TaxPersonal TaxTax credits confusion hits self-employed

Tax credits confusion hits self-employed

Confusion with the government's new tax credits will lead to many self-employed workers losing out because they see them as a tax issue instead of benefits.

Link: Revenue’s tax credit system in disarray

There are now just 10 days to go until the deadline is upon us, after the Inland Revenue extended the deadline by a day to take into account the fact that the original deadline fell on the weekend.

But John Whiting, a tax partner at PricewaterhouseCoopers, said that because the self-employed generally saw tax issues as a year-end matter they could suffer.

‘It is the hub of quite a lot of the issues concerning the new credits,’ said Whiting.

‘The uneasy alliance between tax and benefits hasn’t been sorted out. Undoubtedly people will not get claims in on time.’

Any workers on a variable income should ensure a claim is submitted, even if 99% certain they will earn more than the £58,000 threshold. Because circumstances can radically change between now and the year end, workers could lose out.

While claims can only be backdated three months, entitlements will be reassessed based on actual income to 5 April 2004.

‘The real message is that people bringing up children should consider making a claim for tax credits,’ said Mark Lee, chairman of the ICAEW tax faculty. ‘This is particularly the case for those who have variable incomes, the self-employed and anyone who believes their income levels may fall. A bad accident, illness or a bad debt suffered can never be predicted and thousands of pounds could be lost.’

This point was backed up by Whiting. ‘If in doubt, apply,’ he said. ‘If you apply and get a nil result, you won’t be penalised, and will be applicable should circumstances change. It’s a no-lose situation.’

Some of Lee’s fears are well-founded. The Professional Contractors Group, the trade association that represents the interests of freelancers, does not see it as a major concern, and is not offering any specific advice to its members.Sir Nick Montagu urged tax payers to make protective claims in an exclusive interview with Accountancy Age last month.

Related Articles

Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

2w Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

2m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

4m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

6m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

7m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

9m Alia Shoaib, Reporter