New universal credit replacing benefits not universally helpful?
People are never happy are they? They complain that the current dole is no good, and that the child/working tax credit system is useless, and then they complain that the new universal credit system to replace it all is rubbish too. However, when the latest complainer is the Chartered Institute of Taxation (CIOT), perhaps those Government sorts will actually take some notice…
You see, now the Government are bringing in the new PAYE real time information system from April next year- so they know exactly what you have earned as soon as you earn it- they thought this would be an ideal time to try a new universal credit system which will function as a single monthly payment covering all entitlements. The credit will replace job seeker's allowance, employment and support allowance, income support, child tax credits, working tax credits and housing benefits and enable any changes in benefit entitlement to be processed and paid more quickly than under the previous system.
However, what the Universal credit fails to do is have any consideration for the self employed. The CIOT are warning that “there are big practical problems with the Government’s plans for universal credit. These include extra burdens on business, deadlines that many will find impossible to meet and calculations of ‘income’ that are biased towards the Exchequer”.
Under the current system, self-employed people can file tax credit information annually (by 31 July after the end of the tax year) and the figures that need to be provided are the same as those needed to complete a tax return. The new rules require the filing of figures within just seven days of the month-end, figures calculated in a different way to those needed for a tax return, and which could be more favourable to the Government penny pinchers.
The system also assumes that self employment income accrues evenly over the year, which rarely happens, and would allow such anomalies that a self employed person whose expenses of, say £5,000 were incurred the month before an income of £5,000 was received, would only be able to claim credits for the first month.
Andrew Gotch, Chairman of the CIOT’s Owner Managed Business sub-committee said:
“As a principle, we strongly agree with simplicity in administration and can see some significant benefits from sweeping away the complexities of the current benefit and tax credit system, and making it more straightforward for people to claim the financial support to which they are entitled.
“However, the universal credit proposals seem to fly in the face of simplicity when it comes to the reporting requirements being imposed on small employers and the self-employed. Requiring businesses to report payments to employees ‘on or before’ the time they are made will present huge problems in some sectors. Requiring small businesses to report their earnings online within seven days of the end of a monthly assessment period is totally impractical. Most businesses will struggle mightily to collect the necessary information in this time and many will fail to do so, thus being involuntarily excluded from benefits."
The DWP estimates there are 600,000 households reliant on self employment income alone. However, using HMRC’s published 2007/08 figures, the CIOT estimate that there are over 2million businesses that may be affected by the new rules.
So will you be affected by the new rules? Isn’t making the low-earning self-employed jump through many more hoops in order to get benefits most likely to make them give up and stop working altogether? Good job George.