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  • FIRST POST
    • nik106
    • By nik106 14th Oct 16, 10:59 AM
    • 10Posts
    • 1Thanks
    nik106
    Starting a Business on Benefits
    • #1
    • 14th Oct 16, 10:59 AM
    Starting a Business on Benefits 14th Oct 16 at 10:59 AM
    Hi, I'm sure this topic has been covered multiple times but I wanted to see if people had advice that is current, the only thread I have read so far is from 2008. I'm really sorry for the length of this, and I hope you can bare with me.

    My husband has been my full time carer for the last 3 years and we receive the full range of benefits from carers allowance to ESA, PIP and mortgage relief. With the help of extensive testing, treatment as well as my daughter starting school, I am now able to be a little more self sufficient, although I still need help with meals, showering and overnight care. As a result, my husband would like to return to work in some capacity. Both of us were working full time prior to my disabilities and both finding it very difficult to be reliant of benefits.

    He doesn't have many qualifications and his previous job of a managing foreman was seasonal, with 70hrs+ in the summer and almost no hours in the winter, which is completely unsuitable for the level of care I need. He is currently signed up to an electrician's course (mostly home based), which my grandmother has kindly paid for, with the hope that when he is qualified he can set up a business that will provide us a decent income but accommodate my disabilities and numerous long distance hospital appointments.

    In the meantime, because he is quite a fit and able person, he is constantly being asked by family and friends (and their more elderly parents) if he can do jobs like gardening, decorating and kitchen refurbs (he has done ours) etc but he always has to turn the offers down. At the rate that he is being asked, I think he can set up a viable business prior to being qualified, although being conservative on estimates I don't want to assume he can get full time hours a week from the beginning.

    I have run through the benefits calculator on Turn2Us, with the estimation of 16hours at £7.50 an hour (he will charge more, but we need to cover business insurance etc as well as making sure there is a cushion if he can't get the full 16 weeks sometimes). At this level, the calculator suggests that we would be entitled to less ESA but working tax credits to cover the short fall, and would be getting roughly the same as what we are now in benefits. I think he would still be entitled to carers allowance provided he pays into a pension scheme £20 a week of the £120 wages, as they allow for half of the pension contributions to be deducted from income and would not be over the earnings threshold. We are not looking at this being a long term solution, just a temporary one until he has enough regular work and/or qualified as an electrician. Our ultimate goal is to be off benefits completely.

    Is someone able to clarify whether this is something we can do without there being some rule somewhere that would cause problems or not being entitled to the benefits eg, being a director of the company, or doing unpaid hours whilst the business is setting up eg. doing 20 hours but only being paid 16?

    Thank you in advance, I'm sorry it was such a long post.
Page 1
    • marliepanda
    • By marliepanda 14th Oct 16, 11:29 AM
    • 3,599 Posts
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    marliepanda
    • #2
    • 14th Oct 16, 11:29 AM
    • #2
    • 14th Oct 16, 11:29 AM
    The only thing I noticed (and forgive me if I am wrong) is that I don't think your husband will get any working tax credit for working only 16 hours.

    You only get WTC for 16 hours if it is the disabled person working.

    Declaring more hours for WTC but unpaid may be problematic for the careers allowance which is intended as a work replacement benefit.
    Suvery Earnings 2016 - £188
    • nik106
    • By nik106 14th Oct 16, 11:39 AM
    • 10 Posts
    • 1 Thanks
    nik106
    • #3
    • 14th Oct 16, 11:39 AM
    • #3
    • 14th Oct 16, 11:39 AM
    Thank you for the reply. The calculator seems to think we will get the WTC for him doing him 16 hours, because whilst we are a couple, I have been declared unfit for work. I've just found this on the gov.uk website

    Exceptions for couples with at least one child

    You can claim if you work less than 24 hours a week between you and one of the following applies:

    you work at least 16 hours a week and you’re disabled or aged 60 or above
    you work at least 16 hours a week and your partner is incapacitated (getting certain benefits because of disability or ill health), is entitled to Carer’s Allowance, or is in hospital or prison
    This would apply to us, as somebody is entitled to CA for me, even if it turns out that he works too many hours to claim it himself.

