Carers Allowance and Limited Company Director

smerch1468

I hope someone can help me with my question.

I have just purchased a franchise which is trading through my Limited company for which I am a sole Director.

The franchise has yet to receive any trading income, and I have already spent in excess of £15k in paying the franchise fee and other start up costs. This tax year I expect to break even if I am lucky.

I am also a full time carer for my mother and spending more than 35 hours a week looking after her.

As a Director I aim to draw no more than £100 pw (when I start to gain new clients), to ensure that I do not breach the income threshold for carers allowance. My question is if I draw income as dividends over this amount, will it affect my entitlement to carers allowance?

Also will DWP look at my overall turnover ie profit/loss or the amount I draw as salary from my company?

My aim is not to be on carers allowance indefinitely, but things are tough with trying to build a business at the same time as caring for my mother.

NYM

Dividends are classed as income.

WillowCat

You can still pay yourself paye of £100 per week before you start making a profit - you can leave it in your directors loan account until the business has the money to pay you. Withdrawals from directors loan accounts are not income.

In a similar vein the £15k you have already spent is a directors loan if you paid it from your personal savings/loans and can be withdrawn without penalty when the company has the resources to do so.

My understanding is that DWP should only look at your earnings and dividends, however they may wish sight of your company accounts if they suspect you are keeping more money in the company than would be prudent for the expected future liabilities.

smerch1468

WillowCat wrote: »

You can still pay yourself paye of £100 per week before you start making a profit - you can leave it in your directors loan account until the business has the money to pay you. Withdrawals from directors loan accounts are not income.

In a similar vein the £15k you have already spent is a directors loan if you paid it from your personal savings/loans and can be withdrawn without penalty when the company has the resources to do so.

My understanding is that DWP should only look at your earnings and dividends, however they may wish sight of your company accounts if they suspect you are keeping more money in the company than would be prudent for the expected future liabilities.

Ok interesting comments, thank you.

So the £15k was effectively out of savings and if it can be treated as a loan to the company, drawing income (ie the company repaying the loan to me) out of the company would not be classed as income for carers allowance purposes up to £15k in theory?

It is not my intention to try to play the system, just as my company will have a very low level of income until I have a decent client bank, and I am still spending a large amount of time each week looking after my mother (my business is home based apart from client visits), it would be useful to have this small extra benefit just to keep things ticking over. Eventually the business will support both me an my mother and our reliance on state benefits will diminish.

WillowCat

Yes, the company can repay you the loan you made to it, and this is not classed as income, nor do you pay tax on it (unless you are charging the company interest on the loan in which case the interest paid must be declared on your personal self assessment form).