Going self employed, housing benefit?

Zeldazog · 3 February 2006 at 11:26AM

Hi All

Hoping someone can advise on this.

I can see an opportunity for setting up a small business where I live, a gap in the market.

This is really in its early stages, and I haven't even begun to look at it in detail but there is one thing I wondered about.

My situation: single parent with 8 year old at school. No maintenance whatsover. Currently work 16 hours week, waiting for outcome of HB & CTB claim. In receipt of CTC & WTC.

Where would I stand on housing benefit and council tax benefit?

CIS · 3 February 2006 at 12:14PM

You can claim HB and CTB, Iam self employed and currently receive full HB and CTB, but it depends on your income.

The best thing to do is get the forms off your local council website and apply, the worst they can say is that your getting too much, but from what your saying you may be entitled to something,.

Zeldazog · 3 February 2006 at 12:24PM

Sorry, maybe I confused the issue here - I am not asking whether I will get help in my current situation (I know roughly how much I will get, its just that they are eight weeks behind with claims)

To do what I am thinking of will mean giving up my current job, so I won't have a steady income from that to submit on a claim form.

I wasn't sure how they would work out HB and CTB if you're setting up your own business from scratch, and therefore have no income history to submit. And usually in the first year or so of business, all profits go back in.

elaine373 · 3 February 2006 at 8:14PM

Good point, I have always found housing benefit hard to claim because my husband is self employed. They want to know everything and until you have some kind of proof, like a tax return, i cant see how you can give it to them. Saying that, maybe itsd
changed since i last claimed(years ago) Tax credits take estimates and maybe the council will too.
I gave up claiming hb/ct as it was far too stressful. Let us know how you get on,good luck.

cheddar · 4 February 2006 at 5:18AM

HB/CTB will need to see your accounts to work out exactly what your income is, if it changes on a regular basis you need to keep informing them. Quite often they will appoint a specific person to you to save you time. They will need books though as they will take into account expenses etc...

Zeldazog · 4 February 2006 at 12:20PM

Any idea what happens when I am first setting up then, and I have no books to start with?

I'm fairly sure I would get WTC, and of course CTC, and I can survive, bills and food wise, on these, but obviously no matter how much I might want to set up a business (and try to get myself into a position where I don't need to claim HB anymore) it isn't worth risking losing my house over.

Savvy_Sue · 5 February 2006 at 12:32AM

HB is one of those benefits where if your income changes you are supposed to let them know at once because your entitlement changes as a result. With self-employment, your income obviously varies. And what you're paid isn't actually your 'income', because some of it will go to expenses, materials etc. So I don't know HOW It works, but suggest a phone call to your local council would be a good first step. It is possible, but HB claims can take a long time to process, and then if your situation changes it can take a longer time to adjust.

If you decide to go for it, my suggestion would be that if you're getting HB when you start, you are very careful to put aside money to cover any loss of HB once you start getting money in from the business.

the Small Biz board is very helpful as a source of information as well re: startups.

dag_2 · 6 February 2006 at 11:09PM

I wasn't sure how they would work out HB and CTB if you're setting up your own business from scratch, and therefore have no income history to submit. And usually in the first year or so of business, all profits go back in.

For housing benefit purposes, any variation in your income is considered to be a change in circumstances. As you've realised, if you're self-employed, your income will never stay the same.

However, you will not be penalised for late reporting of changes of circumstances provided that you report them within 28 days of them happening.

Council forms are often laid out in a bullish way to try to frighten you, and will often say in big scary letters that changes of circumstances must be reported IMMEDIATELY, whilst failing to spell out exactly what will happen if you don't. But if you were to take this literally, it would mean you'd need to camp out 24/7 at the council's offices so that you can be on hand to report a fluctuation in your income the moment it happens. This is clearly ridiculous not only because it would prevent you from actually doing any work, but also because you often have to wait in a queue for an hour or two before you can report anything anyway.

The councils which say you need to report changes in circumstances immediately are actually lying to you. Many of them continue to lie, but an increasing number of them are now starting to tell the truth about reporting timescales.

