Tax Credits

lisyloo

Loads of contractors, many on high pay would have no desire to employ anyone.
What's the issue with the one man band?

Pennywise

CLAPTON wrote: »

In sufficient data to makes any conclusions but the logic of the situation leads one to suppose that there are quite a lot of zombie SE 'businesses'.

Of course, there a lots of zombie businesses. Most of which were set up as a direct result of Brown's tax credits. Loads of ebayers, loads of car-boot traders, loads of dog-walkers, loads of people renting a small/cheap lock up shop, the common trait is that they all just break even, so it doesn't cost the "owner" anything but a little time, but the result is a gateway to benefits. That's why the rules are changing for TC/UB to "deem" a self employed person to be earning the minimum wage even if they aren't making that much in profit.

But that doesn't mean that there aren't huge numbers of "one man" businesses which are true businesses, earning "proper" profits, but who don't actually currently employ anyone else. Being a sole trader doesn't make the business any less of a business if it's truly run on commercial lines and truly makes a profit. Nor does it mean that such businesses will never grow and employ others in the future.

The zombie businesses are rightfully being challenged.

kabayiri

Pennywise wrote: »

Of course, there a lots of zombie businesses. Most of which were set up as a direct result of Brown's tax credits. Loads of ebayers, loads of car-boot traders, loads of dog-walkers, loads of people renting a small/cheap lock up shop, the common trait is that they all just break even, so it doesn't cost the "owner" anything but a little time, but the result is a gateway to benefits. That's why the rules are changing for TC/UB to "deem" a self employed person to be earning the minimum wage even if they aren't making that much in profit.
...

The irony is that Work Program providers were advising their clients to take up Self Employment in many cases.

The fact that the provider then got paid their commission has nothing to do with this of course..

princeofpounds

"the common trait is that they all just break even, so it doesn't cost the "owner" anything but a little time, but the result is a gateway to benefits."


That's why that wailing woman on Question Time was supposedly 'running a beauty salon' from her front room.

dktreesea

antrobus wrote: »

Or 4.1 million people who simply aren't interested in employing anyone else. Because the business is nothing more than the owner selling their own services to a variety of clients. Such as a barrister, an IT contractor, a plumber ..... (There is a long list.:))

It could also just be that the size of their business doesn't warrant taking on employees. A barrister, IT contractor (hopefully) and a plumber are probably all making enough not to require any subsidy from the taxpayer.

antrobus wrote: »

What specific examples from other developed countries do you have in mind?

Australia , New Zealand, The States. Are there any other developed nations you know of who subsidise the self employed the way the UK does?

antrobus wrote: »

Do you have any evidence that suggests how many of them are on the taxpayer's dime?

There various data around, and not all of it agrees. The ONS and HMRC both publish data on self employment though it differs.


There was a study published in November 2013, looking at the falling incomes of the self employed, but it only goes up to 2011, the latest information at that time that was available:
http://www.taxresearch.org.uk/Documents/SEI2013.pdf


Just looking at the 2010/11 year, of the 5.1 million people self employed (HMRC data), 3.3 million declared incomes of less than £10k for the year. Is it possible to survive on this without recourse to the taxpayer's dime. Of course it is, even in the UK. But is it necessary? Probably not. The taxpayer comes to the rescue, in a horse drawn carriage, driven by trusty steeds WTC, CTC, HB and CTB.


A more recent publication on tax credits https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/423621/ChildandWorkingTaxCreditsStatistics-April_2015.pdf doesn't differentiate in work recipients by whether they are employed or self employed, but notes that the majority of the support goes to people with household incomes less that £10k per annum, and that there are just under 754,000 families with incomes less than £6,420. How could these be employees, rather than the self employed, considering that the minimum work for a household to qualify for WTC would be 24 hours a week, even at the NMW this works out at £8,361 per annum?

The correlation between low incomes and tax credits is strong because that's what they are there for, to support those on low incomes. But at the same time, they enable those on low incomes, those who want to do their own thing, however poorly paid, or who just want to restrict the hours they work, to be able to afford that lifestyle.


As this article said recently:
http://www.telegraph.co.uk/news/politics/georgeosborne/11967860/Theres-a-strong-moral-case-against-tax-credits-why-didnt-George-Osborne-make-it.html
One particularly ingenious (and perfectly legal) way to become eligible for tax credits is to be self-employed but earn no profit on your business. By being a registered self-employed person who earns little or nothing, you are entitled to have your income supplemented by government both in the form of the Working Tax Credit and, if you have a family, Child Tax Credits. What, you may wonder, could be the point of continuing in such self-employment when it is earning nothing? Exactly this: were you to be unemployed, the new benefit rules would see to it that you were continually pressured into seeking work.


