How much information can they ask for?

Housing_Benefit_Officer

Many Local Authorities have wised up to Company Director Housing Benefit claimants who draw a pittance in Directors Remunerations when their Company may have a multi million turnover and sometimes huge profits. Some unscrupulous individuals get the taxpayer to pay their rent hiding their real wealth and income by drawing a tiny amount as a Director.

benniebert

TELLIT01 wrote: »

I'm guessing that you are both self-employed. That's quite possibly the reason they are doing regular check - to see how income fluctuates.

There is no self employment involved from what the OP has said. It appears that he is employed by his own company and therefore an employee. Why they want to see the audited account baffles me. It doesn't matter what the company earns or how much retained profit it has, what does matter is how much the company (his employer) actually pays out in wages to him.


The company could be earning £1,000's a week making a net profit of 50%. If he is only paid at NMW, the rest of the money would stay in the company presumably as capital for investment purposes.


However I can see why the LA is questioning it, but to be honest they are on a fishing expedition as long as the company has protected itself properly.

benniebert

NYM wrote: »

they need to see who you're paying out to.

Seems that you know. Question Why??


Would it make any difference if he was spending £100 a day on Cocaine? or maybe he likes to lease very expensive cars or has regular expensive holidays or meals out.


What he spends on his lifestyle has no bearing whatsoever on any HB claim. HB claims are based on earnings BEFORE he spends it.

benniebert

poppasmurf_bewdley wrote: »

What you seem to be saying is that you and your partner are directors of a Limited Company that is not making any money.

If this is the case, the council will rightly want to know (a) why you are running a company that is not making any money?, and (b) where the money is going?

They have to make sure you are not paying out to your Great Aunt Fanny and other members of your family to ensure you are not diverting money to them in a bid to show the company as loss making in an effort to increase benefits.

This was not done in the past to any great degree, but it is bound to increase as the government is determined to prevent unemployed people running non-profit making companies to maximise benefit payments - something that has been rife for quite a few years.

Tosh!!


Are you seriously saying that the LA have the rights and power to investigate the financial affairs of a limited company? To investigate if Aunt Fanny is being overpaid for the work she does? A limited company is a legal entity in its own right. What, how, when it earns and spends is for HMRC to consider not some clerk in the LA offices. Besides which, I doubt that many if any at the LA would understand the meaning of a 'Limited Company'.

rogerblack

benniebert wrote: »

There is no self employment involved from what the OP has said. It appears that he is employed by his own company and therefore an employee. Why they want to see the audited account baffles me. It doesn't matter what the company earns or how much retained profit it has, what does matter is how much the company (his employer) actually pays out in wages to him.

Because the government takes the - not unreasonable - view that choosing to retain profit in the company, and have the taxpayer subsidise the directors housing is not a choice that the director gets to make.
Intentionally structuring your affairs to pay less tax or get more benefit is not in all cases legal, and what is legal in some aspects may amount to fraud if done in others.

benniebert

Housing_Benefit_Officer wrote: »

Many Local Authorities have wised up to Company Director Housing Benefit claimants who draw a pittance in Directors Remunerations when their Company may have a multi million turnover and sometimes huge profits. Some unscrupulous individuals get the taxpayer to pay their rent hiding their real wealth and income by drawing a tiny amount as a Director.

I agree it may stink to high heaven, but what powers does the LA have to dictate what level of salary someone should be getting? None that I am aware of.
As for hiding their wealth in the company - how would you presuppose that is carried out? High bank balances, new equipment, new commercial property? All the company has to say is that the high level of reserves are set aside for future investment.
However you may be thinking of Directors Loan Accounts. If so, that is a different thing all together. They are 'holding accounts' for money promised to the director but not withdrawn.


Any decent accountant would put an end to that straight away as it, as you say could cause problems.


Much better to leave it in the company which would affect the share price and still be available to the director via a dividend if and when he wanted it. It would always be company money until that dividend was declared.


Seems therefore that LA's are trying to catch a fish by the tail.


Trusts are the same. With a discretionary trust the beneficiary isn't entitled to anything until the Trustees agree. Obviously if benefits are involved the beneficiary doesn't want to have too much income. That doesn't stop the income accruing in the trust. But until such time as he/she takes that money, it still belongs to the trust. Personally I would let the money accrue, live on benefits for maybe 10 years knowing that in time, a huge wedge of money is coming my way when I would stop claiming.

benniebert

rogerblack wrote: »

Because the government takes the - not unreasonable - view that choosing to retain profit in the company, and have the taxpayer subsidise the directors housing is not a choice that the director gets to make.
Intentionally structuring your affairs to pay less tax or get more benefit is not in all cases legal, and what is legal in some aspects may amount to fraud if done in others.

I'm sorry but your thinking is a little misplaced.
As I have said there may well be good commercial reasons for the company to hold on to the money. That decision is not for questioning by a LA.


Having a company retain it's excess profits instead of paying it out in wages has nothing to do with a LA.


If a director is paid NMW under a contract and the company is retaining profits of millions a year, who do you think has the power to force that company to pay out that excess income? No one other than the directors. It's the shareholders that dictate the salary a director takes. However the shareholders can be the directors so they have two hats to work with.


I'm sorry but you are showing very little knowledge of corporate strategy.

Londonsu

benniebert wrote: »

I'm sorry but your thinking is a little misplaced.
As I have said there may well be good commercial reasons for the company to hold on to the money. That decision is not for questioning by a LA.


Having a company retain it's excess profits instead of paying it out in wages has nothing to do with a LA.


If a director is paid NMW under a contract and the company is retaining profits of millions a year, who do you think has the power to force that company to pay out that excess income? No one other than the directors. It's the shareholders that dictate the salary a director takes. However the shareholders can be the directors so they have two hats to work with.


I'm sorry but you are showing very little knowledge of corporate strategy.

But ANY money a claimant may have access to is everything to do with the LA when it comes to handing out free money.


Even my 84 Dad who worked and paid taxes for 70 years had to go through hoops to claim housing benefit- if he had to then so does everyone else

missapril75

benniebert wrote: »

Tosh!!

Nice of you to warn o the contents.

benniebert wrote: »

I agree it may stink to high heaven, but what powers does the LA have to dictate what level of salary someone should be getting?

I imagine none whatsoever. What they might consider though is notional earnings whereby someone performs a service such as work for a commercial enterprise and doesn't receive the sort of payment commensurate with the service provided.

tomtom256

benniebert wrote: »

I'm sorry but your thinking is a little misplaced.
As I have said there may well be good commercial reasons for the company to hold on to the money. That decision is not for questioning by a LA.


Having a company retain it's excess profits instead of paying it out in wages has nothing to do with a LA.


If a director is paid NMW under a contract and the company is retaining profits of millions a year, who do you think has the power to force that company to pay out that excess income? No one other than the directors. It's the shareholders that dictate the salary a director takes. However the shareholders can be the directors so they have two hats to work with.


I'm sorry but you are showing very little knowledge of corporate strategy.

Here have a blank cheque, take whatever you need whilst you earn nothing from your none business, we will pay you to pretend to work.

Corporate strategy, from a one person company in your own words tosh!!