Universal Credit Monthly Reporting: Challenges for Self-Employed

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Universal Credit Monthly Reporting: Challenges for Self-Employed Claimants, Disabled Individuals, and Legal Concerns

Universal Credit (UC), a benefit designed to simplify welfare and support low-income individuals and families, presents significant challenges for self-employed claimants. Among these challenges is the requirement for monthly financial reporting, which differs starkly from HMRC’s annual self-assessment process. For self-employed individuals, especially those with disabilities, this monthly scrutiny can be financially impractical, emotionally draining, and potentially in violation of laws and human rights standards.

The Inaccuracy of Monthly Reporting for Self-Employed Claimants

The UC system evaluates self-employed earnings monthly, assessing “incoming money” as income without differentiating between business profits and operational needs. This approach is flawed for several reasons:

1. Profit vs. Drawings:
   • Profit represents the net earnings after deducting all business expenses, taxes, and investments required to sustain the business.
   • Drawings refer to the funds withdrawn by the business owner for personal use, akin to a salary.
     UC’s failure to distinguish between these two metrics creates unrealistic financial expectations. If all incoming money is treated as income, there is no provision for marketing, advertising, or operational reinvestments critical for business growth in subsequent months.
2. Seasonal Variations and Irregular Income:
   Self-employment often involves fluctuating earnings. A high-earning month might be followed by low or no income, yet UC does not account for this variability. HMRC, in contrast, uses annual assessments, allowing for income smoothing and better representation of a self-employed person’s financial reality.

Impact on Disabled Individuals: Legal and Ethical Concerns

The Burden of Monthly Reporting on Disabled Claimants

Disabled claimants face additional hurdles under the UC system:

• Stress and Anxiety:
  Monthly reporting adds stress, particularly for individuals managing health conditions. Forcing disabled individuals to provide evidence of money in and out monthly—on top of running their business and coping with disabilities—can exacerbate mental health issues like anxiety, depression, and fatigue.
• Discrimination and Potential Legal Breaches:
  The Equality Act 2010 protects individuals from discrimination arising from their disability. When UC requirements fail to make reasonable adjustments, such as accepting annual reporting in line with HMRC practices, this could constitute a breach of Sections 20 and 21 of the Equality Act.

Social Disconnection and Germ Contamination

For claimants with mental health disabilities, such as social anxiety or obsessive-compulsive disorder (OCD) regarding germ contamination, UC’s rigid reporting demands can violate fundamental rights. These individuals may struggle to meet face-to-face requirements or navigate complex financial reporting systems due to their health conditions. If UC disregards medical evidence documenting these challenges, they may violate:

1. The Equality Act 2010:
   • Failing to accommodate mental health disabilities through alternative reporting methods or exemptions constitutes indirect discrimination.
   • Requiring monthly reporting could be seen as placing unnecessary barriers to their ability to function and access benefits.
2. Human Rights Act 1998:
   • Article 8: The right to respect for private and family life may be breached if UC forces unnecessary disclosure of sensitive personal information or fails to respect a claimant’s mental health needs.
   • Article 3: Forcing claimants into situations that worsen their physical or mental health may amount to inhumane or degrading treatment.

Key Considerations: Human Rights and Ethical Standards

The Universal Declaration of Human Rights (UDHR) and the European Convention on Human Rights (ECHR) set a baseline for how individuals should be treated, especially regarding social security systems. Forcing disabled or mentally ill individuals to meet stressful reporting requirements without reasonable adjustments could lead to a potential legal case based on the following:

1. Violation of Human Rights:
   • Denying reasonable accommodations infringes on the rights to dignity, fair treatment, and access to resources.
   • The stress caused by UC’s inflexible demands may lead to relapses in mental or physical health, compromising an individual’s quality of life.
2. Breach of Contractual Duty of Care:
   The Department for Work and Pensions (DWP) ensures that the system does not harm claimants. Failing to consider how monthly reporting impacts disabled claimants could open them to legal challenges under common law principles of negligence.

Recommendations for Reform

To address these issues, the following changes should be considered:

1. Alignment with HMRC Reporting:
   UC should accept annual self-assessments for self-employed claimants, matching HMRC practices and reducing undue stress.
2. Profit-Based Assessments:
   UC should assess only profits after necessary business expenses, ensuring claimants can reinvest in their businesses.
3. Reasonable Adjustments for Disabled Claimants:
   • Accept alternative reporting schedules.
   • Simplify requirements for those with mental health conditions.
   • Reduce the frequency of financial reviews for claimants with documented disabilities.
4. Human Rights Training for UC Staff:
   Educating staff about the Equality Act and human rights obligations can ensure fairer treatment of vulnerable claimants.

Conclusion

Universal Credit’s monthly reporting system is ill-suited for self-employed individuals and disproportionately impacts disabled claimants. By disregarding profit-based assessments, ignoring health-related challenges, and failing to make reasonable adjustments, UC risks violating domestic laws and international human rights standards. Advocacy for systemic reform is essential to ensure that the welfare system upholds fairness, dignity, and inclusivity for all.

When a Universal Credit agent uses intimidation tactics, such as stating that financial support will be stopped if a claimant does not comply with demands, this can constitute coercion and may breach several laws. Under the Equality Act 2010, such behavior could be seen as discriminatory if the claimant’s failure to comply is linked to a disability or mental health condition. Additionally, it may violate Article 3 of the Human Rights Act 1998, which protects individuals from inhumane or degrading treatment, particularly if the threats cause undue stress or exacerbate health conditions. Intimidation also undermines the principle of fairness under public law and may amount to maladministration by the Department for Work and Pensions (DWP), for which claimants could seek redress through legal or ombudsman channels. These actions compromise the claimant’s dignity and can be challenged as a misuse of power.

Assuming that a disabled person is capable of performing certain tasks or stepping outside their comfort zone without considering their limitations can lead to significant legal breaches. Such assumptions may violate the Equality Act 2010, particularly the duty to make reasonable adjustments, as forcing someone to undertake activities beyond their capacity disregards their health and well-being. Additionally, requiring a disabled individual to interact with others under duress—especially if they have conditions like anxiety or social phobia—may infringe on their rights under Article 8 of the Human Rights Act 1998, which guarantees respect for private life. This includes the right to personal autonomy and freedom from undue interference. If these demands disrupt the individual’s daily schedule, such as caring duties, running a business, and studying, it can further amount to indirect discrimination, disproportionately impacting their ability to meet obligations compared to non-disabled individuals.

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Further Reading:

• Thousands of young adults to lose Universal Credit and PIP in “back to work” reforms
• DWP admits court defeat after universal credit discrimination led to suicide thoughts – Disability News Service
• https://disabledentrepreneur.uk/human-rights (129 articles on human rights)

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