Housing Benefit working out income by adding personal drawings+gross profits? uh?

CIS

You also need to remember that not all allowances that are made for tax deductible expenses are allowable expenses for housing benefit purposes.

CIS

My personal drawings ARE my gross profits,

You need to have one account set up for income and expenditure and then simply transfer out any drawings only to your own account. Never mix business and personal accounts as it causes too much trouble.

It'd guess that that they have looked at the self employed profit & loss details you have supplied and seen the incoming monies on your bank statement and assumed they are separate income streams (not surprisingly due to the way your managing the accounts).

bigboybrother

want_to_know_moreaboutit wrote: »

I am self-employed and have generally been on a low income for the last 18 months (below the minimum national wage, I believe that's about £ 120 a week).

I have been having problems with the Housing Benefit Services for months. They kept calculating a wrong income even though I sent them self employed supplements plus bank statements. They maintained that my income is being £ 156 per week.

There's absolutely no way I have been earning that money. In January, for example, my net profit was £ 230 for the whole month. Since then it's been worse.
I don't have children. I checked with online tools and all of them implied clearly that I should be granted near or near full Housing Benefit. Instead, it's been a nightmare for months and I never know what's going to happen next.

I started sending complaints, they finally replied to my letter and it turns out that they are out of their minds.

That's what they basically wrote:

''Your income has been calculated correctly. You stated on your self–employed supplement form that you had a gross profit of £3404.00 during the period 1 July 2012 to 31 December 2012. However, it has been established from your bank statements that you have been making personal drawings which should also be included as part of your gross profit. Therefore, it was determined that during the stated period you actually had a gross profit of £5983.00''

I could not believe that. They are basically adding my gross profits, to my gross profits!!

In my bank statements, there's a simple column for 'paid out' and one for 'paid in'.

When I make any sales, they clearly show in the 'paid in' column. I then draw the money out and transfer them in my personal account. Through online banking, I always mark whatever money I draw out of my business account, as ' (my name)personal drawings £ xxx', so that when I do my bookkeeping, I quickly spot any money that I took out. That obviously always appears in the 'paid out' column. Duh.

But my personal drawings are still my gross profits ,drawn out! They have nothing to do with my gross profits, as my gross profits are calculated separately.

I don't have an accountant for obvious reasons, but why do you think these people are adding my personal drawings to my gross profits? I don't think I am doing anything out of the ordinary. I listed all sales and all expenses and from them I work out my profits. I tried to be as simple and as clear with them as possible. I think it's insane.

It doesn't matter how you run your business, you don't even need to have a business bank account or business credit card. You can simply work with cash!

What is important is that whatever you do is properly recorded and can be evidenced by receipts and invoices.

I'm not surprised that the council can't get it right - they have none or little training in accountancy matters, something that I pulled them up about a while ago myself.Try get them to explain what is the difference between Gross Profit, Net Profit, Adjusted Trading Profit and Taxable Profit! They just don't understand.

So you have to treat them as though they are young children who start with counting beans.

Drawings has nothing to do with any type of profit. Drawings are simply payments that you take out throughout the trading year in anticipation of what the adjusted trading profit will be.

You might take out more than you make and end up owing the business money or not take out enough leaving the business owing you money.

The only figure that the council should be interested in is the net profit which has been adjusted for the benefit of disallowable expenses claimed which are not allowable for benefit purposes.

If the adjusted net profit is less than what you have taken out as drawings (call them wages) you have in effect lived on the business overdraft.

System

StormyWeather wrote: »

Also, wouldn't it be better to provide them with the net profit, rather than gross? So total income - (all expenses i.e. cost of stock + overheads) = Net Profit.

hi, well yes, I did provide them with a list that shows all the net profit already worked out. I wrote the net profit figures clearly in their form called 'self-employed supplement' or something, plus I drew a list by hand with all gross profit, all expenses, and all net profit worked out. I did at the very least double-check everything, if not triple-check.

I did not provide them with bank statements of my personal card, but I clearly wrote in a letter that, if needed, I would provide that too. I actually asked to let me know if they wanted to know anything at all. I have nothing to hide. They never asked for additional proof or whatever.