    Would have we to declare unpaid hours?
    • sheramber
    • By sheramber 14th Oct 16, 7:56 PM
    • 2,738 Posts
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    sheramber
    • #4
    • 14th Oct 16, 7:56 PM
    • #4
    • 14th Oct 16, 7:56 PM
    His income for tax credits should reflect the number of hours he works.

    His income needs to show a commercial business that is expected to make a profit so claiming for unpaid hours would show the business as less profitable.

    He will need to register with HMRC and get a UTR- UNIQUE TAX REFERENCE.

    He will need to keep a record of his income and expenditure and complete a self assessment tax return each year.

    Cares Allowance is counted as income for tax credits so he will need to include that on his claim of he still receives it.
    • nik106
    • By nik106 14th Oct 16, 11:11 PM
    • 10 Posts
    • 1 Thanks
    nik106
    • #5
    • 14th Oct 16, 11:11 PM
    • #5
    • 14th Oct 16, 11:11 PM
    Thank you sheramber. He rang the tax credits line earlier to ask what the situation would be and he has been advised that should he set up a limited company with himself as a director, he could have an employee contract for himself for 16 hours for which he was paid but could do additional unpaid hours as a director in order to build the business. Any money paid to the company would of course have to go into a separate account that was only used for business purposes. This money would then be subject to any taxes due on profit and any dividends would need to be declared as income.

    They also said that they may wish to look further into the business accounts to ensure that we weren't building up significant profits within the business whilst claiming tax credits before taking dividends at a later date. We want to get to a position where we don't need benefits at all, and his wages will change as the business develops, as will the tax credit and carers allowance entitlement, so I don't think this is something we would have to worry about.
    • FBaby
    • By FBaby 15th Oct 16, 8:05 AM
    • 14,344 Posts
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    FBaby
    • #6
    • 15th Oct 16, 8:05 AM
    • #6
    • 15th Oct 16, 8:05 AM
    He is going to work 16 hours starting a business, which normally involves quite a bit of additional work to start with, continues to study towards his electrician qualifications and provide 35 hours of care to you every week?

    Would he be better off giving up the carer's allowance and put more hours in the business to make sure it has the best chance of becoming self-sufficient?
    • Darksparkle
    • By Darksparkle 15th Oct 16, 8:06 AM
    • 3,430 Posts
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    Darksparkle
    • #7
    • 15th Oct 16, 8:06 AM
    • #7
    • 15th Oct 16, 8:06 AM
    Thank you for the reply. The calculator seems to think we will get the WTC for him doing him 16 hours, because whilst we are a couple, I have been declared unfit for work. I've just found this on the gov.uk website



    This would apply to us, as somebody is entitled to CA for me, even if it turns out that he works too many hours to claim it himself.

    Would have we to declare unpaid hours?
    Originally posted by nik106
    You wouldn't qualify on the basis that your OH receives carers allowance, you'd qualify on the basis that you receive PIP.

    If OH is the one working at least 16hrs per week it is his partner (ie you) that needs to be considered incapacitated.

    Whether or not he continues to receive CA doesn't make him entitled to WTC although he must declare it as income.
    • fishybusiness
    • By fishybusiness 15th Oct 16, 8:36 AM
    • 1,032 Posts
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    fishybusiness
    • #8
    • 15th Oct 16, 8:36 AM
    • #8
    • 15th Oct 16, 8:36 AM
    April 2016 we did almost what you are describing.

    Had a few previous years of Student Finance income, my partner also being in the ESA support group, me being really ill and claiming PIP for about a year, partner claiming Carers and us claiming HB and CTB.

