Why tax credit is a turnoff for self-employed

The Guardian,
Saturday January 22 2000

This article appeared in the Guardian on Saturday January 22 2000 on p25 of the Jobs & Money news and features section. It was last updated at 02:14 on January 22 2000.

Britain's 3m-strong army of self-employed are falling behind in their claiming of the working families' tax credit and the disabled person's tax credit, according to the Low Incomes Tax Reform Group.

It says that after three months of the new schemes, the number of self-employed claimants "is down on the level for former benefits such as family credit".

The LITRG blames "excessive tax office bureaucracy" including over-long forms without step-by-step guidance of the kind provided on income tax self-assessment forms.

To claim the new benefits, the self-employed have to produce different figures for tax and for the new benefits - this can be costly and time consuming. But they cannot claim deductions for spending on business equipment for the new benefits despite these same amounts being allowable against their tax bills.

Other reliefs given for income tax purposes on start-ups or against previous losses are also denied. The result, says LITRG, is a loss of credits which can equate to a tax rate of 100% or even more.

"This unfair treatment needs to be tackled," it says. "But there is little sign the inland revenue is ready to move."