CCM6740 - Particular aspects: work & hours - self-employed customers - self employment for tax credit purposes

Self employed people are entitled to claim tax credits where

  • they meet the criteria of being in remunerative work
    and
  • are working the correct number of hours

If a customer claims to be self employed on their tax credit claim, we need to be satisfied that the number of hours they are claiming to work is credible and that they are expecting to be paid for this work.

We can use our normal compliance checks to question the validity of a claim. We can request documents and supporting evidence to help us make a decision. However, there may be times when self employment comes down to a balance of probability and you will need to make a judgement on the credibility of the information the customer has provided.

It is important to remember you are not examining the amount of income declared; you are using the information provided to decide whether they meet the criteria for self employment.

All self-employed customers will be required to make Self Assessment (SA) returns and the income they report for NTC will usually be the same as the figure they return for SA. There are however some exceptions to this, TC600 notes explain to the customer exactly which figures should be provided.

Some customers will be newly self-employed, or newly set up on SA and they may not have made any SA returns by the time they made the tax credit claim you are examining, so they may not yet have a Unique Taxpayer Reference (UTR). In these cases, customers will estimate their income for the year and will confirm the final figure once they know their actual income for that year.

Any enquiry into the income of self-employed customer will be carried out under SA, outside Benefits and Credits, and the SA section will notify NTC of any increase which may need to be taken into account in re-calculating the relevant NTC award.

There is no requirement within tax credits for the customer to be registered as self employed and paying NI contributions. We can check whether a customer has registered through NIRS. As it is a requirement by HMRC, we would want to question why they had not registered, as this is something we would expect to see from someone who is genuinely self employed.