Tax Credit self employed help

Sixer

BigAunty wrote: »

This is the thing I am struggling to understand (or misunderstanding) about the way the HMRC treat the self employed for tax credits.

Does this mean a ltd company director can merely leave a large sum of money in the business bank account for the period to maximise tax credits and also have their salary ignored as income? Meaning that they can simply pay themselves a huge dividend in the future when they are no longer eligible for TCs?

Yes!

And conversely, it's also possible to take drawings from a sole trading/self-employed business in excess of any profit made. You might pay some bills late (eg go from paying suppliers at 30 days to 60 days). You might reduce your stockholding (eg a market stall owner might keep 3 days stock, not 5 days) etc, etc.

Notmyrealname

BigAunty wrote: »

Could you supply a link about this, please? I've only browsed the HMRC website on self employment but not found this clear distinction between business set-up (sole trader v limited) and the calculation of income. I always assumed it would be a turnover minus expenses = profit calculation.

If you are trading as a Ltd company, in law the Ltd Company is a separate legal entity in its own right hence the wages/dividend you draw are counted and not the whole profit as the profit belongs to the business.

Notmyrealname

lovinituk wrote: »

I agree with the rest of it but just to be pedantic, how can he pay himself income if the business has made a loss? There would be no many to take as income surely?

Turnover is not profit. I'm a sole trader. In my first year I made a loss on paper yet I put money in my bank every week due to the fact there are many expenses with flat rates allowable that don't actually cost you that to accrue.

For example, I go to a supplier to buy stock and it is a 200 mile journey which costs me £30 in fuel. I can claim the mileage as a £90 expense at HMRC rates. I make £90 profit on the goods I buy but I've got a £90 mileage expense I can apply so on paper, I've made nothing. However I've got £90 cash in my pocket that only cost me £30 to get so £60 goes in the bank.

I actually do this 25 times a year. On that expense alone, I have to make a profit of £2250 on what I sell just to reach £0 profit on paper even though I will have put £1500 actual cash in the bank...

sweetietot

JollyOlly wrote: »

After receiving an overpayment from tax credits i am now totally confused as to what information i should be submitting on my declaration. I work 16 hours a weeek, , my partner is self employed and works at least 40 hours a week, he takes a minimum weekly wage and leaves any profit in the business at the end of the year. We have 3 dependants. Do i give them his weekly wage and self employment profit ? help please!!

How are you completing his tax return? As a sole trader he does not have "wages", the money he draws each week is part of his profit, not part of the business expenses.
In the simplest form - turnover less business expenses equals profits