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Starting a business, disability & Working Tax Credits

Apologies for a long post but please read it and if you can offer any advice, then please do.

As many people on here know, I am currently being migrated from IS to ESA. As with many other people I expect to get the dreaded 'nil points' and then have to go down the long route of appealing with no guarantees at the end of it.

Having gone through 2 appeals for DLA (both won), I know what is involved and the stress, strain and effect on your health is with this. I do not really want to go through it all again. So I began looking at my options, which I saw as;

1. Sign on to JSA and try to find an employer that would give me a job taking my health issues into account and could give me the flexibility that my conditions need, hospital appointments, sickness etc.

2. Appeal and put myself through the mill again for another 12 months or more, the stress, the strain, the uncertainty of any result.

3. Curl up in a corner and just give up.

Options 2 and 3 aren't really options to me, especially 3. Waiting for the WCA waterboarding treatment from ATOS is bad enough to be honest and has affected my health as it is. Option 1 seems unworkable, most of the employment in my town is seasonal, there is already massive unemployment. The chances of finding a job I am capable of, with a sympathetic employer that will take my problems into account is going to be like trying to win the lottery. I know disabled people are not allowed to be discriminated against but realistically they are. 2 people with equal skills apply for the same job, more often than not the non disabled person gets it. Thats life and if you have disabilities you know it happens.

So this has got me thinking and discussing with family and friends what else there is out there, that could maybe give me some sort of future with support, yet have the possibility of eventually doing well enough to not need as much, or even no support.

Self employment was suggested by a few people. During the last few years as and when I can I have made some dolls houses for people, grown up collecters ones, not childrens ones. I have done them to a high standard, put electrics in them, real wooden floors, the list goes on. It is something I am good at, can do in my own time and at my own pace. If I am unwell I can take a break, or work on them in the middle of the night, when I can't sleep.

So I have looked into the feasability of making them to sell for a living. There is a healthy profit margin to be had, so you don't need to sell many to make a decent amount of money. It would need little to be able to start this up as a business. Most of the model making tools I already have and materials are readily available to buy locally and from places like Ebay. I would sell them through a website that I would create, also through advertising locally, through social media like facebook and even on the dreaded Ebay. I could also look at craft fairs in the future as well.

I know the market is there, I know I can do it and I know it would fit in with my health and working at home, to the hours I could do.

Obviously I would need some support financially, I would be able to get WTC as long as I am working 16 hours because I am disabled. I looked into everyhting and worked out that with all the support in place and including my DLA, I would be about £40 to £50 worse off than I am now but I would have the added bonus of any profit I make on top.

I thought I had found a way to feel like I was doing something worthwhile, I would register as self employed and pay my stamp, do it all properly. Obviously to begin with things would be tight, I would expect to break even at best in the first year, possibly even make a loss, you just don't know to be honest. The hardest thing would be getting established and getting my product out there in the market place.

Then I started reading about it and have been horrified by some of the things I have read and been told.

Now if I could take a job working 16 hours a week, the system would still give me full housing benefit and council tax benefit, I would get full WTC, free prescriptions etc. I would not pay tax because I didn't earn enough, I wouldn't pay NI because I don't earn enough. I would however get all this and £100 a week wages.

As I understand it, that will not happen if I was to go self employed and try and make a living for myself. HMRC are taking away peoples WTC if they don't earn the minimum wage in profit for the hours they work at their business. Is this right? or am I misunderstanding the rules?

Can someone explain how UC will affect disabled people who are trying to make a living as self employed, as the things I have read suggest if you don't earn the minimum wage, you won't get your tax credits.

I understand that some people have used self employment as a way round working. They get their tax credits etc, don't do anything and then claim to have made a loss year on year. I accept that this wrong and something needs to be done about it. However what about people especially disabled people who want to do something within their capabilities and are making an effort to make some money?

I cannot believe that these people are being forced back onto ESA, or JSA and made to look for jobs that are not there.

If someone could explain to me how this can be better then please do because I just don't get it. Or have I misunderstood?

Any advice would be welcome.


  • [Deleted User][Deleted User] Forumite
    0 Posts
    Mortgage-free Glee!
    tbh i think you need to see what the outcome of your esa claim is first,rather than jumping the gun
  • I don't know about "jumping the gun" - isn't it more about being prepared?
    Also I think there will be other in a similar position - I am myself - so this thread could prove useful regardless.

    It's so ridiculous that the Atos assessments look to see if you are capable of any possible kind of employment, whilst the government simultaneouly makes this kind of work impossible.
  • Simon7685Simon7685 Forumite
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    Part of the Furniture 500 Posts
    I actually think that regardless of the ESA assessment, this could well prove to be a way forward but for the changes they are bringing in. I would prefer to be doing something, that is seen as contributing to society in no matter how small that may be.

    The realism is that I am limited to what I can do, the majority of menial jobs that there are, I could not physically do. I am limited in the hours I know I could do each week. I know from trying to do things in the house that I have limitations. The problems associated with illness would inevitably lead to periods of sick absences, more so than those without disabilities. Would many employers be happy to employ someone with all this baggage that comes with illness and disability.

    Realistically YES there are employers that will but the likelihood of finding one is probably very very slim. All this makes any future seem clouded to say the least. So part time self employment is a viable option but not if you are then to be victimised by these non sensical rule changes.

    Added to this there is also the fear of being found 'fit for work' by ATOS but then either of the other scenarios below come to pass......

