Proving Hours Worked for Tax Credits as a Company Director

verveuk

skateykatey wrote: »

To the OP. How long have you been a director and claiming tax credits? And, has your wage stayed the same for this entire period.

The issue at hand here is some claimants working on a self employed or director basis for a large number of years and with very low earnings, which are then subsequently topped up by WTC.

The question then needs to be asked if they are in actual remunerative work.

To explain better, consider that some customers may be SE artists or authors and spend a great many hours working each week but never actually make any money or only sell very little and haven't done so for many years. Would you consider them to actually be in remunerative work? I wouldn't...

I have been doing it for some years now. I don't recall it was ever asked on the application what my job was, it just asked for hours worked. Personally I do think what I do is remunerative work

I also disclose all my other earnings as in any dividends paid by the company.

verveuk

leveller2911 wrote: »

Its a loop hole that this and the previous government should have closed years ago. Company directors paying themselves minimum wage and claiming maximum WTC whilst paying themselves an extra £28k a year in dividends...

I'm not saying the OP is doing the same but many,many are.

I declare any dividends paid by the company to the tax credit people. The minimum wage thing is just a way of the company paying less tax, as an employee/director we can still earn the same money

verveuk

FBaby wrote: »

Surely a screen shot of the page(s) would suffice? How long is the time period they request confirmation of work?

I would do:
Day 1: did three hours of emails (screen shot as evidence). Made phone calls from 11 to 2pm (copy of telephone bill), then work 3 hours on computer to produce advert (show advert).

The same for each day, then it's all very clear.

...they are asking for 6 months of history, so this would be quite a chore

verveuk

NYM wrote: »

blondebubbles wrote: »

Exactly.

HMRC are not that gullible when it comes to paying from the Public Purse,

Deliberately paying a low income to qualify for tax credits is against the law

Limited company Directors have the flexibility to adjust their earnings each year. Many choose to leave money in their company if they don’t need to draw it down as salary and dividends. In effect could be tempted to pay themselves very little simply to qualify for tax credits.

HMRC is wise to this potential scam, and there is legislation in place that prevents company directors from deliberately depriving themselves of income purely for the purposes of qualifying for benefits. Directors retaining profits in a business for sound commercial reasons won’t attract undue attention from HMRC, but massaging earnings around the tax credit threshold will.

Child tax credit element has no working time requirement.

However, Directors should also be aware that HMRC are disqualifying directors of limited companies from claiming the working tax credit element who do not have an employment contract with their company and are not paying themselves for the qualifying 16 hours at National Minimum Wage (NMW).


OP...Consult your accountant and consider updating, or putting into place, the correct employment contract and company paperwork.

Thanks, this was very interesting. I had never looked at it that way. As I director I have a minimum salary to reduce NI payments which works out as less that minimum hourly wage, but then top up using dividends. But over the past few years due to the recession business has been much quieter so dividend payments have been reduced - hence the WTC claim. It didn't even cross my mind that to purposely change the figures to qualify for tax credits

I can show in our company accounts that we have not made enough profit to pay sufficient dividends. The company even made a directors loan a few years back when times were really bad

skateykatey

verveuk wrote: »

I have been doing it for some years now. I don't recall it was ever asked on the application what my job was, it just asked for hours worked. Personally I do think what I do is remunerative work

I also disclose all my other earnings as in any dividends paid by the company.

The example I offered was just that. The point I was making was that if a claimant has been working in their field for a number of years and yet their income is disproportionate to the number of hours they work then it can be seen as not remunerative work.

Another example, if you spend 25 hours a week on admin work whether it be invoicing customers, advertising, etc etc but only receive payment for 15 hours of actual work and have been doing so for a number of years then how can the full 40 hours be classed as remunerative work?

The work has to be in expectation of payment and not just a hope of payment. The fact that you may consider yourself to be fully in remunerative work may be at odds with which HMRC decide.

I'm not saying that this is the case with you but that along with the other issues raised on this thread gives you an idea of why HMRC are asking you to provide further information.