So basically the business bank statements would show only the money coming in and the personal drawings. The expenses were all listed by me on the written list. I thought this would be ok. I mean that's what the Council suggested to do, to just provide a list and bank statements.

They never asked for other statements and never addressed any personal letters, and I sent more than one. They just sent back my statements and after months of chasing, they sent the 'official' HB letter with a wrong income and HB figures. I thought the lack of a more personal response was appalling, which didn't happen for the past years. In the meantime, arrears and stuff started to escalate.

What I don't understand is, even supposing that they wrongly considered my gross profit as net income because I didn't supply bank statements of expenses, why would they add the gross profits to my personal drawings? It's like I buy an asset for £ 50, then I resell it for £ 100, then I make a personal drawing of £ 100, and they figure £ 100+ £ 100 as my income. It just makes no sense.

Well thank you for confirming that the HB is calculated on my net income. I have been really worried that I might have seriously misunderstood how they would assess HB. I now know that there must be a calculation problem somewhere and that the worst I might have done, is not sending them my personal credit card statements.

There's no way I have ever earned what they claim I have, if necessary I will prove it in a Court. I really hope that won't be necessary because doing battle with other people or with the Council is the last thing on my mind. But if necessary I'll have to do it.

I have submitted the info by post. I would have gone there in person but the problem is, they won't deal with me directly. I tried that before. As I understand it, I can only supply the information to the Council and they will pass it onto the Benefit Services. It's not like they make the process really straightforward. I have lost sleep through all this.

Well, thanks for confirming about the net income detail. My heart sank back in place.

System

benefitbaby wrote: »

And here lies the problem. If you pay all earnings into the business account, and then pay all business related expenses out of the business account, what is left is profit and 'income' for HB purposes.

I can understand that this might have been a problem, although I expressly asked, in my letter, to let me know if they wanted to see any other statements and I would send them immediately. I still provided a clear written list with all my expenses. They didn't object to that so I thought it was ok.

But I still don't get why they would add all the money coming in, my gross profits, to my personal withdrawals, which are basically the same money.

Your suggestion of paying the personal card from my business account, is actually very good, I will certainly figure out how to do it.

Darn it.

CIS

Well thank you for confirming that the HB is calculated on my net income

Housing Benefit net income isn't the same as taxable net income through, you need to factor that in to your calculations.

A good summary can be found here - https://docs.google.com/viewer?a=v&q=cache:8fZ16h2qo6IJ:www.hackney.gov.uk/Assets/Documents/self-employed-advice-htbandctb.pdf+&hl=en&gl=uk&pid=bl&srcid=ADGEESiZsAbav7iwU-3mY7EPl6OE9Fua-K5tG4YcwkJOHIw3pztz7YSmDSTikKqYfQqyzk97DI2BHzeyfcHbeHgL-nP6IqGNQ8pFn7tBO9SE0xdqoVAlxxQOq19tOabD9KTdmU6BU59g&sig=AHIEtbTs693APWm6YEOsCXZ08wMq2WI6dw

CIS

Your suggestion of paying the personal card from my business account, is actually very good, I will certainly figure out how to do it.

It will also help you if HMRC ever come looking at your records.

System

Somerset wrote: »

Actually I understand the OP perfectly but he/she is accounting in a cack-handed way. First, never mix business and personal. Second, for the purpose of official scrutiny, make it as simple and clear as possible because ...........

Essentially, the OP is saying the business account receives only income, less some NI's. eg 6K
His personal, pays all business expenses. eg 2K
The business net profit is the net of the two. eg 4K
Housing say his/her profit is :
the 4K the OP submitted
plus the 6K he drew from the business
therefore per their calculation his business profit is 4K +6K = 10K

Since gross profit is only 8K the calculation is manifestly wrong. But if you want your figures to be accepted you need to show them in the simplest way possible.

Yes I agree, and I admit that I wanted to avoid mixing the personal account and business account as far as I could. Opening a business account was the first thing I have done as soon as I started the business. What happened is that the credit card I have on my business account, is just plain bad.

