7 July 2011

At the beginning of June Benefits and Work asked ‘Is self-employment the way forward?’.

We put forward the possibility that, for a minority of claimants, setting up a ‘micro-business’ and trying to negotiate thousands of pounds in payouts from work programme providers might be a reasonable proposition.

The article attracted a number of comments, both positive and  vehemently negative.  But one Benefits and Work member took the trouble to write us a detailed account of his own experience of being self-employed and on benefits.  Read what happened to him in his own words:

I tried this myself for a few years and found it was minefield of disasters. I started and ran a small self-employed business whilst on benefits. It came under the banner of "therapeutic work" as I did less than 16 hours a week. I made no profit but it didn't make a huge loss either.

One of the main problems stemmed from the DWP having very little experience in this situation and therefore not handling it very well. For a few months I had to send in my accounts, with all of my receipts every two weeks! They then would work how much was needed to deduct from my benefit if necessary.

This proved to be a difficult time as my benefit payment fluctuated like the NASDAQ. After a few months of this they decided to allow me to send in my accounts every six months. It was then that things settled down and became a lot easier from the incapacity benefit standpoint.

The biggest problem I had though was from the local council. In order for them to work out my housing and council tax benefit, initially I had to bring in my receipts and accounts every two weeks. Eventually, I had to submit an exceedingly detailed set of accounts every six months instead. They then suspected me of benefit fraud and requested that I submit all my receipts and payments books. Which I duly did, having nothing to hide, after all.

They combed through my receipts and disallowed all sorts of expenses and payments for no reason other than they couldn't work out what they were for. If they'd asked I would have told them.

Eventually they could find no evidence of fraud. Not surprising to me as I had accounted for every penny of my business.

However, they informed me that they were in a position to disallow certain expenses that would otherwise be allowed by HM Revenue and Customs - they had their own set of rules completely separate from HMRC.

Subsequently, I had to pay back many hundreds of pounds of benefit despite my honesty in declaring every penny.

Rather than help support benefit claimants who wish to work in whatever small way they can, the local council treated me as a criminal. I could have argued and taken them to a tribunal, but by then the stress of it all was taking its toll on my health. 

They had altered my benefit so many times so that I was served an eviction notice from my housing association because I didn't have the money to pay the rent. My health suffered significantly from all the stress and it became necessary to close my non-profit business because of it.

All I wanted to do was contribute to society in my own small way, rather than sit at home feeling useless. I made a loss in my business over the few years it ran, but I was happy to run it at a loss because it gave me some of my dignity back. I felt useful again and the small loss I made was worth it to feel like that.

The local council stripped me of that dignity, turned my small loss into a BIG loss and caused me to have a major relapse.

Would I recommend going self-employed?

I won't say no, because I don't want to put anyone off work if they are able, but I will say that if you are considering self-employment whilst still on benefits be prepared, be very prepared. The government may make a lot of noise about wanting to help people back to work, but they don't back it up.

Have you had experience of being employed or self-employed and on benefits? If so, we’d love to hear how it was for you.  Use the comment facility below or contact us.