimum wage) and still qualify for tax credits. This is especially true if you have childcare costs.

How much would you say someone has to make from self-employment for their business not to count as "failing"?

coffeelover65

Pedent wrote: »

Do you really think that all self-employed welfare recipients either have failing businesses or are "scamming the welfare state"?

If you have children, then you can have pretty decent earnings (much more than minimum wage) and still qualify for tax credits. This is especially true if you have childcare costs.

How much would you say someone has to make from self-employment for their business not to count as "failing"?

Under UC the government is setting the floor at the minimum wage for the number of hours declared, so if you were declaring 35 hours now it would be £216.65 per week net profit (£11265.80 per year).

Pedent

coffeelover65 wrote: »

Under UC the government is setting the floor at the minimum wage for the number of hours declared, so if you were declaring 35 hours now it would be £216.65 per week net profit (£11265.80 per year).

Yes, but MissMoneypenny clearly has a much higher figure in mind, as you can make much more than that and still receive benefits.

Sixer

There are 4 million self-employed people in the UK. These include convenience shop owners, barristers, plumbers, electricians, almost everyone in construction, contract engineers, journalists, yadda ad infinitum. Many of these actually employ people - as shop assistants, apprentices, secretaries, drivers, etc. A convenience store owner I know personally employs 7 part-time people adding up to 3 full-time jobs. And yet she is entitled to a small amount of tax credits. She's already dying of red tape. And now she will have to produce full sets of accounts MONTHLY. More than half of the self-employed are ENTITLED to some tax credits. Only a small minority of those entitled could be seen as scamming the system by someone using common sense - eg hobby businesses and other unrealistic businesses. The number of people who could start a business and either build up sufficient income to no longer qualify for tax credits or to generate sufficient work to employ someone else is much larger.

It is ludicrous to expect the self-employed to produce full sets of monthly accounts - with a 7 day window for reporting from the end of the month, no less. It is ludicrous to say that losses for one month can't be smoothed into profits from others. The downward effect on entrepreneurialism for everyone will be much larger than the punitive effect on the relatively small number of so-called scammers.

In a narrow sense, it's the usual sledgehammer to crack a walnut approach to benefit savings and in a wider sense, it's a massive problem with the implementation of UC and a disincentive to growth.When growth is what we need.

SkyeKnight

dktreesea wrote: »

Stock is a business asset, so excluded from the calculation for determining capital.

I thought the capital was in some sense the "value" of the company - - it's the assets minus the liabilities I seem to remember - the stock has a cash value - how can it not count as capital? Using all your money to buy stock doesn't change the capital to zero...? Not disagreeing with you because I don't know enough, but just interested.

samasama

Sixer wrote: »

It is ludicrous to say that losses for one month can't be smoothed into profits from others.

Exactly. On the ICAEW site one respondent gives the example of a livestock farmer whose cattle will not be ready for market until they're 18mths old. The time that goes into caring for them until that point is unpaid until they're sold. Is that a failing business? No, it's just one that has a very long cash-flow period. (there are plenty of other business types that have the same problems).

Not all low-income small businesses are failing businesses - and not all low-income self-employed are scamming the system.

It would be a wonderful world if there was plenty of work for everyone, both employed and self-employed. Then everyone would have full-time work and earn good money. I'm sure a large percentage of those claiming top-up benefits are working part-time because there is no full time work available.

There are PLENTY of people who don't have reliable access to the internet at home. I live in a rural area where internet is unreliable. At times it's out completely, at others it's no better than dial-up. Not all of us are considered important by utility services ... for instance mobile phone service is limited to upstairs at the back of the house, and electricity frequently cuts out for 10 mins (when that happens the broadband box often packs up for a while in a tantrum). Last month my internet was out for 4 days due to high winds throwing tree branches around taking out a cable (it also took out the power for 7hrs too). That's not unusual (village down the road was without internet for weeks not that long ago).

Of course most employed people I know use the internet at work to access social media and forums ....

Blue22

MissMoneypenny wrote: »

Why should it be? UC is taking (welfare) from the state as you aren't supporting yourself or your family: income tax is giving to the state.....to support others and their families. . As different as apples and pears.

