Starting a business and Freelancing - should I apply for NEA or WTC?

rvox

Hi MSE forum,

I really need some advice, as I thought I was ready to do this, but I'm still wet behind the ears, and I'm beginning to panic and wonder if it was the right choice.

I'm 4 months into being self-employed full-time, having quit my day job to focus on starting a business, and on my first book contract.

I'm working as a freelance illustrator on a big comic book contract, which is taking longer than expected (6 months+). It's great, as I want to be 'known' as an artist and get more work as a freelancer. However, it's taking time, and I get paid nothing until it's published - And that will be digital download only. I get a small % per download. If it does well, it will be published as a paperback and I'll get a bit more... But besides all that, I am not getting paid anything for it right now.

At the same time I am slowly setting up a small t-shirt design business. I am in the middle of setting up an online shop, and I plan to run a few market stalls this summer.

However, my savings are dwindling and I'm afraid the money will run out before I get going. I am luckily living with family for free to help me start, however, this will only be until June (as I initially agreed with them), then I will be expected to pay rent as a normal tenant.

So that's my situation...

I've just heard about the New Enterprise Allowance, however I must be on JSA to claim. Am I qualified for going on JSA? I am working, but again I'm getting nothing until things are published.

With NEA, I could at least get more support for my business start-up.

Or should I apply for Working Tax Credits instead?

I'm really unsure of what to do now, and any advice would be GOLD. Please, does anyone have some advice?

Icequeen99

You will struggle with the art side of things to convince HMRC that you are in qualifying remunerative work for tax credits.

Initially, you will probably get it but if you are investigated (as many self-employed claimants are) you will have to show each hour you worked was for payment or in expectation of payment and it seems like you might struggle to evidence that unless the payment is guaranteed.

The t-shirt printing might be easier, once you have a shop online and can demonstrate how many hours you are working.

IQ

Lady_strange

Also as you have started your business, you won't qualify for the new enterprise allowance.

rvox

Hi, thanks for the answers.

I have started the business, but as a soletrader (which is just like being a freelancer/self-employed I believe). I've yet to register a company or anything like that, so I think I *may* be able to qualify for NEA.

Icequeen99, you are totally right about not being able to prove for tax credits. Thank you for highlighting that. Perhaps I won't bother.

I'm going to pop into the Job Centre next week and ask. I'll post results here, in case anyone else needs to know.

rvox

Oh, I also just heard about the new government Start Up Loans scheme, which is for 18-30s, and I just about fit into that bracket, so I'm applying for that too.

The only thing with that though, is that it is a loan and I'll pay back 6% interest on it too.

At least with the NEA, I won't have to worry about paying it back in the same way...

Lady_strange

I took out a start up loan, and the good thing about it is, that in the first year it is interest only. I know it is still 6% interest, but it gives your business another foot on the ladder, which can get you off to a better start.

paulineb_2

The HMRC website has guidance notes and those notes give examples of what can count as an hour of work and not everything they list is paid.

I have never been investigated in 2 years of trading as a self employed person, either by HMRC or by the working tax credit people.

The rules may be a lot trickier when UC comes into force but at the moment getting working tax credit as a self employed person is not difficult.

Icequeen99

paulineb wrote: »

The HMRC website has guidance notes and those notes give examples of what can count as an hour of work and not everything they list is paid.

I have never been investigated in 2 years of trading as a self employed person, either by HMRC or by the working tax credit people.

The rules may be a lot trickier when UC comes into force but at the moment getting working tax credit as a self employed person is not difficult.

I presume you are referring to what I said above. According to the legislation, each hour must be for payment or in expectation of payment.

Some activities are essential activities that if you didn't do for your business you wouldn't get paid even though you are not getting paid for that specific hour.

So for example book-keeping, emailing customers, taking orders to the post office, travelling between jobs etc....The actual work itself, for example if you are an electrician, will obviously be in expectation of payment.

However, what the OP was referring to was 6 months of doing activities that may or may not be paid at the end of it.

The investigations going on by HMRC at the current time are around people declaring 30+ hrs and declaring either Nil income or a loss year after year. I have dealt with 18 such cases in the last 12 months alone.

Sometimes these are people who have been claiming for years.

I am certainly not suggesting the OP doesn't claim, but that he make sure that he meets the rules. To protect himself I would suggest he phone the helpline, explain his position exactly as he has here re the comic book and make a note of date, time and operator's name. That way, even if compliance investigate later on, he will at least be able to dispute the overpayment.

IQ

rvox

Hi all - thanks for all the advice.

As my situation is quite complicated, I've decided to give both JSA and WTC a try, and I applied today.

If I am accepted for JSA, I will apply for NEA if I can, to get my business moving.

Saying that, someone told me about another loans scheme similar to the NEA, called Bright Side Startup Loans (I'm new so can't post link).

I might apply for that and see where it takes me...

As you can see, I'm pulling out all strings here!

I'll post any results here.

Caz3121

rvox wrote: »

I've decided to give both JSA and WTC a try, and I applied today.

I am confused how you could qualify for a benefit for unemployed or working less than 16 hours per week and also qualify for a benefit that requires you to work over 30 hours per week (or 16 if single parent/disabled)....surely you will only fit one of the categories

rvox

The comic has me working 30 hours a week, but it's all unpaid until it is published.

I also do small freelance work jobs, but these are small (£25-£100, 1-2 times a month) as I don't have time for a lot of them because of the comic I'm doing.

I also work on the business side of things (the t-shirts) when I can - most of that time is going on to the new website at the moment.

All of these I squeeze into that 30 hour quota (6 hours a day, Mon-Fri), sometimes it's even more than that... And a lot of it I'm not paid for. I think I need some kind of support from somewhere, unless I find an investor that believes in my work as an 'artist'. But with 100 pages left of a full colour comic to do between now and June/July, time is very limited and my savings are running out very fast!