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

fishybusiness

spotting if a businesses is paying back loans to the Director

I've wondered about that, we have loaned our company money and wondered about the legailites in HB world of taking it back. We haven't as yet, and we will probably wait years until we do.

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.

Well, good luck to you, I don't think you will find much tbh, have looked time and again.

Thinking on, surely your business would have to make a business case for investing, rather than paying a higher salary.

If wages can be paid and the company can sustain its income, without further investment, with wages to a level above HB threshold, then further investment should be done after ceasing a claim?

Also, in our own company, my aim is to get us right off the benefits system as fast as I can, so that means to me a claimant ought be able to demonstrate a motivation and business behaviour inclined towards moving off benefit reliance.

I'd be surprised if assessors look in to business investment v income, they would need accountant certified accounts. Companies House hold the returns, so I suppose if the yearly accounts show stacks of investment they may ask for more information.

Housing_Benefit_Officer

fishybusiness wrote: »

I've wondered about that, we have loaned our company money and wondered about the legailites in HB world of taking it back. We haven't as yet, and we will probably wait years until we do.



Well, good luck to you, I don't think you will find much tbh, have looked time and again.

Thinking on, surely your business would have to make a business case for investing, rather than paying a higher salary.

If wages can be paid and the company can sustain its income, without further investment, with wages to a level above HB threshold, then further investment should be done after ceasing a claim?

Also, in our own company, my aim is to get us right off the benefits system as fast as I can, so that means to me a claimant ought be able to demonstrate a motivation and business behaviour inclined towards moving off benefit reliance.

I'd be surprised if assessors look in to business investment v income, they would need accountant certified accounts. Companies House hold the returns, so I suppose if the yearly accounts show stacks of investment they may ask for more information.

I dealt with a self employed Eastern European who imported food from his homeland. His self employed income (profit) after a few years trading was in excess of £30k. His Housing Benefit ceased. A few weeks later he reclaimed - this time he was a Director of a Limited Company paying himself just £100 per month. My line Manager said I had to accept his income was just £100 per month! I made sure I had that advice in writing and processed the claim. Still claiming Housing Benefit on a pittance of a Directors remuneration.

Becoming 'self employed' used to be a good way to get people off the unemployment statistics but they have been cracking down on 'fake' self employment for a while now. The next crackdown will be Directors of Limited Companies whose only purpose is to enable the Director to claim means tested benefits.

Lionel_Itchie

Housing_Benefit_Officer wrote: »

I dealt with a self employed Eastern European who imported food from his homeland. His self employed income (profit) after a few years trading was in excess of £30k. His Housing Benefit ceased. A few weeks later he reclaimed - this time he was a Director of a Limited Company paying himself just £100 per month. My line Manager said I had to accept his income was just £100 per month! I made sure I had that advice in writing and processed the claim. Still claiming Housing Benefit on a pittance of a Directors remuneration.

Becoming 'self employed' used to be a good way to get people off the unemployment statistics but they have been cracking down on 'fake' self employment for a while now. The next crackdown will be Directors of Limited Companies whose only purpose is to enable the Director to claim means tested benefits.

It's crazy how someone can go to the trouble of setting up a Ltd company just to pay themselves peanuts to get housing benefit. Why not fully enjoy the fruits of your labour plus have the pride of paying your own rent?

By the way if having a Ltd company would make assessments difficult, do you think it would be better to start as a sole trader? I take it it's much more straightforward, would that be correct? Do they allow a certain amount of profit to be disregarded in the assumption that it's necessary to keep running the business? Also how do they distinguish between income and capital?

Housing_Benefit_Officer

Lionel_Itchie wrote: »

It's crazy how someone can go to the trouble of setting up a Ltd company just to pay themselves peanuts to get housing benefit. Why not fully enjoy the fruits of your labour plus have the pride of paying your own rent?

By the way if having a Ltd company would make assessments difficult, do you think it would be better to start as a sole trader? I take it it's much more straightforward, would that be correct? Do they allow a certain amount of profit to be disregarded in the assumption that it's necessary to keep running the business? Also how do they distinguish between income and capital?

With self employed we look at income and some but not all outgoings and the profit is the income.

With a company Director we look at their remunerations or wages they pay themselves.

If you can perfectly legally reduce your income by becoming a Director to continue to receive, in some cases, £10k of Housing Benefit, Council Tax Support and Tax Credits then most people would do this.

Lionel_Itchie

Housing_Benefit_Officer wrote: »

With self employed we look at income and some but not all outgoings and the profit is the income.

With a company Director we look at their remunerations or wages they pay themselves.

If you can perfectly legally reduce your income by becoming a Director to continue to receive, in some cases, £10k of Housing Benefit, Council Tax Support and Tax Credits then most people would do this.

So as a sole trader, my business income minus expenses would be assessed as my personal income. But what about the fact that I would need a certain amount of cash in the business at all times to keep the business going? Would that be considered?

Housing_Benefit_Officer

Lionel_Itchie wrote: »

So as a sole trader, my business income minus expenses would be assessed as my personal income. But what about the fact that I would need a certain amount of cash in the business at all times to keep the business going? Would that be considered?

We would look at income and expenditure for the financial year. If your income in the last financial year was £15,000 and after allowable expenses your income for benefit purposes was £10,000 and you kept £8,000 in your business bank account - your income for benefit purposes would still be £10,000 - as the capital is in a business account we would disregard it. If you put the £8,000 in your own private bank account we would still treat you as having an income of £10,000 and treat you as having £8,000 capital.

If your business was a Limited Company and you were a Director - we would only treat your Directors remunerations as income.

Lionel_Itchie

Housing_Benefit_Officer wrote: »

We would look at income and expenditure for the financial year. If your income in the last financial year was £15,000 and after allowable expenses your income for benefit purposes was £10,000 and you kept £8,000 in your business bank account - your income for benefit purposes would still be £10,000 - as the capital is in a business account we would disregard it. If you put the £8,000 in your own private bank account we would still treat you as having an income of £10,000 and treat you as having £8,000 capital.

If your business was a Limited Company and you were a Director - we would only treat your Directors remunerations as income.

I think I'm starting to get it. Let me see if I understand.

- Business revenue - expenses = personal income
- Cash remaining in the business bank account = not capital, not anything, just saved profit plus money for future expenses (all irrelevant)
- You don't care what is in the business bank account, you only care about what went in (minus expenses) in a certain period of time. So even if there was a loss, you still ignore whatever is in the account. You're only concerned with what was added to the account.
- Cash in personal account only = capital

I hope I've got that right. If so, that sounds very fair.

fishybusiness

Just be aware if you become a sole trader that expenses for benefit purposes are not identical to expenses for HMRC purposes, so you would have different levels of profit depending on who you are reporting to.

Lionel_Itchie

fishybusiness wrote: »

Just be aware if you become a sole trader that expenses for benefit purposes are not identical to expenses for HMRC purposes, so you would have different levels of profit depending on who you are reporting to.

Yes I heard about that. What kind of expenses do HB usually not count? Do I have to do anything specific? Should I just show them what I have counted as expenses and then they can make adjustments if some of them don't count?

NYM

This is an example of a Housing Benefit claim form...

Self Employed questionnaire...

It might give you an idea of the information that may be required if you were applying as self employed.