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Universal Credit - The End of Small Businesses?
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JohnB



Joined: 09 Jul 2005
Posts: 685
Location: Beautiful sunny West Wales!
PostPosted: Fri Apr 12, 13 10:35 pm    Post subject: Universal Credit - The End of Small Businesses? Reply with quote
    

There have been a few discussions on the introduction of the Universal Credit, but this analysis of how it affects small businesses is seriously scary. It looks like they're trying to wipe out any business that doesn't make serious money very quickly, unless you can do it without claiming benefits .
https://www.permaculturehouseintotnes.co.uk/1/post/2013/03/universal-credit-and-the-self-employed.html

Rob R



Joined: 28 Oct 2004
Posts: 31902
Location: York
PostPosted: Fri Apr 12, 13 11:33 pm    Post subject: Reply with quote
    

I've said what I think about it, and the changes that are so often omitted from such articles elsewhere, so I won't repeat it.

Small businesses existed before Tax Credits so I expect them to carry on afterwards. If a business can support you it will carry on, if it can't support you but you have support from elsewhere (a partner's income, for example) it will continue, what I don't think will continue are stagnant micro-businesses that don't have any plans for growth. These have cropped up since TCs were introduced and some will already be making plans to be independent by 2017, others won't make any plans & are likely to fail.

Hairyloon



Joined: 20 Nov 2008
Posts: 15397
Location: Today I are mostly being in Yorkshire.
PostPosted: Sat Apr 13, 13 12:26 am    Post subject: Reply with quote
    

If Universal Credit is available for people on a low income, then it will subsidise big businesses in the same way that Tax credits do now.

Why subsidise big business and not little ones?

Rob R



Joined: 28 Oct 2004
Posts: 31902
Location: York
PostPosted: Sat Apr 13, 13 9:30 am    Post subject: Reply with quote
    

Hairyloon wrote:
If Universal Credit is available for people on a low income, then it will subsidise big businesses in the same way that Tax credits do now.

Why subsidise big business and not little ones?


Why will it not subsidise little ones?

john of wessex



Joined: 18 Jun 2007
Posts: 2130

PostPosted: Sat Apr 13, 13 9:35 am    Post subject: Reply with quote
    

Bear in mind as well that the 'conditionality' rules will also be extended to part time workers as well.

But of course Employers still wont have to pay a decent wage..........

Hairyloon



Joined: 20 Nov 2008
Posts: 15397
Location: Today I are mostly being in Yorkshire.
PostPosted: Sat Apr 13, 13 10:10 am    Post subject: Reply with quote
    

Rob R wrote:
Hairyloon wrote:
If Universal Credit is available for people on a low income, then it will subsidise big businesses in the same way that Tax credits do now.

Why subsidise big business and not little ones?


Why will it not subsidise little ones?

That was the implication of OP.
Will they be asking equivalent questions of the bigger employer?
i.e. Would your business model be sustainable if your staff were not topped up with tax credit and you had to pay a living wage?

Rob R



Joined: 28 Oct 2004
Posts: 31902
Location: York
PostPosted: Sat Apr 13, 13 10:21 am    Post subject: Reply with quote
    

No, not a living wage, a minimum wage, which employers have to pay, big or small. Now they appear to be encouraging it for self employed folk too.

lettucewoman



Joined: 26 Sep 2006
Posts: 7834
Location: Tiptoe in the Forest!!
PostPosted: Sat Apr 13, 13 10:40 am    Post subject: Reply with quote
    

Rob R wrote:
I've said what I think about it, and the changes that are so often omitted from such articles elsewhere, so I won't repeat it.

Small businesses existed before Tax Credits so I expect them to carry on afterwards. If a business can support you it will carry on, if it can't support you but you have support from elsewhere (a partner's income, for example) it will continue, what I don't think will continue are stagnant micro-businesses that don't have any plans for growth. These have cropped up since TCs were introduced and some will already be making plans to be independent by 2017, others won't make any plans & are likely to fail.


Rob...did you actually READ the link above...particularly this part?

