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

Lionel_Itchie

Building a future business empire on the back of the benefits system. It has a ring to it, I might put that in my memoirs. But no, I just need to be sure how things work so I know what to expect. How would I be able to know that an accountant knows about HB? Is there a term that they might use to indicate that? Sorry for so many questions.

fishybusiness

Be careful of Notional Income and Notional Capital rules.

Having capital held in the company bank, say after CT has been paid, over and above that needed for adequate cashflow may be classed as capital for HB purposes.

Same goes for holding money back, accumulating if you like instead of taking a reasonable salary and/ or dividends could be classed as income.

Purchasing equipment solely for running of the business is legitimate, if you have personal use also, that may be viewed differently.

If you did have a company, with assets and wound it up, sold the assets, as shareholder funds would come to you, HB would need to be informed - would be classed as capital/ income at that point.

Lionel_Itchie

On what basis do they decide what is a reasonable amount of money to keep in the company to keep it going (inc. paying liabilities) and growing? I could of course come up with what I think is a reasonable figure, but obviously they will have their own way of calculating it. Is there a guide to how they do it so I know what to expect?

fishybusiness

Nope, no guide that I have ever found.

You have to play the game, be sensible, be able to justify what you are doing and take it from there.

The company being a seperate legal entity is a bit of a red herring IMO.

If you look in to the HB rules, a sole director and only shareholder can be treated in a similar way to a sole trader.

Have a look at the HB Regulations 2006, No 213, Part 6, Section 6, Regulation 49.

http://www.legislation.gov.uk/uksi/2006/213/regulation/49/made

Lionel_Itchie

Oh yes of course, I understand that being a separate legal entity means nothing in terms of HB (except of course that they can't step on your toes by preventing you from fulfilling your duties as a director i.e. use money to help the business grow).

So I suppose as long as I spend what I need to spend to keep the thing going, and pay myself not too little, I should be fine. I just wish I knew what not too little means. I'd be in no hurry to take much of a salary to begin with, as I'd want the business to start growing quick.

Interesting link. It's so complicated though, with all that legal jargon and weird sentences. I know that there's a housing benefit manual for the councils to use, but I haven't been able to find it.

fishybusiness

It is complicated, I've read it and re read it on occasion, and think I have it sorted now.

Re wages, we started by taking 4 hours NLW for me and 2 hours NLW for my partner.

Made sure PAYE and RTI were sorted out and we didn't have any comeback. All of our extra earnt money went in to advertising, buying equipment and running our vehicle. Vehicle was purchased by us and transferred to the company, via DLA account.

I guess there is a debate hinging on the being paid benefits but choosing to pay low wages, but really it is a stupid debate.

If a start up can't afford to advertise and buy equipment, nor does the business owner have status to borrow money, income is likely to be limited or near non existent for years as growth is funds limited. Meaning a much longer trip claiming benefits.

If a business can grow more quickly, it is more likely it will reduce its reliance on benefits or remove it altogether. That's the way I looked at it.

Housing_Benefit_Officer

Directors and Limited Companies are one of the messiest parts processing Housing Benefit claims. Usually mistakes in processing...

https://www.hbinfo.org/training/courses/company-directors-and-housing-benefit

Lionel_Itchie

Fishybusiness,

True. If it goes well, I suppose none of this will be an issue. But still, I'm dying to know what they'd consider a reasonable amount to spend on the business and to pay oneself based on how the business is doing. I'm probably going to dedicate the rest of the day to finding out. The curiosity is killing me.

Lionel_Itchie

HBO,

Which bit is the trickiest?

Housing_Benefit_Officer

Lionel_Itchie wrote: »

HBO,

Which bit is the trickiest?

Because Housing Benefit Officers aren't qualified accountants. Most can't spot if cash is being stored in a business account rather than a private account. Neither is figuring out what are Directors remunerations or spotting if a businesses is paying back loans to the Director etc etc etc. We used to look at the Business Accounts and ask for wage slips and the P35. Since they were scrapped we refer to real time information submitted to HMRC.