Tax credit measures risk double discrimination against disabled self-employed workers – LITRG Press Release

Published on 10 December 2014

A new test to be applied to working tax credit (WTC) claimants who are self-employed is potentially discriminatory against disabled claimants, the LITRG has warned.

In the draft Finance Bill issued today, HMRC have announced that self-employed WTC claimants who earn less than the equivalent of 24 hours per week at the national minimum wage will be required to provide evidence to HMRC that their work is “genuine and effective” in order to qualify for WTC. While LITRG supports HMRC’s efforts to combat fraud in the tax credit system, the legislation already requires all self-employed claimants to be working “for payment or in expectation of payment” and this, in LITRG’s view, should be enough to enable HMRC to stop fraudulent claims.

Anthony Thomas, Chairman of LITRG, explained:

“It is unclear to us why HMRC have chosen 24 hours as the trigger for the additional evidence especially when some claimants are only required to work 16 hours to qualify for WTC. We are particularly concerned about the impact of this proposal on those who claim the disability element of WTC and only need to work at least 16 hours a week. This reflects the fact that some disabled people may not be able to work full time because of their disability. Setting the threshold at 24 hours for this new test makes it more likely that those who qualify for the disability element of working tax credit will be adversely affected.

“That is one respect in which this new test could discriminate against those self-employed workers who are disabled. Another likely area of discrimination is that a disabled worker who is employed and claiming WTC on that basis can work 16 hours a week and qualify for WTC, while the same disabled claimant doing the same amount of work on a self-employed basis would have the additional hurdle of showing that their self-employment was “genuine and effective”. A case of double discrimination against disabled claimants.”

Anthony continued:

“This new test will run counter to the Government’s drive to help people move from welfare to work. Jobseeker’s Allowance claimants are sometimes encouraged by Jobcentre Plus to turn to self-employment to start to take up work; indeed the New Enterprise Allowance actively encourages this. Historically, working tax credit has always been available as a means of easing the fragile financial transition but this new test has the potential to leave them high and dry, with much uncertainty about in-work support and raising the question whether they would be safer on benefits than trying to work.

“Given our experience of compliance processes around self-employment and other areas, we are extremely concerned at how this test will be implemented by HMRC staff. We have seen similar tests being used to deny tax credits where a person doesn’t meet the minimum threshold rather than the test being used as a starting point to explore the work. HMRC will need to ensure that staff guidance and communications for claimants make it very clear what evidence will be sought and how the genuine and effective test will be applied.”


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