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Where Taxpayers and Advisers Meet
Tax credit measures risk double discrimination against disabled self-employed workers
11/12/2014, by Low Incomes Tax Reform Group, Tax Articles - General
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LITRG warns that a new test to be applied to working tax credit (WTC) claimants who are self-employed is potentially discriminatory against disabled claimants.


HMRC have announced in the draft Finance Bill that self-employed WTC claimants who earn less than the equivalent of 24 hours per week at the national minimum wage will be required to provide evidence to HMRC that their work is “genuine and effective” in order to qualify for WTC. While the Low Incomes Tax Reform Group (LITRG) supports HMRC’s efforts to combat fraud in the tax credit system, the legislation already requires all self-employed claimants to be working “for payment or in expectation of payment” and this, in the LITRG’s view, should be enough to enable HMRC to stop fraudulent claims.

LITRG’s concerns

It is unclear to the LITRG why HMRC have chosen 24 hours as the trigger for the additional evidence, especially when some claimants are only required to work 16 hours to qualify for WTC. The group is particularly concerned about the impact of this proposal on those who claim the disability element of WTC and only need to work a minimum of 16 hours a week. This reflects the fact that some disabled people may not be able to work full-time because of their disability. Setting the threshold at 24 hours for this new test makes it more likely that those who qualify for the disability element of working tax credit will be adversely affected. That is one respect in which this new test could discriminate against those self-employed workers who are disabled.

Another likely area of discrimination is that a disabled worker who is employed and claiming WTC on that basis can work 16 hours a week and qualify for WTC while the same disabled claimant doing the same amount of work on a self-employed basis would have the additional hurdle of showing that their self-employment was “genuine and effective”: a case of double discrimination against disabled claimants.”

The test will work against stated Government policy

This new test will run counter to the Government’s drive to help people move from welfare to work. Jobseeker’s Allowance claimants are sometimes encouraged by Jobcentre Plus to turn to self-employment to start to take up work; indeed the New Enterprise Allowance actively encourages this. Historically, working tax credit has always been available as a means of easing the fragile financial transition, but this new test has the potential to leave them high and dry, with much uncertainty about in-work support, and raises the question whether they would be safer on benefits than trying to work.

Concern at how the test will be implemented

Given the LITRG’s experience of compliance processes around self-employment and other areas, the group is extremely concerned at how this test will be implemented by HMRC staff. It has seen similar tests being used to deny tax credits where a person does not meet the minimum threshold rather than the test being used as a starting point to explore the work.


HMRC will need to ensure that staff guidance and communications for claimants make it very clear what evidence will be sought and how the “genuine and effective” test will be applied.

About The Author

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to those who cannot afford to pay for tax advice. LITRG comprises tax specialists from professional practice and the voluntary sector, from publishing and from HM Revenue & Customs, together with people from a welfare benefits and social policy background. Visit for further information.
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