    This April we started a garden maintenance business. I spent the previous year during my treatment and recovery planning the business. We opted for the limited company route.

    My partner still needs care and we get around it by working together, she comes out with me, sometimes works, sometimes sits in the van.

    What I can tell you is that the swap over from benefits income to earned income has been an incredibly difficult, complicated and worrying time.

    Pitfalls......realised HMRC Tax Credits should have been told about the carers income, didn't think about it at the time as I was so poorly, has come back to haunt us this year.

    Turn2Us didn't get it right, even though I ran different scenario's to make sure we could survive the change over. The WTC element was wrong, and I still don't understand the complexities.

    We are at the 24 hour threshold 6 months after starting advertising, so are now claiming WTC. As soon as we did so, ESA stopped due to earned income, although my partners claim is still open and her nat ins credits are still paid.

    My PIP and partners carers are gone, which is fine, we took a big hit in income there, and sometimes wages don't make it up.

    Time put in to running the business is more than I imagined, which is ok for me as I want it to grow but as a short term venture, would you want to put that time in to drop it later, plus as someone else said, there is study time to consider.

    Getting enough work every week, will likely need some form of advertising, and once you are on that treadmill I think it becomes a full time business.

    He is going to work 16 hours starting a business, which normally involves quite a bit of additional work to start with, continues to study towards his electrician qualifications and provide 35 hours of care to you every week?

    Would he be better off giving up the carer's allowance and put more hours in the business to make sure it has the best chance of becoming self-sufficient?
    Entirely agree, that is my experience. If you move to in work benefits do it to stay there and move forward.
    • nik106
    • By nik106 15th Oct 16, 12:13 PM
    • 10 Posts
    • 1 Thanks
    nik106
    • #9
    • 15th Oct 16, 12:13 PM
    • #9
    • 15th Oct 16, 12:13 PM
    Thank you for all your replies. I'm so very confused. I ran the EntitledTo calculator, which says that we wouldn't be entitled to any tax credits at all, including child tax credit and that we would be subject to the child benefit charge so we might as well not claim child benefit.

    We can't afford to be on anything less than what we're getting in benefits, we're not managing to balance the books as it is, as we have significant debts because things just went horribly wrong after I had my baby and we ended up trying to live of just £90 a week for nearly a year. If I lose the tax credits, I lose the help to cover the costs of transport to my hospital appointments, and they are a minimum of a 5hr round trip in the car. With 4 different consultants, all who specialise in my illness (locally, people haven't even heard of it), I wouldn't be able to cover the costs of travel.

    When I have run the calculators before, in order to be able to cover all our bills, debts and hospital appointments, we need a minimum of £26k a year. At the very least, if the business failed, as a qualified electrician my husband would be able to get a job earning at least that. It would be better if he could work for himself, because he would be able to schedule jobs around my hospital visits, which would be more difficult if employed by a company.

    How would other people move forward? I feel like we have no option but to carry on sinking until he can qualify. I have looked into declaring bankruptcy to give us a clean slate, but we have quite a bit of capital in the house, not enough to buy something smaller outright though. I have looked into selling and renting, but then we wouldn't be entitled to anything and we would end of with no assets at all.
    • Darksparkle
    • By Darksparkle 15th Oct 16, 12:51 PM
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    Darksparkle
    Are you sure you had put in the right figures? Maybe put in an extra zero?

    You'd only trigger the child benefit high income charge if you'd be of you earned over £50,000
    • Jackieboy
    • By Jackieboy 15th Oct 16, 12:57 PM
    • 251 Posts
    • 397 Thanks
    Jackieboy
    What qualification is he working towards - it's unusual to train as an electrician by didtance learning.
    • FBaby
    • By FBaby 15th Oct 16, 1:14 PM
    • 14,344 Posts
    • 36,511 Thanks
    FBaby
    When I have run the calculators before, in order to be able to cover all our bills, debts and hospital appointments, we need a minimum of £26k a year
    DO you mean £26K gross or net?
    • nik106
    • By nik106 15th Oct 16, 1:20 PM
    • 10 Posts
    • 1 Thanks
    nik106
    What qualification is he working towards - it's unusual to train as an electrician by didtance learning.
    Originally posted by Jackieboy
    It's an NVQ Level 2 followed by the NVQ Level 3. We have checked with the exam board to ensure that it is a legit course.