Once entitlement is established, payment will be based on your earnings in an assessment period of one calendar month. You report your income for that month, less any expenses you have paid out that month. The remainder will be treated as your 'income'. You cannot carry forward any business revenue, even if you have regular, foreseeable expenditure coming up in the future. Seasonal fluctuations in income are not taken into account for the purpose of calculating self-employed earnings. If your expenses that month are greater than your income, the loss cannot be carried forward to a future month. So although the Regulations refer to 'gross profit', this effectively means that self employed income is assessed on the basis of business revenue rather than profit. This ludicrous notion is completely devoid of logic or fairness. How can a business be expected to treat all income as being available to live on, just because it isn't spent that month? This is incompatible with annual accounting, and mitigates against ensuring that your business holds even small reserves to see you through market fluctuations let alone any notion of re-investment. See Reg.21 (Assessment periods) and Reg.57 (Self employed earnings).

Revenue is not necessarily income, but this means trying to plan ahead on a small amount of revenue will be next to impossible...not to mention seasonal fluctuations .....

NorthernMonkeyGirl



Joined: 10 Apr 2011
Posts: 4371
Location: Peeping over your shoulder
PostPosted: Sat Apr 13, 13 11:03 am    Post subject: Reply with quote
    

I'm a dunce when it comes to business/finance, but even I' can say that is retarded.

I thought the basic idea was that you did all the maths in March, worked out your income for the year, then paid a lump sum to HMRC? Thus fluctuations, losses, bumper months would all be fairly accounted for?

Or at the very least there was an estimated monthly income that was finalised at the end of the year and sorted out then?

Katieowl



Joined: 01 Jun 2006
Posts: 4317
Location: West Wales
PostPosted: Sat Apr 13, 13 11:08 am    Post subject: Reply with quote
    

I've been pondering on this since it was first mentioned here, and I think it's going to be the final straw for lots of people.

Firstly it assumes that you want your business to continue to increase, and that you will be able to expand to a point where you are making fistfuls of money. It also seems to suggest that if you can't pay yourself the minimum wage (or whatever they seem to deem acceptable) that what you are doing is not worthwhile.

It might only be a few jelly beans income for you, but it might be all you can manage and better than nothing!!! So all these underemployed people are going to be expected to step away from their businesses and join the hoards looking for paid work? Either that or they will decide to just chuck it all in and go on the dole, claiming housing benefit, and council tax rebates etc on top of any living expenses they are entitled to? Or we can decide to carry on with even less income Thank god I make food, because at least if I don't manage to sell it to pay the bills, I can eat it!


Kate

Rob R



Joined: 28 Oct 2004
Posts: 31902
Location: York
PostPosted: Sat Apr 13, 13 11:38 am    Post subject: Reply with quote
    

lettucewoman wrote:
Rob R wrote:
I've said what I think about it, and the changes that are so often omitted from such articles elsewhere, so I won't repeat it.

Small businesses existed before Tax Credits so I expect them to carry on afterwards. If a business can support you it will carry on, if it can't support you but you have support from elsewhere (a partner's income, for example) it will continue, what I don't think will continue are stagnant micro-businesses that don't have any plans for growth. These have cropped up since TCs were introduced and some will already be making plans to be independent by 2017, others won't make any plans & are likely to fail.


Rob...did you actually READ the link above...particularly this part?

Once entitlement is established, payment will be based on your earnings in an assessment period of one calendar month. You report your income for that month, less any expenses you have paid out that month. The remainder will be treated as your 'income'. You cannot carry forward any business revenue, even if you have regular, foreseeable expenditure coming up in the future. Seasonal fluctuations in income are not taken into account for the purpose of calculating self-employed earnings. If your expenses that month are greater than your income, the loss cannot be carried forward to a future month. So although the Regulations refer to 'gross profit', this effectively means that self employed income is assessed on the basis of business revenue rather than profit. This ludicrous notion is completely devoid of logic or fairness. How can a business be expected to treat all income as being available to live on, just because it isn't spent that month? This is incompatible with annual accounting, and mitigates against ensuring that your business holds even small reserves to see you through market fluctuations let alone any notion of re-investment. See Reg.21 (Assessment periods) and Reg.57 (Self employed earnings).

Revenue is not necessarily income, but this means trying to plan ahead on a small amount of revenue will be next to impossible...not to mention seasonal fluctuations .....


Of course I did, I also commented on it. However as you & I fundamentally disagree on whether businesses should be subsidised at all there isn't much point going over that again. The author has also said that she hasn't looked into the UC system in it's entirity.

JohnB



Joined: 09 Jul 2005
Posts: 685
Location: Beautiful sunny West Wales!
PostPosted: Sat Apr 13, 13 11:49 am    Post subject: Reply with quote
    

I can understand stopping people earning peanuts from a non viable business, or hobby, and using it as a way to live off benefits, as that isn't fair.

