Can a Ltd company director get any benefits?

hnwestuk

My business partner Claire and I have a limited company, but we have made a loss for the financial years ending 08 and 09. We've each taken £5000 a year as a salary, and I also get about £2500 working tax credit a year.

We can't work at the moment because of the credit crunch - we were in property, and there's nothing available for us to do. We can't liquidate the business because there's a £100k directors loan in there, borrowed from my parents. If we liquidated, the loan would be eaten up by the loss of equity in our business property. We're renting the property out, so its mortgage is covered that way - the main outgoing for the business is our salaries. Which aren't enough to live off when your mortgage is more than your salary, but that's a separate problem!

I want to stop our salaries and for me to go on JSA. I realise that JSA isn't much more than the working tax credit, but after 3 months I'd be able to get help with my mortgage. Am I eligible if I don't shut down the business?

Claire has separate problems - she's also a full time student, so she can't get WTC or JSA. Are there any benefits open to her?

We'd still be directors, but the company wouldn't be making a profit, and we wouldn't be spending any hours on it.

I hope someone can help - this is keeping me awake all night!

Thanks for reading.

olly300

Talk to your accountant.

hnwestuk

Thanks.

I did talk to them - they're not too good on benefits information. Which is hardly surprising - people on benefits can't often need an accountant, and it's not an arena the accountants commonly work in. They don't know; I was hoping you guys might be able to help.

whitewing

Try the Citizen's Advice Bureau. Turn up and wait as early as you can (even before their actual opening time). You will have a long wait probably but they should be able to help with regard to benefits, even if they haven't seen this particular scenario before.

simpywimpy

I guess you would have to lay yourself off and claim jobseekers in the meantime but you would have to take another job were it offered to you. You wouldn't have to close the company down I don't think.

Premier_2

As an employee of the company, you would probably be entitled to any benefits any employee working for just £5k per year would be entitled to.

Having said that, if you only earn £5k per year, you are obviously only working part-time (minimum wage applies even to employed directors!), so perhaps you could seek employment elsewhere to make up the lack of earnings.

Other than that, you'll need to lay yourself off as simpywimpy suggests so that you could claim job seekers allowance. Don't forget if you do that, you are entitled to at least the statutory notice (or contractual notice if longer) or payment in lieu. You will also need to pay yourself redundancy pay.

whitewing

Would you actually be able to get help with the mortgage if you're renting it out anyway?

Or do you mean that there is a mortgage on your business property, which is covered by its rent, and a separate mortgage on your residential property, with which you are seeking help after a qualifying period?

DaisyFlower

Premier wrote: »

As an employee of the company, you would probably be entitled to any benefits any employee working for just £5k per year would be entitled to.

Having said that, if you only earn £5k per year, you are obviously only working part-time (minimum wage applies even to employed directors!), so perhaps you could seek employment elsewhere to make up the lack of earnings.

Other than that, you'll need to lay yourself off as simpywimpy suggests so that you could claim job seekers allowance. Don't forget if you do that, you are entitled to at least the statutory notice (or contractual notice if longer) or payment in lieu. You will also need to pay yourself redundancy pay.

No children are mentioned so I believe its 30 hours to claim WTC so the figures dont add up for that.

I'd look for any job available and run the business at night/weekends if its onlt renting property out anyway.

If your partner chooses to study full time I assume she'll only be eligible for the usual student loans.

hnwestuk

Thanks!

Whitewing: CAB hadn't occurred to me, I will go in on Tuesday. And yes, the property that's rented out has a mortgage under the business. The mortgage I personally pay is on my home.

Premier: Minimum wage doesn't apply to directors, I'm almost certain. I did work 40 hours a week or, usually, more. But at the moment we don't have any work to do so it's just a few hours here and there, mostly on the phone grovelling for extensions on debts...

"you would probably be entitled to any benefits any employee working for just £5k per year would be entitled to."

I know of Working Tax Credit and Child Tax Credit (although I don't have kids) - is there something I'm not aware of?

Redundancy pay?! Really?! I'll google it, but do you know off hand of a resource that can tell me more about that?

And, how long is the statutory notice period? Two weeks?

Thanks for your help - I'm pretty clueless about benefits, I had hoped never to need them!

olly300

hnwestuk wrote: »

Thanks.

I did talk to them - they're not too good on benefits information. Which is hardly surprising - people on benefits can't often need an accountant, and it's not an arena the accountants commonly work in. They don't know; I was hoping you guys might be able to help.

Your accountant will be able to work out if you can make your company dormant.

That way neither of you will have an income from the company so you will be able to claim any benefits or other financial help you need.

Soubrette

Please check this but I'm (fairly) sure that if you draw a salary then it has to comply with minimum wage.

If you are taking dividends then no, you don't have comply with minimum wage.

Sou