    It is predominately studying at home, but there are practical sessions in a training center after throughout the course (5 weeks for the level 2, and I believe 10 for level 3) as well as additional weeks working on a site to give him a complete qualification with the site experience.
    • pmlindyloo
    • By pmlindyloo 15th Oct 16, 1:22 PM
    • 9,966 Posts
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    pmlindyloo
    I am not sure about the rules as regarding only working 16 hrs if your partner is incapacitated.

    Hopefully, Dark Sparkle can confirm.

    Doing a quick benefit check working tax credits are only awarded for working 16 hrs a week with partner incapacitated if child care costs are involved.

    Please wait for Dark Sparkle to confirm as this will obviously make a great difference.

    Personally, I think you and your partner need to reconsider the self employment/limited company route for the moment.

    Speaking from experience being self employed is not an easy route to take in most circumstances and since you have debts then the fluctuating income may become a real problem.

    Would it be possible for your partner to get a job (16 hrs or 24hrs - whichever is needed for working tax credits) for a while so that you can sort out your debts and budget properly? This would also give him and you an opportunity to see how you all manage, health wise,childcare wise etc

    Are you on contribution based ESA? Which group?

    It may be that a sensible option would be to go to CAB for a 'better off' benefit check up. You need to be able to maximise your income. They will also be able to help with your debts.

    Calculators are generally OK but it is easy to input the wrong information
    • nik106
    • By nik106 15th Oct 16, 1:22 PM
    • 10 Posts
    • 1 Thanks
    nik106
    Are you sure you had put in the right figures? Maybe put in an extra zero?

    You'd only trigger the child benefit high income charge if you'd be of you earned over £50,000
    Originally posted by Darksparkle
    I'm pretty sure that there was no extra 0, but it was quite confusing. At one point it asked me for the annual wage and then later it automatically added that wage to a box and said it was the weekly figure and to correct it. Maybe there is some wording or calculation issues on the site.
    • nik106
    • By nik106 15th Oct 16, 1:33 PM
    • 10 Posts
    • 1 Thanks
    nik106
    I am not sure about the rules as regarding only working 16 hrs if your partner is incapacitated.

    Hopefully, Dark Sparkle can confirm.

    Doing a quick benefit check working tax credits are only awarded for working 16 hrs a week with partner incapacitated if child care costs are involved.

    Please wait for Dark Sparkle to confirm as this will obviously make a great difference.

    Personally, I think you and your partner need to reconsider the self employment/limited company route for the moment.

    Speaking from experience being self employed is not an easy route to take in most circumstances and since you have debts then the fluctuating income may become a real problem.

    Would it be possible for your partner to get a job (16 hrs or 24hrs - whichever is needed for working tax credits) for a while so that you can sort out your debts and budget properly? This would also give him and you an opportunity to see how you all manage, health wise,childcare wise etc

    Are you on contribution based ESA? Which group?

    It may be that a sensible option would be to go to CAB for a 'better off' benefit check up. You need to be able to maximise your income. They will also be able to help with your debts.

    Calculators are generally OK but it is easy to input the wrong information
    Originally posted by pmlindyloo
    He has been offered both of his old jobs back, but they are both completely unsuitable (1 is seasonal and the other is evenings and weekends). The biggest issue is, that we need to fit his hours around my hospital appointments. Another company is not going to be flexible to him taking multiple days off for hospital appointments, which require at least 1 full day if not 2 days off. Working for himself means that he can at least work around them.