But you are right, this is a mistake, and I can clearly see it's a lot more trouble than it's worth. However, I did make things as clear as possible, through the handwritten list. Just two simple columns, one with all the money going in , one with all the money going out. What I didn't do is supplying the personal card statements. That's really the only mistake I did, which they never addressed anyways, even though in my letters I clearly asked them to let me know if there was anything else they needed to know.

They never addressed anything. I don't expect them to take me by the hand, but come on, if they wanted to see other statements, why didn't they just ask.


But I still don't get why they add the money coming in, to my personal withdrawals, to work out my net income.

But yes I'll make sure that everything shows up only on the darn business account, as it looks like there's otherwise no hope.

bigboybrother

want_to_know_moreaboutit wrote: »

hi, well yes, I did provide them with a list that shows all the net profit already worked out. I wrote the net profit figures clearly in their form called 'self-employed supplement' or something, plus I drew a list by hand with all gross profit, all expenses, and all net profit worked out. I did at the very least double-check everything, if not triple-check.

I did not provide them with bank statements of my personal card, but I clearly wrote in a letter that, if needed, I would provide that too. I actually asked to let me know if they wanted to know anything at all. I have nothing to hide. They never asked for additional proof or whatever.

So basically the business bank statements would show only the money coming in and the personal drawings. The expenses were all listed by me on the written list. I thought this would be ok. I mean that's what the Council suggested to do, to just provide a list and bank statements.

They never asked for other statements and never addressed any personal letters, and I sent more than one. They just sent back my statements and after months of chasing, they sent the 'official' HB letter with a wrong income and HB figures. I thought the lack of a more personal response was appalling, which didn't happen for the past years. In the meantime, arrears and stuff started to escalate.

What I don't understand is, even supposing that they wrongly considered my gross profit as net income because I didn't supply bank statements of expenses, why would they add the gross profits to my personal drawings? It's like I buy an asset for £ 50, then I resell it for £ 100, then I make a personal drawing of £ 100, and they figure £ 100+ £ 100 as my income. It just makes no sense.

Well thank you for confirming that the HB is calculated on my net income. I have been really worried that I might have seriously misunderstood how they would assess HB. I now know that there must be a calculation problem somewhere and that the worst I might have done, is not sending them my personal credit card statements.

There's no way I have ever earned what they claim I have, if necessary I will prove it in a Court. I really hope that won't be necessary because doing battle with other people or with the Council is the last thing on my mind. But if necessary I'll have to do it.

I have submitted the info by post. I would have gone there in person but the problem is, they won't deal with me directly. I tried that before. As I understand it, I can only supply the information to the Council and they will pass it onto the Benefit Services. It's not like they make the process really straightforward. I have lost sleep through all this.

Well, thanks for confirming about the net income detail. My heart sank back in place.

As I have said before, you might help the council out if you packaged and posted a bead counting frame!

Another part of my problem with the council - is that they rely too heavily on information from the DWP which is generally unreliable, so you must check all of the income figures.
In my case they had my wife receiving Carers Allowance yet she was also in receipt of the State Retirement Pension which was for more than the CA payment. They also had the dates wrong when I had claimed and ceased other benefits. Their excuse? Well we can only go by what we are told ummm!

bigboybrother

CIS wrote: »

Housing Benefit net income isn't the same as taxable net income through, you need to factor that in to your calculations.

A good summary can be found here - https://docs.google.com/viewer?a=v&q=cache:8fZ16h2qo6IJ:www.hackney.gov.uk/Assets/Documents/self-employed-advice-htbandctb.pdf+&hl=en&gl=uk&pid=bl&srcid=ADGEESiZsAbav7iwU-3mY7EPl6OE9Fua-K5tG4YcwkJOHIw3pztz7YSmDSTikKqYfQqyzk97DI2BHzeyfcHbeHgL-nP6IqGNQ8pFn7tBO9SE0xdqoVAlxxQOq19tOabD9KTdmU6BU59g&sig=AHIEtbTs693APWm6YEOsCXZ08wMq2WI6dw

Yes it is 'Adjusted Net Profit for Benefit Purposes' which is not the same as 'Net Profit' or even ' Taxable Net Profit'.