Be prepared for tax and benefits changes

The self employed are about to find themselves embroiled in the ongoing furore relating to tax and benefits as Universal Credit comes in. No vote hungry politician dare come out and say what is being whispered. However, the tax and benefits checks coming up seemingly apply only to us. Clearly there is an agenda and it appears to have cross-party support. No opposition dare question tax and benefits reform when public opinion has been so cleverly manipulated.

When a government minister (Lord Freud) openly accuses many self-employed businesses of being a sham and simply a device to obtain benefits, he is classifying many of us as skivers not strivers, completely disregarding the challenges of running your own business. The crass answer from his Lordship is if your business is unsustainable you should quit and find something else to do. As if was that easy.

Meanwhile Treasury Minister and the Chief of HMRC David Gauke rants about the morality of paying tradesmen cash in hand, labelling any trader accepting cash as a potential tax cheat.

Defying austerity and departmental cutbacks, considerable money has been invested in creating HMRC and DWP task forces to deliver further political bragging rights. Some 12,000 examinations per year are to be carried out on self-employed Working Tax Benefits claims, requiring evidence of recent business invoices and expenses and bank statements. On supplying this information, a summary decision will be made on whether you are entitled to benefits or not. We could now all be potential benefit cheats.

Under Universal Credit which encompasses tax credits, a claimant is mandated to supply monthly business trading information. Fail to do so within seven days and the benefits for that month are withdrawn and no response within 28 days makes your entire claim null and void.. This is a seismic change for the self-employed community, creating a new set of hoops and hurdles that only we have to jump through. By the time Universal Credit is fully implemented there will be no going back – the government will have changed and any softening of the stance will be deckchair shuffling as the iceberg remains ignored.

Universal Credit also seems to operate by its own set of rules. No one is quite sure which town it is going to pop up in next, whether it is a pilot or the real thing or when those on Tax Credits are going to be “transitioned” (a lovely and unintentionally apt word similar to our understanding of water boarding). All we know is that it is coming and we had better be ready for it.

Comparatively, HMRC Business Record Checks are a softer, more touchy-feely exercise – unless the outcome is deficiencies serious enough to put you in the fraud category. You could view it as your friendly HMRC chappie having a poke around your business and if all is tickety-boo he will probably bid you a fond goodbye, handing out a few helpful suggestions.

Joking apart, I cannot stress this to you strongly enough: be prepared. Find out more about all the implications of the changes here.

Details such as diaries and meticulous business recordkeeping will let you sail through. Whereas once upon a time, you could consider preparing your business paperwork as an afterthought or a chore for quiet moments, from this moment on, you must consider it your absolute priority. Good, up-to-date book-keeping will help you to fight back. And win.

*Des Desai is an accountant and owner of a tax advice software company Mr Tax software and Text 2 Save Tax, which aims to make book-keeping for smaller businesses more straightforward and accessible. Read more here.





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