WTC - Director - Company profit???

WorriedinSussex

Hi and thanks for all your input, it is appreciated.
A few points:
I am not self employed.
I do not have a contract of employment which I believe 'excuses' me from the need to pay myself 30 X minimum Hourly Wage/week.
I am not paid - no PAYE.
I have supplementd my income and that of my business by selling off personal possessions, not much left, I even sold my old Land Rover and a collection of model trains.
I have asked for a mandatory reconsideration to which they have replied that a Ltd Co has to be profitable for WTC to be paid.... Clearly a position not based in commercial reality.
Any further input very welcome.

marliepanda

WorriedinSussex wrote: »

Hi and thanks for all your input, it is appreciated.
A few points:
I am not self employed.
I do not have a contract of employment which I believe 'excuses' me from the need to pay myself 30 X minimum Hourly Wage/week.
I am not paid - no PAYE.
I have supplementd my income and that of my business by selling off personal possessions, not much left, I even sold my old Land Rover and a collection of model trains.
I have asked for a mandatory reconsideration to which they have replied that a Ltd Co has to be profitable for WTC to be paid.... Clearly a position not based in commercial reality.
Any further input very welcome.

Commercial reality is having a company that can pay you at least NMW after 4 years.

What you have is a hobby, and WTC will not supplement your hobby.

I'm not trying to be harsh and disparage your business, but a business is to make money. Yes you need chance to get going, but youve had 4 years. Your business cannot sustain a wage, and youve had to sell off personal possessions to keep it afloat.

It is not viable. It doesnt matter how much money it brings in if the costs are the same. I could make a million pounds a month doing something fantastic, but if it costs me a million and one pounds a month so do it, its not a business.

Pennywise

The rules are that you must be paid at least minimum wage for the hours you are claiming you're working for tax credit purposes. So if on your tax credit claim, you say you're working 30 hours, then HMRC base your tax credit claim on 30 hours at NMW rate.

As a director, you have dual roles. You are an office-holder and also an employee. It's your wages for being an employee that count for tax credit purposes. If you're not paying any wages to yourself, then you can't claim to be working those hours.

Nothing to stop you declaring a "wage" through the companys payroll for the hours you claim to work, submit returns to HMRC on that basis, no tax/nic is due because the wage will be too low, but as you've "declared" a wage for the hours claimed to work, you should get tax credits based on that level of wage. You don't need to actually pay it to yourself, it will just be down in the company accounts as directors loan, to be able to be paid to you at a later date when the company has funds.

FBaby

Clearly a position not based in commercial reality.

Oh really? So if it wasn't for tax credits supporting you for all this time, would you have been happy to take loans and survive on these whilst waiting for your business to succeed so you could repay these loans and finally live off the income?

That USED to be the reality and no-one would have been stupid enough to continue to do that after 4 years.

Comms69

you're an employee, you cant keep money in the company by having the taxpayer subsidise you.


Pay yourself the NMW/NLW or find yourself in this situation.

Darksparkle

Pennywise wrote: »

The rules are that you must be paid at least minimum wage for the hours you are claiming you're working for tax credit purposes. So if on your tax credit claim, you say you're working 30 hours, then HMRC base your tax credit claim on 30 hours at NMW rate.

As a director, you have dual roles. You are an office-holder and also an employee. It's your wages for being an employee that count for tax credit purposes. If you're not paying any wages to yourself, then you can't claim to be working those hours.

Nothing to stop you declaring a "wage" through the companys payroll for the hours you claim to work, submit returns to HMRC on that basis, no tax/nic is due because the wage will be too low, but as you've "declared" a wage for the hours claimed to work, you should get tax credits based on that level of wage. You don't need to actually pay it to yourself, it will just be down in the company accounts as directors loan, to be able to be paid to you at a later date when the company has funds.

There is no rule that says you MUST be paid NMW for the hours you are claiming. They also don’t base your claim on number of hours x NMW.

Rules were brought in for the self employed that if you didn’t earn working hours x nmw then you may be subject to a compliance check to check the self-employed activity is done on a commercial basis with a view to realising a profit and it must be organised and regular. This doesn’t apply to the OP as he isn’t self employed.

Although HMRC rules state you must be employed or self employed, HMRC say that the requirement to be either employed or self-employed will not be applied so as to remove entitlement from those whose status is unclear, such as some company directors

marliepanda

Darksparkle wrote: »

Although HMRC rules state you must be employed or self employed, HMRC say that the requirement to be either employed or self-employed will not be applied so as to remove entitlement from those whose status is unclear, such as some company directors

I don't think that this ruling is intended to allow directors to maintain unprofitable companies until the end of time subsidised by tax credits.

Happy to be shown to be incorrect...

Darksparkle

marliepanda wrote: »

I don't think that this ruling is intended to allow directors to maintain unprofitable companies until the end of time subsidised by tax credits.

Happy to be shown to be incorrect...

Probably not but that’s their issue for not making clear rules for directors. But going on about the self employed rules isn’t going to help OP because they are irrelevant in this case.

It’s likely they are making the decision under work done in expectation of payment.

Pennywise

Darksparkle wrote: »

There is no rule that says you MUST be paid NMW for the hours you are claiming. They also don’t base your claim on number of hours x NMW.

If you follow through all parts of the legislation, there is.

http://www.legislation.gov.uk/uksi/2002/2005

Particularly Para 4 (1) Fourth Condition

"the work done is for payment or in expectation of payment"

Darksparkle

Pennywise wrote: »

If you follow through all parts of the legislation, there is.

http://www.legislation.gov.uk/uksi/2002/2005

Particularly Para 4 (1) Fourth Condition

"the work done is for payment or in expectation of payment"

Yes but that doesn’t say you MUST earn NMW.