Housing Benefit - Self Employed and refusing to agree Net Profit

FBaby

Heating and electricity (proportion as work from home) 200

This is ridiculous. So you think £200 of gas and electricity should be deducted for your ebay business that only brings in £15 a week?

Mermibridg

samroo wrote: »

Re your business. It does seem a huge amount if effort for the equivalent of 3 hours work a week at min wage. I would imagine the allowance for working from home would not be considered fir housing benefit purposes or you would in effect be paid twice for this amount.

It is, but I believe it is common for many businesses to take 3 or 4 years to get into profit after the original first capital outlay as you have to build up a customer base.

Mermibridg

Housing_Benefit_Officer wrote: »

Looks like they are not counting purchase of stock and heating electricity use as expenses.

Yes.. I can understand them querying the heating / electricity but I don't understand not counting purchase of stock for a retail business. How can I sell anything if I don't buy it in the first place and it is one of their categories listed!

Coraline

FBaby wrote: »

This is ridiculous. So you think £200 of gas and electricity should be deducted for your ebay business that only brings in £15 a week?

It's not ridiculous at all.

The OP draws in £5105.67 per year in revenue and is expensing £200 per year for the proportion of heat and electricity used for what I presume is the home office.

Businesses, no matter how profitable or not usually require electricity and heat in the winter.

Mermibridg

rogerblack wrote: »

I am unsure of the rules in this area - I've read the rules for ESA.

Would it be correct that stock purchased - but not sold - is capital, and cannot be offset against income for the purposes of HB?

For example - buy 10 widgets, break one, sell 2.
You can claim the 3 as legitimate business expenses for HB, which can be offset against income - but not the purchase of the 7, until you come to sell them.

Perhaps the problem is that how much of the stock has actually been sold is unclear?
(Though clearly to take the position that none has been, seems odd)

That might be what they are doing.. hmm. Surely net profit should be what comes in minus what goes out though. Some of my stock might not sell for two years, its imported goods, bought in bulk that was bought to sell over the next up to 5 years so if they only look at one year at a time there's always going to be a problem!

Mermibridg

Yes that's true, and this is an expense I wouldn't have if I was working outside the house shelf stacking or similar while my son was at school. Its money gone which I cannot use to pay to feed myself or my son!

Overall its a shame that HMRC lets you carry a loss over and respects that small businesses can take some years to get into profit whereas Universal Credit will only give us one year grace of being in loss (or no profit) and housing benefit ignores it entirely! But anyway...

I have found a link to what north devon council do and it looks like they're using the terms 'Opening Stock' and 'Closing Stock'

Sales + Closing Stock being income (so Closing Stock is what I have already in stock at start of the year) and

Opening Stock plus other allowable expenses as outgoings (what I've bought for resale).

Can anyone tell me if I've understood what Closing and Opening Stock are correctly? Should closing stock be what I have left (ie assets) at end of year maybe?

hayley11

I've recently just claimed housing benefit and i'm self employed, they disregarded 40% of my receipts because they had "non-business items" on them, such as food, household products etc. But I hadn't counted those items in the amount I was claiming, it's just where i've maybe done an online shop and got business ingredients delivered with my regular shopping. Maybe they are doing something like this? Have you spoken to anybody as opposed to just writing them letters? I spoke to the woman who assessed my claim and she explained that to me.

Housing benefit do seem to be a lot fussier than HMRC and tax credits when it comes to self employed, they took over 70 receipts and photocopied them all! (And still two weeks later haven't sent them back to me:mad:)

Also I don't think £200 is ridiculous for electricity/heating, I claim £520 as per my accountants advice and I don't make much more than the OP.

Mermibridg

Thanks Hayley, I appreciate your reply, I'm finding it all very stressful!
I will ring and talk to them tomorrow. I was just hoping that if they want any more figures I could be prepared to give them to them rather than it dragging on for days.

The more I read about opening and closing stock the more I'm confused! Some councils seem to treat it as income and some as outgoings!

Hope you get your receipts back soon. they keep making me drive in to pick things up and its 12 miles away!

Mermibridg

I am now trawling through various councils websites...

Lancaster use :
INCOME
Sales + Cost of Sales
where Cost of Sales = Opening Stock + Stock Purchased - Closing Stock


Babergh
INCOME
Sales + Closing Stock - Opening Stock - Purchase of New Stock

North Devon
INCOME
Sales + Closing Stock

EXPENSES
Opening Stock + Cost of New Stock



How can different councils be working it out different ways! Ok it doesnt' matter if you subtract it from the Income or allow it as an expensive but surely they need to decide whether cost of new stock is an expense or an asset!

Michelle


.. Cantebury have Opening Stock, Cost of New Stock and Closing Stock all as income! the list goes on...

Poppy9

Mermibridg wrote: »

Y
Can anyone tell me if I've understood what Closing and Opening Stock are correctly? Should closing stock be what I have left (ie assets) at end of year maybe?

If your trading year is 1st April 2012 to 31st March 2013 your opening stock is the value of stock you hold on the 1st April 2012.

Your closing stock is the value of the stock you hold 12 months later on 31st March 2013.

Normally for a business your cost of sales =

Opening stock + purchases - closing stock.

So if you hold stock of £200 at beginning of year and spend £400 on stock throughout the year and have stock remaining at year end of £300 then your cost of sales is

200+400-300 = 300

Just looked at form North Devon require you fill in if you don't have accounts and if I assume the left column is income and the right column is outgoings then they work by:

Income= Sales + closing stock
Expenses = cost of sales+opening stock + other expenses

Your information posted below doesn't give a value of opening/closing stock. Your problem might be how you have worded your accounts "purchase of stock for resale" and they are assuming this is the closing value of your stock. You need to show clearly

• Value of opening stock (the starting period of your accounts)
• Cost of purchases made in year
• Value of closing stock (the cost value of stock held on the last day of your accounts)

You value your stock on it's cost value not on it's resale value.