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Self employed hours

 

PCLC
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On the previous thread (Appealing an overpayment) Victoria suggested I find out first what year the overpayment had occured in. I spoke to the intermediaries line today who told me that all of the client’s WTC for 10/11 had been deemed to be an overpayment following a compliance investigation into the number of hours of self employment that she had done. This was on the basis of her declared income for 09/10 which was around £1080 and income for 10/11 of £4518. I was also told that this was below the minimum wage. I was told as well that HMRC had used available evidence to them (self assessment returns?) and invited the client to prove that she had worked for at least 16 hours per week throughout 10/11, which she could not do. Finally I was told that HMRC were conducting a general investigation into all the self employed receving WTC to verify hours worked.

In our case the client says that her hours reduced from 16 to 8 in January and her WTC stopped in February. Her 8 hrs pw stopped in March and she is now on JSA. I will obviously check her paperwork to see if it is worth persiung an appeal/ dispute but;

I am concerned about the general approach taken by HMRC, as given by the intermediaries line

Can anyone shed any light on this? Is there a general check on all the self employed going on, in which case I can expect alot more cases to come my way. Also I am concerned that the minmum wage does not apply to the self employed - taking this logic ,16 hrs pw over 50 weeks say at the minimum wage would mean a net profit of £4744 to pass this test. Are HMRC checking self-assessment returns generally?

Also in my experience the self employed do not tend to keep a record of hours worked all the time (or any of the time) - should they be doing this especially at the margins of 16 hours? Then there is the general problem of the normally working rule, which could catch alot of people if applied rigidly as the rule does not include fluctuations. I have come across clients whose self employed hours fall below 16 but who cannot afford to give up their WTC, as the chances of them finding more work are harder on a lower income and they dont want to claim JSA.

Finally HMRC’s approach does not seem to allow for higher expenses for a period, without looking at the reasons why profit was lower - compliance just seemed to focus on numer of hours. Also no allowance for the other time you can count towards self employment apart from actually working.

Thanks all

     
Altered Chaos
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In my opinion HMRC are wrong to focus solely on paid hours of work.

For a user friendly - yet detailed - overview see http://www.revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/self-employed/

Chaos

     
victoriatodd
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Altered Chaos - 08 September 2011 07:12 PM

In my opinion HMRC are wrong to focus solely on paid hours of work.

For a user friendly - yet detailed - overview see http://www.revenuebenefits.org.uk/tax-credits/guidance/how-do-tax-credits-work/self-employed/

Chaos

I’m glad you found that section useful.

HMRC are carrying out compliance investigations involving those who are self-employed, but as far as I am aware it isn’t everyone who has claimed as self-employed (I doubt they would have the capacity to do that). I think it is those claims that are declaring nil/low income and who fall within their risk assessments.

Firstly, NMW has nothing to do with being self-employed. I agree with your point that they should not be taking the tax return figure and dividing by the number of hours.

If the compliance investigation was for 10/11 then you can appeal against the decision. Can the claimant gather evidence together of what she was doing for those 16 hours? Although she may not have kept a record, anything she has from her business such as diaries, appointment emails, records of mileage, anything that shows the hours? Or if she has a record of the income, she can write down the hours for each piece of income. I can’t really think of what evidence HMRC would have for working hours as such, they would have the SA return but that doesn’t gather data on hours only the income.

The claimant should have received a letter from the compliance officer setting out the decision and telling her that she can appeal. On that letter should be a direct dial number. You can probably find out a lot more by speaking to the compliance officer directly (or at least I would hope you can - depends on who you speak to) and getting the actual account of what evidence they wanted and what evidence they used to make their decision.

If you do decide to appeal, send it directly to the compliance officer as their office will deal with first line appeals involving compliance investigations. It sounds to me that at the very least it is worth confirming why compliance made the decision directly with them, and if the answer is the same (linked to NMW and hours) then it is definitely worrying. The link posted by Chaos to our material on revenue benefits links to the manuals which set out the factors that should be considered when looking at hours. As you quite rightly say it is much wider than just the work itself.

We are very interested in how HMRC are approaching these self-employed cases so I would be very interested to hear how this turns out, or indeed if you want any further help feel free to email me: .(JavaScript must be enabled to view this email address)

Victoria

     
PCLC
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Thanks again for the posts

     
Stainsby
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I think HMRC are wrong on a number of points here.

First of all, the minimum wage does not apply to the self employed, it only applies to employed earners so its not relevant of itself, unless perhaps HMRC are using it as a basis to argue that your clients accounts are not credible.

The mere fact that hours worked my fall below 16 hrs in any period is of itself not suffinet to disenttitle that person from wtc.  It may well be that the pattern of work may have to be considered of the whole tax year in order to establich whther the persons working hours were above the threshold.  I agree that time spent drumming up trade will count towards that threshold.

