Working tax credits self employed

LONDONBOY123

Hi all,

I am a trainee ACCA student who has been asked to help a client as regards becoming self employed and claiming working tax credit. However , I am unsure on how to advise and am looking for any pointers/help.

To summarise :

My client is single, no kids, 33 years old. He has been refferred to the New Enterprise Allowance ( NEA ).He has been claiming Job seekers allowance but has now signed off in order to pursue his business interests and has now become self employed and has registered with HMRC. ( The Job centre said he would be entitled to WTC due to working 30+ hours a week and being self employed ) His business is home based selling Sporting goods. He has put a claim in for Working tax credit and has had a letter back asking for " proof of income ".As this is a start up business no profits have been made to date, so how can he go about claiming WTC if no profits have let been produced? Also how does he prove 30+ hours are worked each week?

All in all it sounds like a hell of a lot or red tape has been put in front of him.If he cannot claim the WTC then he will no doubt have to close the business down and go back on JSA. Needless to say you can see his frustration as he is trying to make a go of things and not just sit on the dole.

I would be grateful for any useful responses as how to help my clients situation.

LONDONBOY123

The letter asks for 2 subheadings. First being INCOME - WORK and the second PERSONAL INFORMATION. The letter was sent from a compliance officer from B & C Compliance operations.

-Type of work
-copies of advertisemnts
-breakdown of hours worked
-evidence to confirm hours worked, summary or diary of booking and appoitments made or taken
-invoices for any work you have done
-receipts for any expenses
-summaries of orders or payments receieved
-summaries of orders or payments for raw products
-registration documents for vechicles
-insurance documents for vechicles
-details of tools used
-details of any trade or business qualifications..

The list goes on... As you can see many of the above are not applicable to him as its just a simple retail business in its start up phase.

Any ideas...??

Thanks

LONDONBOY123

Thanks for your response. So by the sounds of things you dont think he will qualify for WTC ( despite being advised by the Job centre that he would be with his type of business ).He has been trading for around 2 months but has yet to sell any products , hence has no profit/loss accounts.Would this type of business not qualify as " remunerative " work and as a result not qualify for WTC? I hope this is not the case as he will be forced to close the business and regrettably have to go back on JSA to find a employed position.
Thanks again.

merlin68

when we became self employed a few years back, we were told you could carry on getting jsa and just declare any income made that week.
Trouble is for wtc from april, you will have to earn i think £153 a week in order to claim it.
I suggest that he signs back on and declares any income he does make each week.

Mattygroves2

LONDONBOY123 wrote: »

Thanks for your response. So by the sounds of things you dont think he will qualify for WTC ( despite being advised by the Job centre that he would be with his type of business ).He has been trading for around 2 months but has yet to sell any products , hence has no profit/loss accounts.Would this type of business not qualify as " remunerative " work and as a result not qualify for WTC? I hope this is not the case as he will be forced to close the business and regrettably have to go back on JSA to find a employed position.
Thanks again.

It's not the type of business that is the problem - it's the fact he hasn't generated any income despite working for 30+ hours a week for 2 months.

Presumably he can substantiate the hours worked so that would be a start. Also he must have costs - buying stock, website setup, advertising etc - so will have a loss to date which would be normal for a startup. Retail should be a fairly quick turn into profit though if he's calculated his margins properly and is any good at selling things.

LONDONBOY123

The time he spends working is looking for further stock ( via internet sites ) to buy at a price he likes ( not easy to do, and is spending around 40 hours a week in doing so ) He deals in Jet ski's and outboard motors so as you can imagine it is rather a niche business and not like selling everyday items or " pile em high sell em cheap" products. No idea how he can prove on how many hours he works.

He does not visit any clients ( they come to him ) He has a website yes in which to sell his stock on ( Ebay ).

Thanks for reply in advance.