What this means in practice is that you have to report on your income to the council at least once every 28 days. A forward-thinking council might be able to accept this report electronically or over the phone, but be prepared for the possibility that you might have to visit them once a month. They might want to see original documents, which might seem silly if you're the one who's creating those documents in the first place - but they might also want to see supplier invoices, customer remittance advice notes and bank statements.

When you first start your business, they will accept an estimate of your income. By all means make that estimate as low as you like. Once figures start to become available, any overpayment they have made will be deducted from future benefit - but you will still need to report on your income at least once every 28 days.

As a general rule, expenses which are allowable for tax purposes are also allowable for housing benefit purposes - but there are exceptions. Merely giving them your taxable income figures won't do, they will probably want to know some detailed information about your sales and expenses - and they will want this at least once every 28 days. If you can't do this once every 28 days, you will be penalised - either by losing out if your income has dropped, or by being at risk of benefit fraud action if your income has risen.

dag_2 · 6 February 2006 at 11:45PM

Oh - another thing. Housing benefit is assessed on a weekly basis. What this means is that the payment you receive every four weeks, is the sum total of your housing benefit entitlement each of those four weeks calculated separately, plus any underpayments from previous periods, minus permissible deductions of overpayments from previous periods.

So when you go to report on your income, you need to provide separate weekly income and expenditure totals for each week.

A housing benefit "week" starts on Monday and finishes on Sunday. The council might provide you with a form which lets you list several weeks' income and expenditure on one page - but if they don't, you would be well advised to design your own pro-forma, and make the start and end dates and income and expenditure for each week crystal clear. The clearer your form is, the faster your benefits will be processed.

Accounting concepts which allow cash receipts and payments in one week to be reallocated as income and expenditure in other weeks, such as credit sales, credit purchases, accruals, pre-payments and depreciation, are permissible for housing benefit purposes. So you don't necessarily have to say that your net income for any given week is the same as your net cash receipts for that week, as long as it all balances out in the end.

Is this making any sense? If you are in a position to cook your books a bit, then I'd advise you not to let your income in any week drop below income support amounts - because you won't get any extra money for that week without filling in income support claim forms. I'm not sure what happens if your income in any one week goes so high as to disqualify you from housing benefit for that week - do you have to submit a new claim for subsequent weeks when it goes down again? Probably not, unless it has been too high for several weeks in a row - but I have no idea. I'd advise you to check with the citizens advice bureau on that one.

Hope that helps.

Zeldazog · 7 February 2006 at 12:05AM

dag wrote:

Oh -

I'm not sure what happens if your income in any one week goes so high as to disqualify you from housing benefit for that week - do you have to submit a new claim for subsequent weeks when it goes down again? Probably not, unless it has been too high for several weeks in a row - but I have no idea. I'd advise you to check with the citizens advice bureau on that one.

Hope that helps.

Thanks for the info, it gives me hope!!

As for the question above, I seem to recall I once asked HB officer (a while back) what happened if I did a lot of overtime in one week - and was told that (if the income went too high) I would lose benefit for that week, but it wouldn't be treated as a new claim - only if, as you suggest, the income remains at a high level for several weeks.

dag_2 · 7 February 2006 at 12:16AM

And usually in the first year or so of business, all profits go back in.

Be careful about that - because a reinvested profit is still a profit. If you're building up the assets of a business, then, technically, the expense of those new assets should be depreciated over many weeks, and should not all be posted as an expense in the week that you buy the asset. Even if you buy the asset on HP, you'll probably be expected to depreciate the asset over a somewhat longer period than the HP term lasts. Similarly, non-perishable stock for resale shouldn't be posted as an expense in the week you buy it, but in the week you either sell it or lose it.

Why is this important? Because if you're building up assets of a new business but not depreciating them properly, and casting a low profit as a result, and claiming housing benefit on the strength of that low profit - then they might consider it to be fraud.

Going self employed, housing benefit?

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