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I have recently started working self employed making a variety of jewllery and cards. I have claimed working tax credits and housing benefits. I was not planning to start trading until march next year and as such will not be making any profit. I informed tax credits of this and they have awarded my tax credits. When I informed the housing benefits of this they have told me that I should not be claiming that I am self employed as I am not yet trading and should be sigining on. I thought that I could not sign on as I am working long hours building up stock. Please could anybody clarifiy this as I am really worried now that I am breaking the law. Thanks.
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Re: Self Employed and confused
In my opinion you have began work, you are building up stock to sell, the same applies if you purchase stock to sell, you are trading and are in the right to apply for tax credits. If they catch you building up stock to sell while signing on then they will be after you. Same as if you open a shop but no one buys from your shop, you are trading. -
Re: Self Employed and confused
Hi Scooter Lady,
Some years ago I had a similar experience where I went self-employed, and spent some time researching and then building up a clientele. Although I was actually trading, I was not making a profit at first, so my earnings were actually zero for some time. My experience of Housing Benefit staff was that they really did not know the HB regulations, and I had to read up on them myself and tell THEM what they should have been telling ME !!! They often think that just because they know a little, they know it all - and they get away with it far too often.
If you sign on as unemployed, then you are declaring that you are available for work - which you are not. Therefore it seems to me that it is the Council who are acting unlawfully by telling you to sign on under the circumstances you have described. Personally, I would suggest that you look into becoming officially self-employed immediately (you may be able to backdate the official start date of your self-employment). The fact that you are not yet making a profit should not prevent you from having self-employed status. You will need to tell your Tax Office, and to start paying NI contributions, or apply for low earnings exemption from them.
This is my personal advice, but it is based on my own experiences from many years ago, and I hope some others will give better and more up to date advice here.
EDIT: I see Salsmoss has now posted, and we seem to concur.Comment
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Re: Self Employed and confused
Thanks guys, that has put my mind at ease slightly. I have not been self employed before and I am going to a course run by WENTA in January to find out more specifics about how to keep books and such. In the mean time it looks as if I am going to have to research more into HB. My only concern is that I am going to run into more rent arrears while they sort it out and if that's the case then this business will have failed before I have started. Obviously hoping that this is not the case.Comment
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Re: Self Employed and confused
You have a month from trading to notify hm revenue and customs that you are self employed. Tax credits is that children's tax credits or working tax credits? So until you start work you are not self employed.
Originally posted by scooter lady View PostComment
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Re: Self Employed and confused
I'm not dead sure, but I don't think that it matters whether you are making a loss or a profit. I would have thought - if you are buying in stock and equipment, and are assembling items for eventual sale - that you are both working and trading, but not selling as yet. You are busy 'fitting out the shop,' but the doors are not open to customers as yet - so you are not available for employment elsewhere because you are busy working in your business. That's my take on it. I think this concurs with Salsmoss, but I'm not sure if it sounds OK to you, Tuttsi ?Comment
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Re: Self Employed and confused
i concur with you Bill if this indeed what this lady is doing. Then she has to notify hm rev and customs that she is self employed and keep all receipts/ invoices as evidence including any travel receipts incurred for the business and for all stock purchased. This will set off against your eventual sales and reduce any tax liabilities.
Originally posted by Bill-K View PostComment
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Re: Self Employed and confused
Thanks Tuttsi. SL says she is taking a course in January which covers basic book-keeping, so - as you say - until then, keep a record of all business expenditure (and receipts of course). It may be worth recording any other expenditure which may possibly be claimed as business expenses. For example, if working from home, then a portion of utility bills (heating, lighting, phone, broadband, rent, etc.) - also such things as stamps, stationery, insurance, business mileage on private car, etc. If in doubt, record it - SL can decide which items to actually include in her end of year accounts, once she has learned more.Comment
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Re: Self Employed and confused
I think I am getting slightly confused now. I have let HMRC know of my circumstances and therefore have been awarded tax credits. Are you saying I need to let another department know? I have kept a record of stock purchased but will bear in mind the other things mentioned.
HB orginally asked for a projection of how much I was going to earn and this is when I told them I was not yet trading and then was told I should be signing on..... Until I do start trading/selling I have no idea of how much I will earn and until I go to this course I wouldnt even like to guess, if that is what I am supposed to do. I feel really stuck on this issue.Comment
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Re: Self Employed and confused
Ok the tax credits is a different department. Go online to HMRC and you should find a link for advising self employment. You will probably need your NI number and they will then issue you with a unique self employment reference number which you will need for filing you tax returns.
You should also be able to claim for the bookkeeping course if indeed it cost you any money.
Originally posted by scooter lady View PostComment
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Re: Self Employed and confused
Has the Op not done a businees plan i would think that the authorities would ask for this a bank no doubt would have done several but did not see the problems that came but others like to see that you have researched what you want to do if they are going to register for vat it can be backdated if needed in the current crisis councils will look everwhere to save paying out housing/council tax benefits.
Whatever happens heres hoping it all works out.
GOOD LUCKComment
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Re: Self Employed and confused
To be VAT registered the lady would have to know in the quarter she will have a decent turnover. Since she is not going to start selling until April 2013 that is not a criteria at present. However if the turnover looks like she will have to register she may be able to claim back vat on start up costs.Comment
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Re: Self Employed and confused
Thats the point of a business plan you need to know your costs expenses profit and loss dont go into into blind i lost it all because sales went down in the recession until then sales and profits were rising year on year profit margins grew slightly i like many didnt predict the recession without it and with the growth that was there i would be a millionaire now planning works but the unforseen can destroy it allComment
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Re: Self Employed and confused
As Tuttsi says, Tax Credits are now administered by HM Revenue & Customs (HMRC) - who ALSO administer Income Tax. But they are different sections. You may already have this, but you can register with HMRC online, and have your own personal ID. You can then access all the help and info and file your Tax returns online. Whatever earned income level that HMRC are using for determining your Tax Credits should be acceptable as the basis for your HB claim. There are some differences in what expenditure is allowed, but if your earned income for TC is zero, then that should be accepted by HB, as it is officially accepted by HMRC as your income.
As Wales says, you may eventually need to generate a business plan to forecast your expected income - but you cannot be expected to do that at this stage. If they insist on a plan, then I would say to them that until you open the doors for business, your earned income is zero (or whatever HMRC have accepted), and they must similarly accept that - I feel sure.
I don't think you should worry about registering for VAT. As a Sole Proprietor, you will probably be below the VAT threshold for a while, and unless there is a very good reason for voluntarily registering (pretty rare), then I would advise against doing so.Comment
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Re: Self Employed and confused
Thanks tuttsi, that helped.... and thanks wales man for the luck.. When I go to the WENTA course they will be helping with the business plan.Comment
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