Even if the HMRC could be persuaded to publish how many of the self employed receive CTC and/or WTC, more telling would be how many years they have been in receipt of it. It's probably hard, under the current regime, to be healthy/not disabled and be unemployed and on the taxpayers dime for ten years. Not so hard though if you are self employed, because there's no requirement to earn a profit, just to be "gainfully employed" in the pursuit of one.

dktreesea

Pennywise wrote: »

Of course, there a lots of zombie businesses. Most of which were set up as a direct result of Brown's tax credits. Loads of ebayers, loads of car-boot traders, loads of dog-walkers, loads of people renting a small/cheap lock up shop, the common trait is that they all just break even, so it doesn't cost the "owner" anything but a little time, but the result is a gateway to benefits. That's why the rules are changing for TC/UB to "deem" a self employed person to be earning the minimum wage even if they aren't making that much in profit.

But that doesn't mean that there aren't huge numbers of "one man" businesses which are true businesses, earning "proper" profits, but who don't actually currently employ anyone else. Being a sole trader doesn't make the business any less of a business if it's truly run on commercial lines and truly makes a profit. Nor does it mean that such businesses will never grow and employ others in the future.

The zombie businesses are rightfully being challenged.

I'm not sure that the minimum income floor will ever see the light of day. There's a lot of lobbying against it.


But who is currently challenging the zombie businesses? All that has to be shown is that you gainfully employing yourself in pursuit of a profit. The fact that it takes you 20 years to build a business that can earn the NMW in profits rather than just a year is neither her nor there.


You can have businesses with a turnover of £100k which still only have profits of £6k.

kinger101

dktreesea wrote: »

On the other hand, other customers have found a fang, frog, locust and venomous spider lurking in their food from Waitrose....

Well, what do they expect if they buy from the Heston Blumenthal range.

antrobus

dktreesea wrote: »

It could also just be that the size of their business doesn't warrant taking on employees. ....

Yes, that's what I'm saying.

dktreesea wrote: »

...A barrister, IT contractor (hopefully) and a plumber are probably all making enough not to require any subsidy from the taxpayer. ....

Eh?

First of all you say that are "4.1 million people who apparently aren't doing well enough to be able to afford to employ anyone else", now you 're saying that they "all making enough not to require any subsidy". Make up your mind.:):):)

dktreesea wrote: »

...Australia , New Zealand, The States. Are there any other developed nations you know of who subsidise the self employed the way the UK does? ....

But how exactly do those nations tax and benefit systems differ from that of the UK.

dktreesea wrote: »

...There various data around, and not all of it agrees. ....

There you go then.

Look, no sensible person doubts that there are people who have and are taking advantage of the tax credits system, but none of that changes the fact that huge numbers of people are actually gainfully employed by small busineeses.

In any event, the issue is being adressed by Universal Credits.

antrobus

Pennywise wrote: »

Of course, there a lots of zombie businesses. Most of which were set up as a direct result of Brown's tax credits. Loads of ebayers, loads of car-boot traders, loads of dog-walkers, loads of people renting a small/cheap lock up shop, the common trait is that they all just break even, so it doesn't cost the "owner" anything but a little time, but the result is a gateway to benefits. That's why the rules are changing for TC/UB to "deem" a self employed person to be earning the minimum wage even if they aren't making that much in profit.

But that doesn't mean that there aren't huge numbers of "one man" businesses which are true businesses, earning "proper" profits, but who don't actually currently employ anyone else. Being a sole trader doesn't make the business any less of a business if it's truly run on commercial lines and truly makes a profit. Nor does it mean that such businesses will never grow and employ others in the future.

The zombie businesses are rightfully being challenged.

That would basically be my position. I would guess that you have the same practical experience as I do.

Although I would add, that it does happen that a zombie business established to exploit tax credits sometimes springs to life and actually works.:)

dktreesea

sequence wrote: »

I'm not sure why dktreesea thinks the 4.1m are being subsidised because thay aren't employing anyone ? If anything it's more likely that those employing are being subsidised by tax credits than those who aren't. Employing people isn't any measure of success. I'm one of those 4.1m, and no I don't get subsidised by anyone. I make a good living doing what I do, and I choose not to employ anyone, mainly because it's a major pain in the !!! to employ people.

Where did I say 4.1 million self employed people who can't afford to (or choose not to, a point already made by Artrobus) employ anyone else are therefore being subsidised by the state? Please don't misquote me.