CIOT warned that losses rule showed ‘fundamental misunderstanding’ of how businesses operate
The government has defended draft universal credit regulations after the Chartered Institute of Taxation said the new rules would impose extra burdens on business including deadlines that ‘many will find impossible to meet’.
The CIOT warned last month of a ‘new and burdensome requirement’ on self-employed people to report transactions monthly, within seven days of their month end, if they might be eligible for universal credit. A rule preventing losses from one assessment period being carried forward to the next ‘shows fundamental misunderstanding of how businesses operate’, it said.
Andrew Gotch, Chairman of the CIOT’s owner-managed business sub-committee, said that as well as completing an annual tax return self-employed people would be required to ‘report transactions monthly, but to do so using a different method of calculation and even a different set of criteria for determining self-employment’.
The tax body set out its concerns in a submission to the DWP at the end of July. ‘The current proposals assume that income arises for the self-employed in the same linear and regular way that it usually does for employees. That is wholly unrealistic,’ it said. A number of aspects of the regulations needed ‘considerable further thought’.
Universal credit will replace tax credits and other benefits including housing benefit. Lord Freud, Minister for Welfare Reform, said the government was determined that universal credit would support ‘those entrepreneurs who are taking steps to make a living from their business’.
In a letter to the Financial Times, Freud said that under the current tax credit rules ‘claimants who make no profits from self-employment can legitimately report that they haven’t made any money from their business and still receive tax credits, with no obligation to increase their earnings or seek more work’.
He added: ‘Universal credit represents a different approach to supporting families by giving claimants a real incentive to increase their income and take responsibility for their lives, so we are making sure that more accountability is built into the new system. These include gateway checks to ensure that self-employed businesses are genuine and regular and have a simple reporting mechanism to help claimants keep a strong hold on their business finances.’
CIOT warned that losses rule showed ‘fundamental misunderstanding’ of how businesses operate
The government has defended draft universal credit regulations after the Chartered Institute of Taxation said the new rules would impose extra burdens on business including deadlines that ‘many will find impossible to meet’.
The CIOT warned last month of a ‘new and burdensome requirement’ on self-employed people to report transactions monthly, within seven days of their month end, if they might be eligible for universal credit. A rule preventing losses from one assessment period being carried forward to the next ‘shows fundamental misunderstanding of how businesses operate’, it said.
Andrew Gotch, Chairman of the CIOT’s owner-managed business sub-committee, said that as well as completing an annual tax return self-employed people would be required to ‘report transactions monthly, but to do so using a different method of calculation and even a different set of criteria for determining self-employment’.
The tax body set out its concerns in a submission to the DWP at the end of July. ‘The current proposals assume that income arises for the self-employed in the same linear and regular way that it usually does for employees. That is wholly unrealistic,’ it said. A number of aspects of the regulations needed ‘considerable further thought’.
Universal credit will replace tax credits and other benefits including housing benefit. Lord Freud, Minister for Welfare Reform, said the government was determined that universal credit would support ‘those entrepreneurs who are taking steps to make a living from their business’.
In a letter to the Financial Times, Freud said that under the current tax credit rules ‘claimants who make no profits from self-employment can legitimately report that they haven’t made any money from their business and still receive tax credits, with no obligation to increase their earnings or seek more work’.
He added: ‘Universal credit represents a different approach to supporting families by giving claimants a real incentive to increase their income and take responsibility for their lives, so we are making sure that more accountability is built into the new system. These include gateway checks to ensure that self-employed businesses are genuine and regular and have a simple reporting mechanism to help claimants keep a strong hold on their business finances.’