Why as different as apples and pears? Both are calculated by something called 'income'. A PAYE worker has the same annual income that is used to calculate both welfare and income tax. So why shouldn't someone who is self employed?

As someone who ran a business for over two decades (a proper working business that employed others, not a hobby business) I can understand the unfairness of the guidelines.

I always played by the rules when SE. I paid my taxes on time, only claimed for genuine expenses and collected large sums in VAT for HMRC.

If I were still in that position and had dependent children, I would feel so resentful that I would do things differently. I would not be prepared to pay my taxes so PAYE workers on higher annual incomes could receive UC that I and my family were not entitled to.

The guidelines are implying that all the self employed are fiddling the system, so to be perfectly honest, that's what I would feel justified in doing.

dktreesea

coffeelover65 wrote: »

Whilst I think the new rules under UC will be too far, self employed income is already treated calculated differently for benefit purposes than it is for income tax so that's not really a new thing.

The current system used for self employed people in the benefits system just doesn't work as its widely abused and has been for years. In my job every SE worker will declare they work exactly 16 or 30 hours a week, regardless of the income they generate and most of you will know working that number of hours is a requirement for other elements and tax credits.

At present we have a system where SE workers can have an unsuccessful business which never makes any money which allows SE workers to be exempt from job centre reviews/sanctions/training/workfare schemes, and allowed to have their incomes topped up with tax credits.

I can't really see a system that the government could use instead that would get rid of this fraud and treat SE workers the same as employees and not allow people to be engaged in fake SE work that produces no income or an income less than the minimum wage. If tax credits currently was only paid to SE workers who earned above the minimum wage for the hours declared, I do wonder how many of those people would continue with their SE work.

Why should SE people have to actually earn the minimum wage for the declared hours? They just have to be deemed to have earned that much, and just for benefits calculation purposes. And why just the declared hours? If someone is self employed but only wants to devote 4 days a week to the business, why should Joe Public have to fork out to cover their shortfall?

I don't have a problem with self employed people working for little or no income, or working one day a week if that's all they can be bothered to do, provided that the benefits paid are based on a notional income of full time employment at the minimum wage.

I realise a lot of self employed businesses make little or no money due to lack of capital to invest rather than lack of labour and that many workers are forced into self employment because they cannot get a job in the "working for someone else" workforce. Sure, it's better to work than be unemployed, no matter how little the resultant income.

If you are self employed, are prepared to work for £20 a week and don't want to work for someone else, fair enough. Nobody has to work for someone else, even if there are jobs available. But I don't think they should get any more in benefits that someone in an equivalent position who is working full time for the minimum wage.

This isn't fair because they can't get a minimum wage job? But how can we possibly know if that's the case, given they are not looking for one.

dktreesea

SkyeKnight wrote: »

I thought the capital was in some sense the "value" of the company - - it's the assets minus the liabilities I seem to remember - the stock has a cash value - how can it not count as capital? Using all your money to buy stock doesn't change the capital to zero...? Not disagreeing with you because I don't know enough, but just interested.

Well, under the current proposals cash accounting will apply, so for UC purposes, you need only to spend on the stock to be able to expense it. You don't even have to view unsold stock as an asset - so much for GAAP (generally accepted accounting principles).

I suppose the thinking is provided you employ your capital by investing it in your business, it's working towards production of your income and therefore no longer available to be spent on maintaining yourself.

The proposals as they stand are ludicrous. 95% of self employment in Britain is in micro businesses that don't employ anyone (source: Office of national Statistics). I'm not saying they are all marginal by any means, but imagine someone with a shop on the high street who pays their rent quarterly in advance. This could mean they will only get UC one month in three - the month they pay their rent, because in the other two months they are deemed to have sufficient surpluses, even though a good part of that surplus has to be set aside to fund the coming quarter's rent.

An outcome like that looks to be in the government's favour. But you could just as easily have a business that makes 90% of its sales in the Christmas quarter and barely any profit during the rest of the year. So they could at least get UC for the other 9 months of the year, even if, when taking their results over a full year, they ought not to have got any UC.