This April some changes came into effect with regard to people who are self employed but don’t earn a living or minimum wage. What seems to be happening is that in order to cut down of possible fraud among the self employed a number of new criteria are being applied and if you fail to meet them then you will no longer be paid working tax credits as you will not be classified as running a viable business.
Firstly your job must not be considered a hobby, even if you are making money from it. So all of those people I know who make Role playing and LARP items as a side line or even some writers, can you prove what you are doing isn’t a hobby?
Only ‘Proper’ businesses that can demonstrate that they are trading on a commercial basis and their business is done with a view to achieving profits will qualify. The self-employment should also be structured, regular and ongoing.
So if you are doing ad hoc stuff, a few hours here and a few there rather than working shifts, if you are dealing with orders from customers as and when they arrive rather than every week. Sorry people, prepare to appeal against the loss of your working tax credits.
Oh incidentally this could also hit seasonal work, if you work a hundred hours a week for ten weeks and just a few hours a week for the rest of the year, you have to ‘Prove’ that it’s a proper job since it certainly isn’t regular or ongoing.
“The information we ask for should be available as part of normal business activity, for example receipts and expenses, records of sales and purchases. We may also ask for supporting documents such as a business plan, planned work, cash flow and profit projections.”
This seems reasonable, after all as a self employed person running a tiny business from their kitchen or bedroom this should be easy, its not as if planned work reports, cash flow and profit analysis etc are going to be difficult to write when you are working sale by sale, working when you have spare time or to meet an order and your schedule is irregular to suit the rest of your life.
Oh and accountants and business planning advisors are cheap aren’t they, or do you risk a generic online one when it’s your business on the line.
“During the early stages of self-employment it may prove difficult to make a profit. If someone in this situation claims WTC they may be asked to show that they have a commercial approach and how their business would become profitable. This could be demonstrated in a business plan.”
Yep, trust the government to be fair and considerate when it comes to taking away any benefits you may be receiving.
Secondly self employed people with earning below the threshold based on the national minimum wage and hours worked will be required to provide evidence that they are in a regular and organised trade, profession or vocation on a commercial basis and with a view to achieving a profit.
Bakers, crafters, artists, writers, photographers, advisors, self helpers, gadget makers, tinkerers, entrepreneurs, are you in a regular and organised trade or profession, can you demonstrate you are making a profit? That single line is going to make it very hard for any self employed person who isn't part of an employer scam to reduce costs.
The problem here is that I don’t know anyone who earns the national minimum wage for every hour they work while self employed. Given the minimum of 24 hours a week this means a minimum weekly income of £156 purely from being self employed. What the Revenue people are doing is looking at how much you earn and counting how many hours at minimum wage that represents, then if the number of hours is under 24 you are no longer employed. Oh and when Universal credit rolls in (When, well alright IF) that number of hours will rise to 35 unless you have a serious medical condition OR children so be ready to rent next doors offspring.
Just about everyone I know who is self employed does it because they want to do it, they are looking for something better in the future and working hard now. People working fifty hours a week but earning only a hundred pounds in that week would be classed as having worked only 15 hours, the rest magically vanishes. Unless you can PROVE to the Revenue that you are working those hours.
So anyone who is self employed and this means just about every entrepreneur who is starting up must make enough each week to be classed as employed or they will lose any benefit support. The next Apple or Dyson creator, tinkering in their garage or shed, well guys you better have a job as well.
Now I’m sure by this point people are shaking their heads and muttering about benefit parasites and why should people who are doing nothing get working tax credits. Admit it, you were weren’t you.
Well here is the thing, the detail behind the headline so to speak.
Working tax credits are an attempt to get people to earn a living wage, mostly what they are used for is to benefit all those big companies who pay so badly or who have their staff on contracts with no minimum guaranteed hours. It’s not a benefit for the employee, rather it directly benefits the employer by removing the need to pay proper wages.
99% of those who go self employed want to make a go of it, they want to make money and turn it into a profitable job that pays the bills. They are doing something they like or something they are good at. That final 1% may be taking the piss but the vast majority are not.
What this change does is pull the rug out from under anyone who is taking the huge risk of going self employed. The working tax credit gives them a chance to get started, to survive the long weeks and months before they can establish themselves and start making money. Think of all the biographies of the famous entrepreneurs that talk about starting up on a shoe string.
Why is it that the government thinks it is acceptable for the likes of our big companies to under pay staff with the difference made up through working tax credits but people trying to start new businesses cannot do the same when they are employing themselves.
It means that only those with enough money to live will be able to attempt a start up or go self employed, the days of the poverty stricken entrepreneur making it good after years of struggle will be over, only those with money will be able to take that jump to improve themselves.
One final note. For several months as I go from meeting to meeting about getting a job or improving my CV or the rest of the mandatory stuff that repeats what I heard the month before hand I have encountered significant pressure to go self employed. The job centre has special schemes to help the unemployed go self employed, I have been told by several people representing the DWP or job centre how I can ‘PLAY’ the system, sell a few items on Ebay to generate an income then claim thirty hours a week and get Working Tax credits.
There was even a special course last month on going self employed and it was full of the glowing advantages, the fact that you only needed to make a small amount of money and could claim WTC and housing benefit and more was highlighted.
Over the last five years the governments much vaunted increase in the number of people employed, ONS stats are saying as many as two thirds of them are self employed. The men (or women) working at a building site are all too often pushed into going self employed so the employer no longer pays their contributions, online jobs, selling Tupperware or makeup or diet stuff, work through an agency, are you self employed???
The DWP has actively pushed hundreds of thousands of unemployed people into self employment, the magical drop in the number of people claiming unemployment benefit isn’t due to a massive increase in good jobs, people who are now being told to prove they have viable jobs.
But since many of them were pushed into self employment simply to manipulate the unemployment figures and have swapped Jobseekers and the never ending meetings for working tax credits and no meetings they don’t have viable jobs.
This is the DWP fudging its figures and then the Treasury coming along and giving people who were foolish enough to believe the job centre a good kicking.
But in the process they are going to hurt a huge number of people who are genuinely trying to make a living out of being self employed. People who happily work far more than 24 hours a week in return for less than the minimum wage because they are building a future. As someone who is looking a hundred hours of writing to earn a few hundred pounds but who likes writing so is happy to get paid a little in return for writing I couldn’t meet the criteria given and yet I am still being pressured to go self employed. Others I know who are struggling to make a difference for themselves and for others put in long hours for little pay with working tax credits making up the bit of the difference. They would be better off saying “Sod it” and going back onto benefits instead of trying to better their own lives.
With one hand the government are pushing people into self employment, with the other hand they are stopping them from surviving while self employed. Unless you can support yourself financially from the very beginning then going self employed becomes impossible but there are plenty of people in authority pushing you into self employment.
Yes I know the treasury has said it will accept evidence and consider that start ups work long hours for little pay, does anyone honestly expect compassion and consideration from our government or jobs-worth bureaucracy? Oh and even if they do accept that you are earning below the minimum wage and allow you to continue, it’s only for a year. By the second year if you aren’t making the minimum of 24 (or 35) hours of paid work each (and EVERY) week then you aren’t in viable employment.
Different day, same crap. Oh and no one can say when this will hit since its tied to Universal credit so you could have a few weeks’ notice and come under UC or not hear a thing for years.
Self employed and working for yourself, not any more.