Tax Credits & Company Director on Zero Wage

getmeouttahere

A bit of background...up until recently, I was employed earning £18,000 per year, and a company director earning no wage from the company. My wife is a company director but doesn't get any wage yet, and is also disabled. We've been receiving Working Tax Credits of about £50 per week.

I've just lost my job and have decided to throw myself into our own company and make it my full time job. The company, at present, is not making enough to pay either of us a wage, but I know if I have more time to dedicate to it, the company will start to make a profit (the company is covering its own expenses including rent on an office without much advertising).

To top it off, my wife also had a baby two weeks ago, so I need to tell HMRC about the change in my employment, and the addition of our first child. However, I'm worried that they'll turn round and say that because I'm not earning anything, we don't get anything.

I've tried reading up on company directors entitlement to WTC but get a bit confused, so I was wondering if anyone could offer any help.

Thanks

HappyMJ

You can still pay yourself a salary from the company even if it is not making a profit.

You can lend the money to the company as a director loan so it can make the salary payment to you. That loan can then be repaid to you in the future and you won't pay any tax on it at the time. It'll minimize your corporation tax bill in the long term.

UC claims require you to eventually earn something usually something similar to minimum wages for the hours you claim to work. They are trying to eliminate unprofitable businesses from continuing just for the purposes of claiming UC without any requirement to actually do any meaningful work. UC and JSA pay very similar amounts. One requires to do some work and one requires you to actively look for work. Some people have been choosing to work very casually with no intention of making a profit just to get an easy life on tax credits.

WTC rules are slightly different but you will still have a requirement to intend to work for a profit but there is no requirement to earn Minimum Wages so I would pay something even if it's just one or two pounds an hour.

Darksparkle

You dont need to work or earn to receive CTC, only WTC.

Guidance isn't very clear for company directors to be honest. Directors are treated as employees rather then self employed. You need to declare any salary, company benefits and dividends you both take.