From 6 April 2015, if you are self employed and claim Working Tax Credits, you will need to meet new criteria being introduced by HM Revenue and Customs (HMRC). You must be able to meet a new qualifying remunerative work test for Working Tax Credits that demonstrates that that you are trading on a commercial basis and your business is run with a view to achieving profits.
This is in response to cases of claimants who are not self employed but claim that they are in order to claim Working Tax Credits. For example, if someone has a hobby which they claim is a trade, it will not qualify for Working Tax Credits.
In respect of the changes, self employed Working Tax Credit claimants with earnings below a threshold (this will be based on working hours and the National Minimum Wage) will be asked by HMRC to provide evidence that they are in a regular and organised trade, profession or vocation on a commercial basis and with a view to achieving a profit.
The evidence requested would be the kinds of records kept by a business, such as records of sales and purchases, expenses and receipts. HMRC may also want to see other business documents such as a business plan. This is particularly relevant during the first couple of years of trading; many businesses show low profits, or even losses, in the first year or so. In those circumstances, HMRC will simply want to confirm that the business is genuine.
These changes will not affect the rules for claiming Child Tax Credit.
Further details can be found here.
