New Universal Credit pilot failing to take adequate account of freelancers

25th November 2013 | News

The pilot of the newly introduced Universal Credit system has come in for criticism for failing to take account of its impact on self-employed professionals.
Tax campaigners, the Low Incomes Tax Reform Group, led calls to ministers indicating the existing rules regarding Universal Credit were "designed to place obstacles in the path" of people whose earnings are from freelance work.
"The self-employed face unnecessary bureaucratic burdens in having to prepare monthly accounts for the Department for Work and Pensions (DWP) and annual accounts, on an entirely different basis, for HM Revenue and Customs (HMRC)," added the charity.
"Additionally the self-employed face the disregard of trading losses under the DWP basis of accounting, so that if a claimant’s expenses exceed his/her receipts in any month, he/she cannot set the difference against a profit for the next or any subsequent month."
The charity also highlighted a third issue regarding the pilot scheme, the minimum income floor, which for Universal Credit purposes replaces a specified amount of profit in any month in which the actual profit is lower.
Robin Williamson, technical director for LITRG, believes the current system leaves self-employed claimants "worse off" than an employed claimant doing a "similar job and earning the same amount of money".
"It is particularly important that the experience of the self-employed claimant is tested sufficiently robustly to find out whether Universal Credit can indeed act as a work incentive for claimants choosing that route," added Williamson.
"In their present form, the Universal Credit rules for the self-employed seem to us to be strong on bureaucratic burdens and red tape, and weak on work incentives and growth."
It is felt the rules should better reflect a wider understanding of how freelancers and self-employed professionals operate, which will only evolve from pilots that assess their Universal Credit responses.