You could also argue thet the level of corrcoboration HMRC are demanding is unreasonable, and point to the well establiched case law on that issue (eg R(I)2/51, R(SB)33/85, CH/4065/2001, CP/3037/2004).  All those cases established that corroboration was not necessarily essential, but would add weight to the evidence.

As far as establishing hours normally worked, see R(FC)1/92 and CTC/2103/2006

     

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Pippa Norris
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Hi, I have a client who was on JSA in 2009 but was encouraged by JCP to set up in self employment as a Digital television Engineer (he had previously worked for Sky). Client was given a job grant of £300 and helped to claim WTCs. Client was putting in 30hours+/wk (usually 40). Client then received a letter April 2011 from HMRC Compliance Officer saying he had been selected for a review and reuired client to send in self-employment detail e.g. diary of bookings/appointments etc. which he duly did. Unfortunately, because lots of others had had the same idea for self employment work dried up in July 2011. Client informed HMRC of Cof C and WTCs stopped August 2011. Also in Aug 2011 he received a letter from the compliance officer saying that “I have made a decision that I do not accept that you work at least 16 hours a week.”. No explanation at all. I saw the client yesterday and made a phone call to the compliance officer. I was told that they could not tell me anything because “that project has ended now and we are on a new project”. I just met a blank wall for ages but then the C.O. said that client had not been entitled to WTCs during the set up period and was adamant that people setting up in self employment are not entitled to WTCs because it is this “setting up period”. There are 2 overpayments: period ending 06/04/10 and period ending 06/04/11 (Total overpayment £3435). I am going to dispute this but thought the other person might like to know there is another “project” the compliance officer is dealing with now!

     
Kevin D
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On the specific issue of the “setting up period”, you should be aware that unless someone is actually trading during that period it may well be correct to find that a person is not in remunerative work for the setting up period.  See, for example, Smith v Chief Adjudication Officer [1994] CA (reported as R(IS) 21/95) - available on the Tribunals website.

http://www.osscsc.gov.uk/Aspx/default.aspx

     
Mark Willis
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Hi Pippa

A blanket policy that people setting up in self employment are not entitled to WTC can’t be right. From what you have said it seems he was trading and working 30-40 hours in expectation of payment. They seem to have revised the decision with the benefit of hindsight when work dried up (two years later?) to decide he was not working throughout the period. HMRC’s own guidance makes it clear self-employed new starters may be entitled to WTC:

Claimant Compliance manual
http://www.hmrc.gov.uk/manuals/ccmmanual/ccm6755.htm 
If a business is in its early days, it is more likely that the claimant will have to invest large amounts of time and effort in building up business contacts for little or no outcome. However, over time the amount of unproductive time spent in this way reduce considerably. If it does not, it may be an indication that the work is not genuinely remunerative.

Tax credits manual 0126220
http://www.hmrc.gov.uk/manuals/tcmanual/TCM0126220.htm
A self-employed earner’s expectation of payment must be a reasonable one. The customer must confirm that the work is done in expectation of payment. It doesn’t matter that the self-employed earner might trade at a loss.

Good luck with the appeal

     
JohnA
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I will be picking up this issue at the Benefits & Credits consultation forum on Thursday of this week. From letters that I have seen HMRC are not acting professionally or with any understanding of what it takes to keep your head above water as a low income self-employed person.

     
Pippa Norris
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Cardigan Citizens Advice Bureau

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Thank you Mark Willis

     
Gareth Morgan
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Pippa

Do you get the meeting details for Welfare Rights Advisers Cymru (WRAC)?

If not, let me have your details and I’ll add you to the list.

     
Lorraine Cooper
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Family Support, Barnardo's, Merthyr Tydfil

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Gareth, could I be considered for WRAC too? Merthyr Tydfil here!  lorraine (dot) cooper (at) barnardos (dot) org (dot) uk

     
Pippa Norris
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Cardigan Citizens Advice Bureau

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Gareth

Thanks re: WRAC - Here are my details: .(JavaScript must be enabled to view this email address) or if by post: CAB Ceredigion, Napier Street, Cardigan, Ceredigion. SA43 1ED

All help and info gratefully received!

      [ Edited: 4 Jan 2012 at 10:32 am by Pippa Norris ]
Pippa Norris
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Hi

On the same theme, I have another client who has had an HMRC decision re: tax credits award: “I have completed my checks and I do not accept that you have been in paid work of at least 30 hours a week from 6 April 2010. The reason for this is that although you have sent in evidence of hours worked and expenses paid, the evidence provided of payments from business customer does not show a high enough amount of payments received to qualify as remunerative employment”. !! This client is a self employyed potter who works all hours as an employee as well at B&Q. The letter from B&C Compliance Operations does not even have the client’s NINO. These reterospective decisions are getting out of hand. Appeal is in - the overpayment is over £4k. These are client’s who have been helped by the JCP to make the claim for WTC in the first place - what are they thinking? It appears that the policy to claw back as much tax credits as possible has only just begun?