How specialist tax charities can make a difference.
When one hears of bold, adventurous entrepreneurs setting up on their own with a business idea most of us are, rightly, impressed. It takes confidence, bravery, knowledge and the help of a good tax professional to launch a successful start-up. Sadly many self-employed people in the UK live in poverty and cannot afford the tax help that makes such a difference to a successful business.
Self-employment poverty stats
Over the years self-employment has risen. The Trades Union Congress (TUC) has analysed Office of National Statistics figures to show that self-employed people now make up 15 per cent of the workforce, some 5 million people.
Previously, many of the people who are now self-employed would have been paid employees on PAYE tax arrangements. The Joseph Rowntree Foundation has found that solo self-employment now accounts for over a third of all employment growth since the onset of the 2008 financial crisis.
They are forced to seek freelance and gig-economy contracts as delivery drivers, hospitality workers and cleaners. The TUC has revealed that almost half of self-employed people over 25 earn less than the minimum wage.
Our beneficiaries often lack the resources to organise their tax affairs and cannot afford the professional support that can help them understand and comply with the complexities of tax. They often find that their linguistic, physical, mental and cognitive challenges make it almost impossible to remain within the system without TaxAid’s specialist help.
TaxAid supports self-employed people of any age and works closely with advice charities to demystify tax and address often longstanding tax issues for self-employed people.
The nature of tax debt
More generalist advice charities are surprised to learn of the very different nature of tax debt. Rather than immediately moving to help manage the debt, you will know that the first task of a tax professional is to establish whether the amount assessed by HMRC is correct. It takes skill, experience and a strong relationship with HMRC to be able to do this. Tax expertise is needed to understand a tax bill before moving towards a resolution. This can result in significantly reducing the debt by highlighting extenuating circumstances for penalties and otherwise ensuring that the beneficiary’s tax liability is correct.
So, in addition to supporting vulnerable self-employed people, we can support the wider charity and community sector to give the correct advice through our training, signposting and referral programmes.
Tess contacted TaxAid in September 2019 because her friend had informed her that she had completed her tax returns incorrectly. Tess had been diligently preparing her own tax returns for several years and had included all of the income she received on these returns. She had an annual income of less than £10,000 (made up of state pension, a small other pension and some self-employment income) but had also included housing benefit received of around £3,000 per year, not realising that this income is not taxable and shouldn’t have been included.
Tess does not have a computer and struggled to understand the tax return forms. She had made the same mistake for 2015/16, 2016/17 and 2017/18 and had overpaid in excess of £1,000 in tax. TaxAid were able to contact HMRC and request that the 2017/18 tax return was amended as this was still in time to be repaired. The 2015/16 and 2016/17 tax years were out of time to be repaired so TaxAid submitted an overpayment relief claim. This was accepted by HMRC and Tess received a refund for £1,064.63. She also now understands that housing benefit does not need to be included on her tax returns and so should be able to complete these correctly going forward.
Helping the self-employed with their tax
Tax professionals know that their professional expertise can make a huge difference to a tax outcome. Many self-employed professionals navigate their challenges with professional, paid expertise. TaxAid is there to provide this tax expertise to any self-employed who lack the resources to manage their tax affairs.
As Tess’s story shows, this support can make a huge difference to countless self-employed people. As we work to support community organisations and advice partners we can also use our specialist knowledge to help them manage their beneficiaries’ tax issues and debt correctly.