But for people struggling to get by, and who need benefits to survive, and those at the early stages of a business that will take time to grow, it's totally unfair. A lot of people who start small businesses can't keep proper accounting records , and it used not to matter too much, as they could pay someone to sort out a shoebox full of papers at the year end, but they will need a proper accounting system from day one, on top of everything else they need to do. I spent years doing accounts for small businesses, and just don't see how many of them would be able to get everything together in time, or be able to afford to pay someone for the extra work involved.

I know someone who has struggled with health issues for years, and can't get a job she can either cope with for long, or that pays enough to live on. The benefits people suggested that she became self employed, and she started a business doing something new to her, but that she enjoys, but she can't live without WTC, housing benefit and disability benefits too, and I don't see that changing. However, the business gets her out doing things and meeting people, and her health is better for it. There is no way this business will be acceptable under this new system, and the extra pressures on her will be too much to handle. So she will probably end up costing the state far more.

I broke the news to a local small shopkeeper yesterday, who was vaguely aware, but not of all of it. She said a lot of her fellow shopkeepers in town will be affected too. These are all people who work hard, and do their best, but I suppose it saves Tesco and the like putting them out of business when they move in.

I think it could have serious implications for the social enterprise I'm working on setting up at the moment, and I certainly won't qualify for it, meaning I will have to put more effort into trying to earn money in the short term, rather than working towards better long term prospects.

Hairyloon



Joined: 20 Nov 2008
Posts: 15397
Location: Today I are mostly being in Yorkshire.
PostPosted: Sat Apr 13, 13 12:35 pm    Post subject: Reply with quote
    

JohnB wrote:
A lot of people who start small businesses can't keep proper accounting records , and it used not to matter too much, as they could pay someone to sort out a shoebox full of papers at the year end, but they will need a proper accounting system from day one, on top of everything else they need to do.

That is a "don't" not "can't". It is not difficult, all you have to do is write down everything that goes in or out as it goes in or out.
Probably it is a good idea to push people into doing this.
Quote:
I think it could have serious implications for the social enterprise I'm working on setting up at the moment, and I certainly won't qualify for it, meaning I will have to put more effort into trying to earn money in the short term, rather than working towards better long term prospects.

Is that "you" won't qualify as yourself, or that the social enterprise won't qualify?
If the latter, then I would hope there is a workaround else charities will no longer be able to employ volunteers.

JohnB



Joined: 09 Jul 2005
Posts: 685
Location: Beautiful sunny West Wales!
PostPosted: Sat Apr 13, 13 1:27 pm    Post subject: Reply with quote
    

Hairyloon wrote:
That is a "don't" not "can't". It is not difficult, all you have to do is write down everything that goes in or out as it goes in or out.
Probably it is a good idea to push people into doing this.

Strictly speaking they don't, but doing paperwork doesn't come naturally to a lot of people, especially when they are busy doing what they went into business for. In an ideal world it would be good to push people into doing it, but we're talking about imperfect living creatures, not machines!

Hairyloon wrote:
Is that "you" won't qualify as yourself, or that the social enterprise won't qualify?
If the latter, then I would hope there is a workaround else charities will no longer be able to employ volunteers.

It's me, but I think it will cause problems for businesses where the aim is to do good, rather than to be ruthless money making machines. And where a business is built gradually for the long term, rather than for short term gain with no long term planning.

Rob R



Joined: 28 Oct 2004
Posts: 31902
Location: York
PostPosted: Sat Apr 13, 13 1:53 pm    Post subject: Reply with quote
    

Hairyloon wrote:
JohnB wrote:
A lot of people who start small businesses can't keep proper accounting records , and it used not to matter too much, as they could pay someone to sort out a shoebox full of papers at the year end, but they will need a proper accounting system from day one, on top of everything else they need to do.

That is a "don't" not "can't". It is not difficult, all you have to do is write down everything that goes in or out as it goes in or out.
Probably it is a good idea to push people into doing this.


Doing it every month rather than every year is much more efficient as it doesn't give you chance to forget where money went. OK it took me six months to get an invoice out of Vodafone but as my new years resolution was to tighten up my bookingkeeping it's meant that I was reminding them about it every month, instead of every year. Earning money & keeping a track of expenses isn't exactly an unreasonable demand to place upon businesses.

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