Mattygroves2

LONDONBOY123 wrote: »

The time he spends working is looking for further stock ( via internet sites ) to buy at a price he likes ( not easy to do, and is spending around 40 hours a month in doing so ) He deals in Jet ski's and outboard motors so as you can imagine it is rather a niche business and not like selling everyday items or " pile em high sell em cheap" products. No idea how he can prove on how many hours he works.

He does not visit any clients ( they come to him ) He has a website yes in which to sell his stock on ( Ebay ).

Thanks for reply in advance.

So he's got stock listed for sale but not sold any yet ? In which case he's got the evidence of his website and the invoices for stock already bought.

He's also presumably got his search history to prove how long he has been spending searching out his stock and e mails to prove he has been enquiring about stock. He ought to start keeping timesheets or a diary to ensure he can prove his hours worked.

He must also have been doing some targeted advertising or even visits to local clubs who might be willing to buy things from him. So should be able to prove that activity.

To be honest no sales in 2 months doesn't look like it is a viable business. Maybe he needs to think about diversifying into something that might sell easily to start generating some cashflow - parts for example.

merlin68

http://www.cafamily.org.uk/news-and-media/how-the-autumn-statement-changes-the-benefits-sytem/

LONDONBOY123

Nope- he not sold any yet as he is pitching his prices high with a view to lowering them until he hits the correct market level ( think an estate agent which hasnt sold a house for 6 months as price obviously to high) He could lower his price and sell it in 5 minutes but he doesnt want to do this he know he will EVENTUALLY sell for the price he desires.
Yes he has stock for sale on ebay. He doesnt email other people he only uses ebay /gumtree to buy stock on and only buys it when he likes the price on the " buy it now" option ( hence needs to spend so much time working on ebay ).
The only advertising is his products are on ebay.He has not been visiting local clubs as there are none and he has no access to a car and doesnt want the business to go further at a loss due to these transport costs ( his business model is purely ebay- both buying and selling ).

I know the rules are changing from April.But April is not the issue at the moment I am talking about the last 2 months he has been working with still no working tax payment which is obviously not helping his cashflow for living expenses which was put into his business plan/ cashflow approved by the Job centre.

Looks like I will have to advise him to close down the business and go back on JSA from the above posts?

Mattygroves2

LONDONBOY123 wrote: »

Nope- he not sold any yet as he is pitching his prices high with a view to lowering them until he hits the correct market level ( think an estate agent which hasnt sold a house for 6 months as price obviously to high) He could lower his price and sell it in 5 minutes but he doesnt want to do this he know he will EVENTUALLY sell for the price he desires.
Yes he has stock for sale on ebay. He doesnt email other people he only uses ebay /gumtree to buy stock on and only buys it when he likes the price on the " buy it now" option ( hence needs to spend so much time working on ebay ).
The only advertising is his products are on ebay.He has not been visiting local clubs as there are none and he has no access to a car and doesnt want the business to go further at a loss due to these transport costs ( his business model is purely ebay- both buying and selling ).

I know the rules are changing from April.But April is not the issue at the moment I am talking about the last 2 months he has been working with still no working tax payment which is obviously not helping his cashflow for living expenses which was put into his business plan/ cashflow approved by the Job centre.

Looks like I will have to advise him to close down the business and go back on JSA from the above posts?

Assuming he is actually serious about running a business he needs to do the sensible thing and drop his prices to ones that sell but still return a profit. He needs to generate some cashflow and then start marketing his business properly.

MissMoneypenny

LONDONBOY123 wrote: »

Nope- he not sold any yet as he is pitching his prices high with a view to lowering them until he hits the correct market level

Perhaps the correct market level to sell on ebay, is the price your friend paid when he bought these items on ebay?

LONDONBOY123 wrote: »

He doesnt email other people he only uses ebay /gumtree to buy stock on and only buys it when he likes the price on the " buy it now" option ( hence needs to spend so much time working on ebay ). The only advertising is his products are on ebay.