Projected income for internet marketing- what to put?

tamiami

I think there is confusion as to how much you need to earn as a profit in self employment.

It is possible to earn the minimum wage, then you minus out your "allowable expenses" this will then leave your net profit, which will probably be no where near the the minimum wage, but you can still claim your tax credits.

It is the same as with large companies who make a loss on paper at the end of the tax year and therefore pay less corporation tax - the government dont tell them it's not viable and to close down.

BigAunty

tamiami wrote: »

I think there is confusion as to how much you need to earn as a profit in self employment.

It is possible to earn the minimum wage, then you minus out your "allowable expenses" this will then leave your net profit, which will probably be no where near the the minimum wage, but you can still claim your tax credits.

It is the same as with large companies who make a loss on paper at the end of the tax year and therefore pay less corporation tax - the government dont tell them it's not viable and to close down.

Please don't lull the OP into a false sense of security with your apples and pears comparison.

The government have explicitly said that they are introducing changes for the self employed under UC to discourage long-term benefit dependency and to encourage them to become more self sufficient. I have read official papers that have directly said that the self employed who don't reach the minimum income floor have options which include winding up their profitless businesses and seeking alternative employment instead.

To clarify, currently under tax credits, there is absolutely no requirement for the self employed to earn any profit as eligibility for it focusses on hours worked (with the additional requirement that it is in expectation of profit, not wishful thinking that it might lead to being paid......). And this is the problem, according to critics, as its lead to people indulging in their hobbies or micro businesses and trying to palm them off as legit businesses while the benefits that cushion them actually prevent them from growing their business.

In the future, under UC, they govt has set a target for the self employed with regard to their profit because they've found WTC counter-productive in its emphasis on achieving time rather than income.

There are certainly huge companies out there that legitimately pay low taxes on their high revenues (morally questionable but legal) but then they usually employ thousands of employees who pay taxes, many of whom are lifted completely clear of the benefit system, and buy goods/services from hundreds of other suppliers. This contrasts with the OP whose main expense is actually met by a neighbour and who requires long-term benefit support for what sounds like a very unviable business.

tamiami

I have only said what I have been told by the Inland Revenue!! Maybe different types of self employment have different rules.

Xign

Of course the question is will UC actually come into play anytime soon?

I can see the government screwing that up. Just like every other big IT project they had.

Lady_strange

Also, you wouldn't get wtc for the first 6 months, as they are stamping down on s/e. They say you have to be getting paid, or doing work in expectation of pay.

BigAunty

Lady_strange wrote: »

Also, you wouldn't get wtc for the first 6 months, as they are stamping down on s/e. They say you have to be getting paid, or doing work in expectation of pay.

While I'm aware that the HMRC do target WTC self employed recipients for compliance investigations and some fail them and are required to pay back their WTC, I am not aware that there are any restrictions on someone applying who is expecting low/no profit (though there are the other requirements that you've listed on expectation of pay that need to be satisfied).

Unpaid work does not count as work under WTC and the HMRC have provided guidelines to help the self employed understand what is considered to be a business related activity.

"If you're self-employed, paid work means any work you do for payment (or would expect to be paid) or profit.

http://www.hmrc.gov.uk/taxcredits/start/who-qualifies/workingtaxcredit/work.htm

If you're self-employed
Put down the number of hours you normally spend working in your business, either on work billed to the client or related activity, for example:

• trips to wholesalers and retailers
• visits to potential clients
• time spent on advertising
• cleaning the business premises
• cleaning a vehicle used as part of the business, for example a taxi
• book-keeping
• research work

If you work from home, include time spent travelling to see customers.

http://www.hmrc.gov.uk/taxcredits/start/claiming/income-hours/work-out-hours.htm

rogerblack

BigAunty wrote: »

While I'm aware that the HMRC do target WTC self employed recipients for compliance investigations and some fail them and are required to pay back their WTC, I am not aware that there are any restrictions on someone applying who is expecting low/no profit (though there are the other requirements that you've listed on expectation of pay that need to be satisfied).

Quite.
While there is under universal credit to be an implicit assumption (for most purposes) that self employment will be at minimum wage - this is not yet in place, even though very low income may trigger questions on if the work is within the definition of work - £60 of work a year in principle could qualify for WTC.

Lady_strange

Well I was refused working tax credits, even though I was working 60+ hours a week, I have business premises, and I was building extra rooms for my studio, along with getting paid by a band to use the space for rehersals. Apparently that wasn't enough for wtc.

rogerblack

Lady_strange wrote: »

Well I was refused working tax credits, even though I was working 60+ hours a week, I have business premises, and I was building extra rooms for my studio, along with getting paid by a band to use the space for rehersals. Apparently that wasn't enough for wtc.

On what grounds?

Lady_strange

rogerblack wrote: »

On what grounds?

I wasn't getting paid as I was building the studio. Which when you look at their guidelines, I should have received the money, as I was building to get more customers in, as you can't record in an empty shell.