The Government is rolling out Universal Credit (UC), a single payment replacing the six main benefits including working tax credits (WTC). It has already been introduced in some parts of England and will be in use across the UK by October 2017.
The switch means self-employed workers will have to demonstrate they are “gainfully self-employed” — otherwise they will need to look for and be available for other work in order to receive payment.
UC also includes a ‘minimum income floor’ (MIF), which is an assumed level of earnings used to calculate the payment and in most cases will be the equivalent of 35 hours per week at the national minimum wage. UC will not bridge the gap if self-employed workers earn less than this in any given month.
The changes only apply to businesses more than 12 months old, and will not apply for the first six months after a a claimant applies for UC.
However, Association of Licensed Trade Accountants (ALTA) chair David Jones said he has clients who will stop receiving credits as a result of these changes.
“Currently there is no MIF so licensees earning less than this or making losses will lose this financial support, which could precipitate their exit from the pub,” he warned. “There can be periods in self-employment where, because of investment, you don’t make a profit, but UC will assume this reality doesn’t exist.”
Paul Gilleran, tax accountant at Roslyns, said although the new UC could “reduce benefit income for the self-employed”, it will encourage publicans to review whether they have a viable business.
Publicans currently claiming working tax credits could lose the benefit if their pub is not “gainful” under new Government changes, according to trade accountants.
Enterprise Inns tenant Jerry Blay, who runs the Wheel Inn in Etchingham, East Sussex, said he earned £4,000 last year, from a net turnover of £205,000, and he receives £160 per week in working tax credits. “[The changes] are going to drive an awful lot of people under. It’s a lifeline, and it’s pretty much the only one we’ve got left,” he said.
Another anonymous host said: “We made £4,000 profit last year. I’m hoping it will pick up, but I’m relying on the £300 a month we get in tax credits.”