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

System

StormyWeather wrote: »

I think they need to highlight any business expenses on personal statements and explain them, one at a time if necessary.

The person looking over the accounts probably isn't an accountant.

It's possible that the first person who looked at the accounts decided that gross profit + personal payments = gross profit. And that subsequent assessors have been using this to calculate total earnings and HB.

Lots of insight there. Thanks. Darn it I won't use the personal card again, it's more trouble than worth.

To add problems, all the PO expenses I had, were paid through my personal cc and some PO business expenses were mixed with PO personal expenses, as I sold some personal items and sent them at the same time I would send the business items, to save time. I have only done it a few times and we are only talking a few pounds, but still I can smell it was a bad idea. Good thing I keep all the receipts, but if I'll have to highlight expenses in that way, it will take me days of work.

I should have tested if my whole rubbish bookkeeping 'system' worked a few weeks in, instead of letting it go on for months.

Lesson learned.

paulineb_2

I had real trouble getting any form of a rent or council tax rebate the last time I was self employed, this time it was no problem. I figured the person doing the sums knew what they were doing. But it can be pot luck. I gave them bank account statements, a copy of my last tax return, copies of my income and expenditure books and anything else they needed.

The only thing I will say is the self employed pro forma some councils use seems to be out of date and doesnt apply to a lot of businesses.

All you can do is ask for a re assessment. I dont have an accountant nor do I have a separate business account but its quite easy to see in my banking what expenses are for the business and what are for me and my own expenses, bills etc.

System

CIS wrote: »

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.

Yes, it really looks like a bad idea. I was even aware of this and my idea was to use the personal cc only temporarily, but a week became a few months.

I will definitely change this from now on.

System

bigboybrother wrote: »

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.

hi, thank you. All you wrote makes sense to me. I honestly tried to make it as easy as possible for them, but I can see it wasn't good enough.

''Drawings has nothing to do with any type of profit.''

Exactly. It's basically just cash movement. And yet they are working out drawings as profit. Well at least I am now sure that there's a misunderstanding. In the future, will do all I can to make things dumb-proof.

''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.''

I actually never even included, in the expenses, the interests I paid for buying assets through my personal cc. I just didn't nit-pick every expense I could have, although I have always been aware of them all. I tend to understate my expenses, meaning ,in reality I earn even less than I indicate. There have been months when I could actually have received more HB as I was earning less, but it didn't bother me, I could afford to pay a couple more tenners.

At a certain point I could no longer do it. Actually, I have had some serious misconceptions about HB for months: I thought that the HB would never pay full rent or near full rent, if my income would fall way below the minimum national wage, as it has happened on some months. I didn't know that I could submit the lower net income figures, no matter how low, and get more HB.
I was basically paying more than I should have, sold personal stuff, and even got into credit card debt as I was paying rent through the cc. Money that I still have to pay back.

I even asked in my letter if they could help me and backdate some rent as I was not aware, in previous months, that I could have received more HB. They never replied to these requests, but since then it's been like waking up a rabid dog.

But yes, I will make sure that all the evidence of income and expenditure, is dumb-proof. I really try to stay away from trouble, who needs it.

System

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

Thank you so much for the link. Believe it or not, I have been killing myself to try to find booklets like this. I have googled endless times and looked for information like that, but for some reason didn't find anything.

System

bigboybrother wrote: »

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!

I can identify with the lack of logic. In March last year, I had an accident to my knee. I was dragging myself at home, completely on my own, with the help of an office chair, for two months, before I had an operation. The whole hurdle lasted 3 months before I could start walking again. Obviously I could not work, so I claimed ESA. After a few months, I received an HB letter stating that for the accident period, I had to pay full rent, so I owed something like £ 800 in arrears or something. It was crazy. I had to seek legal advice in November last year before things got out of hands completely.

I never even understood what the heck happened there. Just that things got eventually clarified and the arrears were cancelled.
It's like playing roulette.

I was lucky to find a very good adviser that offered an excellent service and basically sorted it all out for me. This time I wasn't so lucky, tried to phone same numbers but it looks like the whole system changed because of the welfare reform.

I tried to phone elsewhere and had no luck. Will have to try again on Monday.

System

paulineb wrote: »

I had real trouble getting any form of a rent or council tax rebate the last time I was self employed, this time it was no problem. I figured the person doing the sums knew what they were doing. But it can be pot luck. I gave them bank account statements, a copy of my last tax return, copies of my income and expenditure books and anything else they needed.

The only thing I will say is the self employed pro forma some councils use seems to be out of date and doesnt apply to a lot of businesses.

All you can do is ask for a re assessment. I dont have an accountant nor do I have a separate business account but its quite easy to see in my banking what expenses are for the business and what are for me and my own expenses, bills etc.

The pro forma thing is the one I used. And yes it really feels like the luck of the draw. It's really crazy. Sometimes I have got absolutely nowhere with someone, left it for another day, tried again with someone else, and it was like going for a walk in the park in comparison.

I will ask for a re assessment. Actually I already did and now they suggested I ask for a 'review'.

When you brought them the bank statements etc, did they reassess your HB while you were waiting? Or did they merely take the documents and passed it onto the HB services and say to you that you will get the news through the post?

If the former can be done, I'd rather walk for miles and see them in person rather than dealing through the post. At least if I see any problems arising, I will be aware of it there and then.

Thrugelmir

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.

Does you not favours sending PM's . In future please don't bother.

Thought this comment on the thread summed up well.

I don't see any point in trying to advise you as you seem to know more than any of us.

There's always someone........

dktreesea

How long have you been running your business? If you are self employed, your current award of housing benefit should be based on whatever net profit you declared to the tax office for the accounts that are for the year ended 5/4/2012.

As to transferring money between accounts, all that is for a sole trader is a transfer. There's no implications, or impact, on your profit and loss at all.

Also, gross profits are not what matters for housing benefit. It's net profits, i.e. your taxable income. So after taking into account any fixed overheads, (e.g. the cost of your business phone contract if you have one, or some percentage of your personal phone contract if you also use it for business and need a phone to do your particular business activities), as well as any variable costs (costs incurred as a direct result of raising the revenue/sales).

What I don't get is, if you are only earning a net income of £230 a month, however did the housing benefit office get to conclude, in the letter they have sent to you:

"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."

What were your expenses over that period? Was there somewhere on that form to also declare your business expenses? Have they attempted to disallow any of your business expenses? In particular interest on your business loans? If yes, they are in error. Whatever happens under UC, under the current housing benefit regulations, for the avoidance of doubt, interest incurred on borrowings for business are allowed as a deduction. There is actually a specific clause that states this.

For that period, 1st of July to 31st of December 2012 (though why they are only taking 6 months into account is another departure from their guidelines, which tell them to take a full year's net profit into account if a full year's figures are available) what was your net income/profit?

fluffymovie

dktreesea wrote: »

How long have you been running your business? If you are self employed, your current award of housing benefit should be based on whatever net profit you declared to the tax office for the accounts that are for the year ended 5/4/2012.

Just to confirm that this isn't actually quite right - for example, HMRC allow costs for depreciation which HB do not allow for so just wanted to be clear that it is not what you declare to HMRC alone that determines how we calculate your HB