Self Employment no profit

NorthFin

Just wondering if there are any rules about what you can do for a self employment business for working tax credit claims.

Talking to someone who said there are stupid buinesses starting up who make no profit every year, they just live off WTC.

Someone said they were a full time treasure hunter, they spent 40hrs a week out with their metal detector. Loads of expensies but never finds anything (that they report)

Another was a full time gardener, who spend all the working week at his allotment. He is supposed to sell the produce but eats most of it himslef and never makes a profit, just has loads of expenses.

So are there any rules governing what someone can do? Could somethings be not accepted as genuine businesses?

I keep hearing about you have to make min wage after the first years trading, but it all seems to be just talk, some of these bogus businesses are making a loss year after year. They just live off WTC, or soon to be UC.

vintagebrighton

I wouldn't believe all you hear

quietriot

If you're going to go down that route, declare yourself as a self-employed dialysis machine, since you're clearly taking the p1ss.

Bantex_2

Think you call yourself a SE Big Issue seller and get a nice little handout from HMRC. Believe you have to be Roma though.

tomtontom

Historically people have been allowed to claim WTC unchecked but that is changing - unviable claims are being audited and in some cases refused in the first place. Times are definitely changing, self employed WTC should no longer be seen as an alternative to JSA.

CKhalvashi

tomtontom wrote: »

Historically people have been allowed to claim WTC unchecked but that is changing - unviable claims are being audited and in some cases refused in the first place. Times are definitely changing, self employed WTC should no longer be seen as an alternative to JSA.

However, it also needs to be taken into consideration that some businesses won't be profitable in the first few years.

We spent about £30k in the first few years to buy the assets to start the business, which (with both directors working full-time) there wasn't a lot of profit from the business itself in that time.

In year three (with us both working full-time), there was around a £20k profit, and it went up from there.

Setting up the business itself can be time-consuming, and if expenses are fixed to an extent, there can't always be guaranteed to be a profit, but I'd say 3-4 years of this will then start to trigger with HMRC an investigation.

FBaby

Many people are getting away with it just because they haven't been checked yet. Living on a time bomb though because when they are, they lose all their living benefits and find themselves struggling to get the same income elsewhere, and of course, have to pay it all back. Not sure the benefits of claiming to do your hobbies for a few years outweigh the stress and struggles that follow.

NorthFin

tomtontom wrote: »

Historically people have been allowed to claim WTC unchecked but that is changing - unviable claims are being audited and in some cases refused in the first place. Times are definitely changing, self employed WTC should no longer be seen as an alternative to JSA.

That is what Im hearing but this all seems to be talk only.

There are still many people runnning a so called S.E business for years with little or no profit and relying on benefits like WTC.

PlutoinCapricorn

Do you know this from personal experience? You may well be right, but sooner or later the axe may fall and the day of reckoning come.

NorthFin

blondebubbles wrote: »

As well as meeting the qualifying conditions, age/hours/income etc you also need to be working in expectation of payment. This means it must be more than a mere hope.

http://www.hmrc.gov.uk/manuals/tcmanual/TCM0126260.htm

Tax credits are investigating self employed cases more and more now. There are also plans to change how it works under universal credits.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/322280/uc-and-self-employment-quick-guide.pdf

From that last link.....

This will apply if your business is less than 12 months old. During this time you will not
have to look for other paid work, allowing you to focus on your business. You will be allowed
one start up period every five years provided you meet all the other eligibility criteria.
If you are within the 12 month start up period under Universal Credit, the minimum income
floor will not apply.

-

So you can start a new S.E business every 5 years and have 12 months where you dont have to make a profit?

Sounds like a good idea, because after 12 mnths you should know if it will fail or not.

Morlock

NorthFin wrote: »

There are still many people runnning a so called S.E business for years with little or no profit and relying on benefits like WTC.

Yes, that is right, around 70% of the 1 million 'new jobs' the government claims credit for creating are actually self-employed, benefit claimants.