Unfortunately there are a number of claimants who state that they are working 30+ hours but the income received for the hours apparently worked just don't stand up to scrutiny.

verveuk

skateykatey wrote: »

The example I offered was just that. The point I was making was that if a claimant has been working in their field for a number of years and yet their income is disproportionate to the number of hours they work then it can be seen as not remunerative work.

Another example, if you spend 25 hours a week on admin work whether it be invoicing customers, advertising, etc etc but only receive payment for 15 hours of actual work and have been doing so for a number of years then how can the full 40 hours be classed as remunerative work?

The work has to be in expectation of payment and not just a hope of payment. The fact that you may consider yourself to be fully in remunerative work may be at odds with which HMRC decide.

I'm not saying that this is the case with you but that along with the other issues raised on this thread gives you an idea of why HMRC are asking you to provide further information.

Unfortunately there are a number of claimants who state that they are working 30+ hours but the income received for the hours apparently worked just don't stand up to scrutiny.

Thanks - I would argue that the work I do is necessary to the operation of the business and if it wasn't done there were would be no business. But I suppose this isn't HMRC's concern and they just looking at the black and white

I did read this regarding directors:

The position of Directors for WTC has caused much discussion in the tax world over the last few years. However, HMRC have confirmed that for WTC purposes, a Director, as an office holder, does not have to be engaged under a contract of service in order to claim WTC. This interpretation of the regulations means that Directors do not need to pay themselves the National Minimum Wage in order to claim tax credits as such a requirement only exists where there is a contract of service.

Hopefully this is true as it would mean I can work for less than the minimum wage

NYM

Any entitlement to claiming WTC is deliberately wide ranging. Even Tax Professionals/Accountants are unable to agree on whether someone, in your circumstances, is entitled to make a claim. It's all in the interpretation of the Rules set by HMRC.

The link as given on the website (in the paragraph).. ...the Tax Credits Team have received a response from HMRC Department for Benefits and Credits, Customer Strategy, Policy and Change....returns an HTTP 404 code.

However, each case I'm fairly certain, will be judged on its own merits.

One thing to consider is that HMRC are slowly but surely closing whatever 'loopholes' exist.

verveuk

NYM wrote: »

Any entitlement to claiming WTC is deliberately wide ranging. Even Tax Professionals/Accountants are unable to agree on whether someone, in your circumstances, is entitled to make a claim. It's all in the interpretation of the Rules set by HMRC.

The link as given on the website (in the paragraph).. ...the Tax Credits Team have received a response from HMRC Department for Benefits and Credits, Customer Strategy, Policy and Change....returns an HTTP 404 code.

However, each case I'm fairly certain, will be judged on its own merits.

One thing to consider is that HMRC are slowly but surely closing whatever 'loopholes' exist.

Which website was that?

Yes I just checked with my accountant, he had not come across this before and suggested just a covering letter on company headed paper explaining my situation. Like you say it will probably just come down to the individual merits and individual interpretation.

NYM

verveuk wrote: »

Which website was that?

Yes I just checked with my accountant, he had not come across this before and suggested just a covering letter on company headed paper explaining my situation. Like you say it will probably just come down to the individual merits and individual interpretation.

It from this website...http://www.taxcreditsteam.co.uk/home/news.aspx The link in the final paragraph is a broken link but I had hoped that as it was from the Dept for Benefits and Credits it would be conclusive.

You'd hope that there was some authoritative information somewhere but there is nothing that I can find

Keep us updated won't you ?

FBaby

I would argue that the work I do is necessary to the operation of the business and if it wasn't done there were would be no business. But I suppose this isn't HMRC's concern and they just looking at the black and white

Then that's what you need to prove. It all depends on what your job actually is. Do you do the same tasks on a weekly basis more or less? If so, show evidence of what you do in a week in detail. If it is different (contract work), then explain what you did each specific week.

The fact that without your job there would be no business is irrelevant. It could be that all that is required to keep the business going is a couple of invoices sent a week, or it could be working 70 hours a week to keep it going. That's what they are interested in.