Self Employment no profit

NorthFin

Morlock wrote: »

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

Will this come to an end if UC new rules are enforced?

I wonder how many of those 70K 'new' jobs will survive if they are assumed to be earning 35x NMW?

NorthFin

FBaby wrote: »

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.

So if someone is checked, and they are claiming to be self employed working this many hours and showing no profit year after year, and they are thoughrly checked and found to be sitting at home all day not working the hours they say on their business, THEN WHAT? at the moment they are allowed to just keep claiming WTC, but are there any changes coming in soon to stop this from happening?

BoJangles_2

NorthFin wrote: »

So if someone is checked, and they are claiming to be self employed working this many hours and showing no profit year after year, and they are thoughrly checked and found to be sitting at home all day not working the hours they say on their business, THEN WHAT? at the moment they are allowed to just keep claiming WTC, but are there any changes coming in soon to stop this from happening?

I would imagine that if that were the case and they were found to be guilty of what you describe then they would be pushed onto jobseekers allowance.

Jobseekers allowance is a pain for some people as it involves doing something in return for the money they receive.

PlutoinCapricorn

I think that some of the people who register as SE don't realise how difficult it can be to earn anything i.e. they are naive rather than attempting to cheat the system. Perhaps people at the JobCentre encouraged some of them to 'start their own business' and it sounded good.

BoJangles_2

PlutoinCapricorn wrote: »

I think that some of the people who register as SE don't realise how difficult it can be to earn anything i.e. they are naive rather than attempting to cheat the system. Perhaps people at the JobCentre encouraged some of them to 'start their own business' and it sounded good.

It sounded good because it meant not having to go to the jobcentre every 2 weeks or so. I wouldn't say that cheating the system comes into it at all.

I think some businesses that were set up in this way were probably legitimate but failed to lift off. If profits are less than minimum wage, what is the point. It makes sense to end that business and move to jsa.

WantToBeSE

I think for too many people see SE (claiming TCs) as an alternative way of not working but still getting benefits.


I went from unemployed and claiming JSA, to SE and claiming WTC. I am actually running a profitable business, with an employee, so have no worries if HMRC check up on me.


However, I think that HMRC should check up on more people who go down this route. I've been trading since September last year, so only 4 months, and have never heard from HMRC about any kind of checks. I presume they can look at my SA and see that I am making a profit, but I would have expected stringent checks. Maybe I'll get them, who knows, but maybe they should be done as a matter of course, say every 3 months.

dktreesea

According to the latest statistics available from the HMRC (year ended 5/4/2012, so somewhat out of date) being self employed is not particularly lucrative. Of the 5.75 million, less than 1 million made over £20k profit. 915,000 made a loss.


While the HMRC are interested in whether you are running a genuine business, and do send out auditors from time to time, the emphasis is on whether or not the business is genuine, as opposed to how much profit it makes.


You could be running your business on very low mark ups, just to enable you to compete. Say you run a market stall, 4 days a week, turnover £1k a week. Quite a reasonable turnover in some sectors. You could be only making £200 a week, due to a relatively low markup, then, taking the stall rent out, say £80, and your petrol costs of getting to the various markets, say £90 (a couple of hundred miles a week claimed at 45p a mile), so only have £30 a week profit to show for it.


Is this worth it? Sure, if you fancy being your own boss, enjoy running a market stall, have a few kids, rent your house, so qualify for a fair swag of benefits, all the while being able to please yourself about how and when you work. You can take up to 8 weeks off at a time without affecting those benefits, so it isn't as if you have to work 52 weeks a year to make this "scheme" work.


Plus, there's a perverse incentive to have a viable business but not to grow it too much, because of the hefty clawback rates of the benefits.


Take a family of 5, 3 children, all in school, both parents working the family business, more than 30 hours a week. Even if they are only entitled to the 3 bedroom LHA, as opposed to the 4 bedroom LHA rate in our neck of the woods, and even if they made a profit of £120 a week, let alone £30 a week, they would still qualify for the maximum rates of benefits.


At 2014 rates, plus the latest rates for LHA in our neck of the woods, those benefits come to a hefty £26,600 a year. WTC: £4,730, CTC: £8,795, CB: £2,475, CTB: approx £1,000 depnding on where you live, HB: £9,600.


No such thing as the benefits cap if you work, however poorly that work pays.

dktreesea

WantToBeSE wrote: »

I think for too many people see SE (claiming TCs) as an alternative way of not working but still getting benefits.

It would be pretty hard to be SE and not work at all. You do actually have to show enough revenue through your books to prove you have a viable business. And not just through the books either. Places like the council - if you are claiming HB and CTB - want to see the money going through the accounts, and clear indications as the to source of those funds.


The HMRC may not check so often, but, if they do check and are not satisfied that the business is viable, they could require you to pay back any tax credits you have received, which would in turn trigger repayment of HB and CTB.


So for people who are running a marginal business and relying on benefits for a top up, it's crucial that they do actually have a viable business.

Killerseven

PlutoinCapricorn wrote: »

I think that some of the people who register as SE don't realise how difficult it can be to earn anything i.e. they are naive rather than attempting to cheat the system. Perhaps people at the JobCentre encouraged some of them to 'start their own business' and it sounded good.

It lowers the unemployed numbers, which is good for elections.

If they become so strict then the numbers will be very high unemployment and will look like the recovery is over and we are back in depression.

Killerseven

dktreesea wrote: »

According to the latest statistics available from the HMRC (year ended 5/4/2012, so somewhat out of date) being self employed is not particularly lucrative. Of the 5.75 million, less than 1 million made over £20k profit. 915,000 made a loss.


While the HMRC are interested in whether you are running a genuine business, and do send out auditors from time to time, the emphasis is on whether or not the business is genuine, as opposed to how much profit it makes.


You could be running your business on very low mark ups, just to enable you to compete. Say you run a market stall, 4 days a week, turnover £1k a week. Quite a reasonable turnover in some sectors. You could be only making £200 a week, due to a relatively low markup, then, taking the stall rent out, say £80, and your petrol costs of getting to the various markets, say £90 (a couple of hundred miles a week claimed at 45p a mile), so only have £30 a week profit to show for it.


Is this worth it? Sure, if you fancy being your own boss, enjoy running a market stall, have a few kids, rent your house, so qualify for a fair swag of benefits, all the while being able to please yourself about how and when you work. You can take up to 8 weeks off at a time without affecting those benefits, so it isn't as if you have to work 52 weeks a year to make this "scheme" work.


Plus, there's a perverse incentive to have a viable business but not to grow it too much, because of the hefty clawback rates of the benefits.


Take a family of 5, 3 children, all in school, both parents working the family business, more than 30 hours a week. Even if they are only entitled to the 3 bedroom LHA, as opposed to the 4 bedroom LHA rate in our neck of the woods, and even if they made a profit of £120 a week, let alone £30 a week, they would still qualify for the maximum rates of benefits.


At 2014 rates, plus the latest rates for LHA in our neck of the woods, those benefits come to a hefty £26,600 a year. WTC: £4,730, CTC: £8,795, CB: £2,475, CTB: approx £1,000 depnding on where you live, HB: £9,600.


No such thing as the benefits cap if you work, however poorly that work pays.

Very good post.

But soon if people are assumed to be making NMW x35hrs each then many S.E businesses will crumble.

They would be better off getting low stress a min wages job. Running your own business is way harder than just working for a company, depending on what job you do though.