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Period of self employed earnings

Damian
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Welfare rights officer - Salford Welfare Rights Service

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I must be missing something on self employed earnings. Reg 50 says unless otherwise provided for earned income is what is recieved in the assessment period, Reg 53 in the draft regs seems to involve calculating by reference to the assessment period only - no reference to a regular cycle or tax year and an assesssmnet period seems fixed at one month (reg 17). I can’t imagine its really planned to be done on the basis of monthly self employed earnings (with wild fluctuations for lots of people) so can someone tell me what i’ve missed?

Thanks

LITRG
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Low Incomes Tax Reform Group

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Damian - 16 October 2012 12:22 PM

I must be missing something on self employed earnings. Reg 50 says unless otherwise provided for earned income is what is recieved in the assessment period, Reg 53 in the draft regs seems to involve calculating by reference to the assessment period only - no reference to a regular cycle or tax year and an assesssmnet period seems fixed at one month (reg 17). I can’t imagine its really planned to be done on the basis of monthly self employed earnings (with wild fluctuations for lots of people) so can someone tell me what i’ve missed?

Thanks

I don’t think you have missed anything, we can’t see how fixed monthly assessment periods can work for the self-employed. Our evidence to SSAC focused on this issue:
http://www.litrg.org.uk/Resources/LITRG/Documents/2012/08/SSAC_-_universal_credit_and_related_regulations_0712_(final).docx.pdf

Victoria

Gareth Morgan
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It’s also, I think, going to cost people their transitional protection when there are big variations in income in different three month periods.

Steve_h
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Welfare Rights- AIW Health

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Taxi drivers will go wild

Mendip
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Welfare rights, Mendip CAB

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Another related issue regarding self employment, is the definition of gainful self empmloyment in reg 57 , which states the self employment must be in the expectation of profit, whereas the current defintion of remunerative work specifies ‘expectation of payment’.

I believe this could mean that self employed people with businesses that are initially unprofitable cannot get UC for the first couple of years of self employment , when they need it, but can get once they are making a profit, by which time they may not be entitled anyway.

(maybe this should be a separate thread, apologies if so)

Paul Treloar
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Head of Policy, LASA

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You can find the LITRG report that Victoria tried to include earlier on at this page.

Universal credit and related regulations

Executive summary from para 4, and main report from para 19.

Advice NI
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Head of policy - Advice NI

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Concerned about Universal Credit and self-employed (in particular sectors like beef farming, where there isn’t a regular monthly income – more likely an annual cycle of income); concerned about (i) ability of certain sectors to cope with monthly reporting; & (ii) fact that for some self-employed sectors there will be nothing to report in many months throughout the year.

Edmund Shepherd
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Regarding getting UC while engaged in unprofitable self-employment, the rules were - a while ago - that self-employed people could get UC with no profit for a year and thereafter assumed to have income of minimum wage multiplied by full-time hours. I haven’t read anything about this being changed.

Gareth Morgan
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People will get one years exemption from the Minimum Income Floor rule when starting in self-employment.  This can be used once every five years, so don’t go bust and start again in any shorter period.

It’s going to be dreadful -both administratively and in income.  We’re testing a calculator / planner for self-employment and Universal Credit, and the results and workload are a nightmare.

It will get worse next year when the proposed 6 month previous earnings rule kicks in while the loss carry-forward will have very little effect for most self-employed people.

stevejohnsontrainer
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I understand the normal time window to report self employed income and allowable costs is from 7 days before the end of the AP and ten up to 14 days after the start of the next AP. Does that result in the means testing always lagging behind needs by one AP?

In terms of allowable costs, how is the minicab driver to calculate one months depreciation on their vehicle? Who is supposed to give this advice?

HB Anorak
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Depreciation of business assets won’t be an allowable expense (assuming anyone will be checking): motoring costs and use of home for business will be subject to the monthly equivalent of HMRC’s flat rate tax allowances.  So 45p a mile for the first 10,000/12 miles each month covers the cost of acquiring, taxing, servicing, cleaning and fuelling a vehicle.

It’s still a big administratiuve burden on the claimant though.  I am self-employed myself and I normally spend the last weekend in January desperately trying to reverse-engineer my business miles with Google maps because I am too lazy to keep a daily log. Doing that (and all the other expenses) every month will be a pain for sure.

Advice NI
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I agree HB; a pain for claimants and much nugatory work at the administrative end; I read LITRG briefing doc which states that should be annualised in line with income tax approach - I find it hard to disagree with this.

Jon (CANY)
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Welfare benefits - Craven CAB, North Yorkshire

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How are people finding the reporting of self-employed income to be working out?

Some online resources, eg MAS, reckon that you can report self-employed income to UC online. As far as I can see that doesn’t seem to be possible on the journal (might be in future??). Claimants are being told to get through on the UC helpline each month with cash in/out and expenses, which isn’t always very practical to achieve in the narrow reporting window.

Sally63
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Generalist Adviser, Southwark Citizens Advice Bureau

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We’ve got a client who was told she had to report self employed income on a specific day each month. She did this—took ages. She had to phone it in. Not allowed to report it online.

Then she got a long set of overpayment demands.

Eventually she found someone who could explain why despite reporting on the correct day every time, she still had overpayments.

Apparently she was phoning them in at the wrong time of day. The decision had already been taken by the time she phoned. So it was wrong every time (didn’t take up to date info into account).

The decision letter acknowledged that she hadn’t done anything wrong but she still had to pay because departmental errors were no defence.

I thought about that sentence for a long time and we challenged it.

Jon (CANY)
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Welfare benefits - Craven CAB, North Yorkshire

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Hi Sally, that case seems ludicrous. And from what I’ve read (below), the day people are asked to report their income is the last day of the AP, and so should be a week before the decision is even made..?

According to gov.uk, when you tell UC that you’re self-employed you are given a guide which explains how to report self-employed earnings. For some reason that guide isn’t itself made available on gov.uk, but I think this is it, in this FOI request.

The guide tells us (emphasis in original):

You must report your self-employed earnings on the last day of each assessment period, even if you have no income. If you have no income in an assessment period you must report ‘zero’ for your earnings.
We will post a to-do in your Universal Credit account on the last day of each month to remind you.
We calculate your Universal Credit payment each month, using assessment periods. This will usually be calculated from the day you submit your claim, and will last for one month. If waiting days apply, your assessment period will start on day 8 of your claim. You will be told your assessment period dates.
Important: If you don’t tell us your self-employed income each month your Universal Credit payment will be delayed or stopped.

Issues arising from this:

- A one day reporting window just isn’t practical in some cases, especially when the ONLY way to report is by getting through on the helpline. Why haven’t they sorted out reporting it online as well?

- I am not sure if the guide is handed out in all cases, such as where someone’s main income is from employment which they top-up with self-employment, and so they are not “gainfully self-employed” for UC purposes. Without the guide, you may get little/no help from the UC helpline on what sort of business expenses you can or should be reporting each month.