Self-employed face new criteria for claiming Working Tax Credit

1st June 2015

From April 2015, self-employed professionals will need to meet new criteria in order to claim Working Tax Credit (WTC).

All new claimants who are using self-employed work to meet the qualifying remunerative work test for WTC must now show that they are trading on a commercial basis and their business is carried out with a view to securing profits.

In the event any business activity is construed as a hobby it will not be considered commercial with no genuine expectation of realising a profit.

HM Revenue and Customs (HMRC) will be asking self-employed WTC claimants with earnings below a set threshold – based on total working hours and the National Minimum Wage – to provide evidence of working on a commercial basis, with a view to achieving a profit.

This evidence is likely to be in the form of receipts and expenses or records of sales and purchases. Supporting documents such as business plans, planned future work, cash flow and profit projections may also be required.

Those in the infancy stages of self-employment will naturally find it difficult to turn a profit. WTC claimants in this instance are likely to be asked to demonstrate their commercial approach and how their business would become profitable via a detailed business plan.

HMRC will then use the information provided to reach a formal decision about a claimants’ WTC award.

Claimants could lose their WTC in the event they fail to provide adequate evidence and may be forced to repay any tax credits they are no longer entitled to. Those who disagree with HMRC’s decision can ask for a review.

All WTC claimants affected will receive information from HMRC regarding the new criteria and the action they need to take.

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