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Housing Benefit : How is income and capital worked out for Ltd companies?

If you have a Ltd company, and it's a one man band (you're the director and sole shareholder), how does the council assess what your income and capital is when working out housing benefit / council tax?
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Comments

  • *~Zephyr~*
    *~Zephyr~* Posts: 612 Forumite
    Eighth Anniversary 500 Posts Combo Breaker
    The same way they assess everyone - they will want details of any monies you've drawn via PAYE and any dividends received.

    They also may want to see company accounts to verify that the PAYE and dividend information is accurate, but they can obtain those themselves from Companies House.


    As long as you don't lie about your income or any cash you hold in the bank (savings) you can claim all the same benefits as those normally employed.
  • So they assess based ONLY on what the director chooses to pay themselves (whether as salary or dividends or drawings)?

    What about saved profits still in the business?
  • *~Zephyr~*
    *~Zephyr~* Posts: 612 Forumite
    Eighth Anniversary 500 Posts Combo Breaker
    edited 22 March 2017 at 1:49PM
    Retained profits belong to the Company, not you. The Company being a separate legal entity.

    However, your accountant should advise you of an appropriate salary & dividend to pay yourself in the light of the income of the company and the expected costs. The council will expect you to claim an level of salary that is commensurate with the profits the Company makes and if you are not doing so purely to claim benefits, they are not going to fall for it.

    Obviously they cannot expect you to claim a salary that is going to run your business into loss, because this is not reasonable (You have legal responsiblities as a Director), but they won't believe you if you just don't drawn a salary and left the profit in the business.

    I think you need an accountant with very specialist knowledge of the benefits system. You may not find such expertise in every town.
  • tacpot12
    tacpot12 Posts: 9,012 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper
    Saved profits are capital.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • Thanks Zephyr. So they only assess my salary + dividends + drawings (as opposed to the company's income), and I must pay myself an amount that would be considered reasonable in relation to my company's post-expenses post-corporation tax profits. i.e. I shouldn't pay myself too little if they think I could pay myself more. In other words I can plough profits back into the business but not so much that they'll think I'm deliberately impoverishing myself. Is that a fair overview?

    What about saved profits still in the company? Does that count as capital? Does this mean that they begin making deductions when profits exceed £6,000?
  • *~Zephyr~*
    *~Zephyr~* Posts: 612 Forumite
    Eighth Anniversary 500 Posts Combo Breaker
    Thanks Zephyr. So they only assess my salary + dividends + drawings (as opposed to the company's income),

    Drawings? You cannot take drawings from a Ltd Company. Drawings are for Sole Traders.
    ...and I must pay myself an amount that would be considered reasonable in relation to my company's post-expenses post-corporation tax profits. i.e. I shouldn't pay myself too little if they think I could pay myself more. In other words I can plough profits back into the business but not so much that they'll think I'm deliberately impoverishing myself. Is that a fair overview? ?

    Yes. That is fair. Although your Salary is a pre-tax expense and thus reduces your C Tax liabilities.
    What about saved profits still in the company? Does that count as capital? Does this mean that they begin making deductions when profits exceed £6,000?

    Retained profits i.e. profit left over after all expenses (including your PAYE salary), dividends and Corporation Tax, will be classed as Capital in the Company Balance Sheet. The intention being that the Company uses that money to build the business in coming years. That money belongs to the Company, not you.

    This is not to be confused with your own personal capital (savings etc) which affects the benefits you can claim.
  • Lionel_Itchie
    Lionel_Itchie Posts: 23 Forumite
    edited 22 March 2017 at 3:47PM
    Really? The company's retained profits aren't considered? But it's still capital. I know it belongs to the company but would the council really not consider it yours for their purposes nonetheless? Not that I'm complaining, I hope it's true. It's just that it doesn't seem to be something the council would allow (it seems too generous and out of character). I mean, what if your company makes £200,000 profit (post expenses and corp tax) but you pay yourself £10,000?

    If what you're saying is correct, would you have a link to confirm this? I'd rather know for sure than always be wondering. At least I'd know where I stand (I hate too much uncertainty). Cheers.
  • *~Zephyr~*
    *~Zephyr~* Posts: 612 Forumite
    Eighth Anniversary 500 Posts Combo Breaker
    Really? The company's retained profits aren't considered? But it's still capital. I know it belongs to the company but would the council really not consider it yours for their purposes nonetheless? Not that I'm complaining, I hope it's true. It's just that it doesn't seem to be something the council would allow (it seems too generous and out of character). I mean, what if your company makes £200,000 profit (post expenses and corp tax) but you pay yourself £10,000?

    If what you're saying is correct, would you have a link to confirm this? I'd rather know for sure than always be wondering. At least I'd know where I stand (I hate too much uncertainty). Cheers.

    But if your company makes £200k you would be expected to draw a salary+dividend package of considerably more than £10k.
  • Of course. I guess what my question boils down to is, do the council get much in the way of a company trying to grow? Obviously if you're relying on them for HB, you can't just earn large amounts without them reducing their help (they've got to draw the line somewhere), but at the same time, if you really want a business to grow so that the owner doesn't need help with rent any more, you'd need to allow some breathing space. A reasonable balance, if you will. I'm just worried that the deductions will be so much that the company's progress (and thus eventual non-reliance on the council) will be seriously impeded.
  • *~Zephyr~*
    *~Zephyr~* Posts: 612 Forumite
    Eighth Anniversary 500 Posts Combo Breaker
    I think I appreciate what you are trying to say but what you are essentially describing is the building of a future business empire on the back of the benefits system. This isn't how it works and (I assume) isn't how 'the dragons' made their money.

    As I said before, you need an accountant with very specialist knowledge of the benefits system.
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