Can I register a business on universal credit?

kate1irwin1

I'm on universal credit with limited capability for work, I'm really not fit for work for various health reasons, but I wanted to learn something new in lock down so was looking at making websites that sell things.  Haven't made any money from it but think I could potentially.   Although it's taken me a long time to learn anything and progress is slow as health issues get in the way of what I'd love to be able to put into it.  I've just been learning when I'm able.  I don't want to do anything I'm not allowed to, but worried if I contact universal credit to let them know they will stop benefits.  Should I just not do it?  Also worried that if my illnesses really get bad again I won't be able to carry on with potential business and will then have nothing.  Can anyone tell me the best thing to do?  Thanks.

huckster

There is nothing stopping you becoming self employed while being treated as having limited capability for work on Universal Credit.  They won't stop your benefits, but obviously at some stage if you have a capability for work assessment, if you are able to work, this may affect whether you are still considered as having capability for work.

Before you start self employment, I would suggest that you obtain advice from local organisations that help people wanting to become self employed.  They will be able to check whether you are taking all the necessary steps required.  If you send a journal message to Universal Credit asking about self employment help, asking for details of local organisations that can help you with questions you have about possibly starting a self employed business, they should respond with details of who to contact.

 Normally for Universal Credit, they will want you to register as self employed with HMRC.  And you would need to report the change of circumstances on your claim under work & earnings that you had become self employed.  And then at the end of each Universal Credit assessment period, you would be asked about your business income and expenses.  Universal Credit would then take into consideration any net profit after business expenses.

kate1irwin1

Thank you very much, that's a good idea to contact local organisations, I want to do it correctly but just worried about stuck in a situation with no benefits and no business!  I really would like to get off benefits but just worried about the period in between - if I can find something I can do working around my health conditions it would be amazing:)

Spoonie_Turtle

For registering with HMRC you don't (from their point of view) need to until you have £1000+ income from something in a tax year. UC might expect you to as mentioned, though.

(Out of curiosity, I don't understand what you mean by making websites that sell things - are you making the things to sell, making the websites to sell, or, ? I had toyed with idea myself of trying to make things to sell but ended up too ill to make the things I thought I would be able to anyway! )

kate1irwin1

Thank you! Building websites that drop ship stuff.  Not cheap stuff from China!! I did it years and years ago and did ok but it’s a very different ball game now so would have a lot to relearn.  Hope you are better now?! What were you going to make? I wish I could do craft stuff, not artistic at all!!

Spoonie_Turtle

kate1irwin1 said:

Thank you! Building websites that drop ship stuff.  Not cheap stuff from China!! I did it years and years ago and did ok but it’s a very different ball game now so would have a lot to relearn.  Hope you are better now?! What were you going to make? I wish I could do craft stuff, not artistic at all!!

Oh interesting, thanks for replying. I like your optimism but no, not better. I had several different ideas, bookmarks, coasters, hair clips, etc. Ironically, on UC the financial side of it would have been fairly simple!

calcotti

huckster said: Normally for Universal Credit, they will want you to register as self employed with HMRC.  

Would this be true for all self employment or only for those seeking to be treated as gainfully self employed (rather than doing some minor self employed activity)?

NedS

calcotti said:

huckster said: Normally for Universal Credit, they will want you to register as self employed with HMRC.  

Would this be true for all self employment or only for those seeking to be treated as gainfully self employed (rather than doing some minor self employed activity)?

For UC, anyone operating a business regardless of their turnover/profut must declare they are self employed.

HMRC's guidelines require anyone with over £1000/year turnover to register for self assessment so theoretically you could be self employed on UC without having to register for self assessment with HMRC if you turned over less than £1000/year. Registering with HMRC/self assessment is not optional if turnover is more than £1000/year.

Being registered with HMRC is simply one piece of evidence the WC would take into consideration at a Gateway when deciding if a claimant was gainfully self employed or not. A claimant is far more likely to be gainfully self employed if they are registered with HMRC.

calcotti

Ned. I understand there are HMRC rules regarding registration. I also understand that anyone engaged in any self employment activity must inform UC and following the income/expenditure reporting requirements.

Huckster appeared to indicate that DWP would require anyone self employed to register with HMRC. My expectation would be that someone with a little self employment with turnover expected to be below £1000 would not be required to register by either HMRC or DWP. Clearly at that level they would not be gainfully employed.

huckster

At the point someone starts self employment, if they did not have aspirations of turnover of £1000 or more in a year, you would start questioning whether this was really a business or a hobby interest. 
My understanding is that if someone is claiming they are self employed and this is taking up most of their time, with no time for any employed work, there is an expectation they should be registering with HMRC. Whether they wait until they are close to turnover of £1000 would be up to them.

NedS

calcotti said:

Ned. I understand there are HMRC rules regarding registration. I also understand that anyone engaged in any self employment activity must inform UC and following the income/expenditure reporting requirements.

Huckster appeared to indicate that DWP would require anyone self employed to register with HMRC. My expectation would be that someone with a little self employment with turnover expected to be below £1000 would not be required to register by either HMRC or DWP. Clearly at that level they would not be gainfully employed.

IMHO They would still be expected to declare self employment with UC, even if turnover is less than £1000 per year.

The difference here between UC and HMRC is that HMRC allow flat rate expenses of £1000 per year for those with low turnover, and as a consequence there is no point registering for HMRC self assessment if you have a turnover of less than £1000 and are allowed flat rate expenses of £1000, giving a net loss or profit of zero. HMRC are basically washing their hands of anyone with turnover (income before expenses) of less than £1000.

However, UC has no such flat rate expense rule, so you'd still need to declare your income and expenses each month (regardless whether considered gainful or non-gainful) on UC, and they will be taken into account in the normal way.

The other consideration here is whether someone is self employed, vs just selling their personal possessions. Generally, if someone buys something with the intention of selling it later for a profit, then that is self employment. I believe we have previously had discussions on this board regarding self employed dog breeders vs someone who's dog just has a litter and the puppies are sold, but again this is a whole different discussion to the question here.