    DWP refuse to allow you claim JSA because you can't commit to the standard Jobseekers agreement because of the disabilities that ATOS say do not prevent you from working.


    After being found 'fit for work' DWP choose to use and share the result of the WCA and then disallow your DLA that has just been renewed in June 2012.

    They claim a benefit saving, ATOS get their bonus and me the poor buggar at the end of it all ends up without the support that I need. It may be unlikely but it has and does continue to happen.
  • Simon7685 wrote: »
    DWP refuse to allow you claim JSA because you can't commit to the standard Jobseekers agreement because of the disabilities that ATOS say do not prevent you from working.

    Does anyone know what happens about this? If Atos have said you are fit to work does the DWP have to accept you are fit for Jobseeker's Allowance?
  • Simon7685Simon7685 Forumite
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    No they don't, is the short answer.

    In order to claim JSA it is a condition of the benefit that you sign and abide by a jobseekers agreement. that agreement imposes certain conditions on jobseekers to do certain things to find employment. For example walk down the high street asking for jobs in shops. If you cannot abide by the conditions of the agreement, you can be found unfit to claim Jobseekers Allowance.

    It is a strange set of circumstances when you can be declared 'fit and unfit for work'. the bottom line is.....

    No Job, no benefit you are able to claim and little or no hope. It is happening already.
  • edited 2 November 2012 at 10:18PM
    patman99patman99 Forumite
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    edited 2 November 2012 at 10:18PM
    If Simon7685 were to register a Limited Company, would they then be classed as an employee for the purposes of benefits calculations ?. I know they would be PAYE as far as Tax/NI is concerned, but they would also be a Director (unless they have a partner prepared to be Director for a nominal fee). The rules for a Director are, I think, slightly different but not sure how.

    You need to factor in how long it actually takes to make a dolls house from start to end. If you add-up the costs of materials along with labour @ hours taken x £6.19 (min. wage) then add-on 20% for insurance, power and other stuff, will you still make a good profit ?.
    Never Knowingly Understood.

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  • Simon7685Simon7685 Forumite
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    That is a very good question Pat and not easily answered with a yes or no. Having sat down to do some calculations, I believe that I could produce 1 house a week if I committed 16 solid hours labour. I have got the costings down to £80 for a basic house, which I believe would sell for around £150 - £175.

    So the profit from 1 sale would be at least £70. this is obviously underneath the minumum wage criteria but not by a massive amount. the objective over time would be to decrease the building time and like all things, it gets easier and quicker to make something the more times you make it.

    I would imagine that during the first year of trading the powers that be would accept an overall earnings amount of beneath minimum wage, as it takes time to build and establish any business and its common sense.

    The main question is will they allow that time, or will they move the goal posts?
  • PedentPedent Forumite
    150 Posts
    Eighth Anniversary Combo Breaker
    Simon7685 wrote: »
    I would imagine that during the first year of trading the powers that be would accept an overall earnings amount of beneath minimum wage, as it takes time to build and establish any business and its common sense.

    The main question is will they allow that time, or will they move the goal posts?

    Self-employed tax credits claimants don't have to earn minimum wage, so as things stand there's nothing to worry about there. (Withdrawal of other benefits may be more of an issue, I don't know.)

    However, this is seen as a loophole, as it allows people to set up their own lifestyle businesses that could never support them, and top up their wages with tax credits year after year, rather than getting a less pleasant job that would pay them more. Because of that, there are plans to move the goal posts when tax credits are phased out and Universal Credit comes in.

    Under Universal Credit, self-employed claimants will be subject to a "Minimum Income Floor". What that means is that if they earn less than they would from employment (generally taken to be minimum wage for however many hours their circumstances would allow them to work), then their award will be based on what they would earn from employment rather than what they actually earn, meaning they get less in benefits.

    However, this won't apply to those in their first year of self-employment (the "start-up period"), in recognition of the fact that it usually takes a while for businesses to get established.
  • Simon7685Simon7685 Forumite
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    Part of the Furniture 500 Posts
    Thanks for the info, it has confirmed that I have understood it the right way, with one exception......

    While the minimum wage is not applicable to the self employed and is not supposed to be taken into account where WTC are concerned, it is being used by HMRC when carrying out compliance checks on people. There have been a great number of cases (some documented on this forum), where people have received a check, been told their business is not a business but a hobby because of what they earn against the hours worked. The result has been their WTC stopped and some cases told to repay all their tax credits received.

    Then is the other side of things.

    Disabled people only have to work 16 hours to get WTC, which is a realistic amount of hours for most. If I could get a job, to the capabilities I have with an employer that would give me the opportunity, then that is fine. I can continue to work my 16 hours, take the wages and still benefit from all the in work benefits, WTC/HB/CTB this could feasibly go on until I retire and that is classed as acceptable.

    No additional questions would be asked.

    If I set up a bonified business doing something within my capabilities, at the hours I can work (16) and as a result earn less than £99.04 a week, then that is not fine. However I fail to see what the difference is? If they want to class my earnings as £99.04 a week then that is fine, I do not have an issue with that, nobody should. They are not just doing that though, they are taking away peoples in work benefits because they do not earn the minimum wage and this is not right.

    I want to do this, I want to do it right but if they take away peoples entitlements and force them to repay their benefits, where is the incentive? Surely if benefit is set using a minimum income floor then if you don't earn it, it is only you that loses out.

    Are they not trying to use a lump hammer to crack a walnut with this approach?
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