    I am in the Income ESA Support group, and I receive enhanced rate PIP for both daily living and mobility. I'm pretty sure he only has to do 16 hours. He could look for a job that is only 16 hours, but then he has to then find another job when he has qualified or be back in this position whilst he builds a business as a self employed electrician.

    After school childcare is not an issue for us, we live within a mile of 4 sets of parents/grandparents and I do have someone come in for several hours a week to help me and give him a break, but this is only Mon-Fri during the day.
    • nik106
    • By nik106 15th Oct 16, 1:36 PM
    • 10 Posts
    • 1 Thanks
    nik106
    DO you mean £26K gross or net?
    Originally posted by FBaby
    That is gross. If I remember correctly from when we did that calculation, that was the figure he needs to cover wages, tax, ni and employers contributions if he was to own a ltd company.
    • sheramber
    • By sheramber 15th Oct 16, 2:24 PM
    • 2,738 Posts
    • 2,129 Thanks
    sheramber
    Have you checked out the government site about setting up a limited company?

    https://www.gov.uk/limited-company-formation/overview

    Also the New Enterprise Allowance

    https://www.gov.uk/moving-from-benefits-to-work/starting-your-own-business
    • Darksparkle
    • By Darksparkle 15th Oct 16, 2:36 PM
    • 3,430 Posts
    • 2,121 Thanks
    Darksparkle
    I am not sure about the rules as regarding only working 16 hrs if your partner is incapacitated.

    Hopefully, Dark Sparkle can confirm.

    Doing a quick benefit check working tax credits are only awarded for working 16 hrs a week with partner incapacitated if child care costs are involved.

    Please wait for Dark Sparkle to confirm as this will obviously make a great difference.

    Personally, I think you and your partner need to reconsider the self employment/limited company route for the moment.

    Speaking from experience being self employed is not an easy route to take in most circumstances and since you have debts then the fluctuating income may become a real problem.

    Would it be possible for your partner to get a job (16 hrs or 24hrs - whichever is needed for working tax credits) for a while so that you can sort out your debts and budget properly? This would also give him and you an opportunity to see how you all manage, health wise,childcare wise etc

    Are you on contribution based ESA? Which group?

    It may be that a sensible option would be to go to CAB for a 'better off' benefit check up. You need to be able to maximise your income. They will also be able to help with your debts.

    Calculators are generally OK but it is easy to input the wrong information
    Originally posted by pmlindyloo
    I already confirmed in post 7 and OP posted the criteria in post 3.

    Childcare is an element of WTC, there doesn't need to be childcare for them to receive it.
    • fishybusiness
    • By fishybusiness 15th Oct 16, 2:51 PM
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    fishybusiness
    A bit more help maybe....

    Being a company director won't be a problem for benefits purposes. In theory if a company holds lots of cash the council could call it notional income, in practice if you are not hoarding money in the business no one will bother you.

    Regarding your wages question, working 20 hours, being paid 16 is not a problem. Don't forget a business has expenses and wages is only 1 expense, so your husband, as an employee can draw any salary he wishes. Following on from that he can charge out at say £15 per hour and pay himself £7.20 an hour, and may have to so there is enough money in the business to pay for example an accountant, mileage, tools etc.

    He could draw £90 a week to keep other things in balance, but don't forget ESA will be reduced, Council Tax benefit also, and maybe other things I am not sure about.

    Your 26k is about 500 a week.

    PIP, Carers, Child Benefit, Child Tax totals to about 390, so you are 110 per week away from surviving.

    When I did the sums for us I couldn't get past about 420 per week at 24 hours work at minimum wage, which is the point WTC is paid and is at its maximum level. That was without PIP, and at that level you would have lost Carers payments. PIP at around 100 per week would see you just over the 500, but you would need that wage every week.

    We were most definitely better off on benefits, by some margin.

    Food for thought....
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