Tax Credits Messed Up. Is there help available?

gazfocus

A bit of background info...I worked full time until February 2016 at which point I lost my job. I began working for myself (directory of a ltd company) and have been doing so ever since. In April 2016 we had a baby and she started nursary in November 2016.

So, a few weeks ago now (probably January), I received a letter from tax credits saying that they could find no information about my employment and I needed to send proof by x date. I sent the proof in that they asked for and a letter explaining everything, they posted everything back to me and I heard nothing more. Fast forward to this week and I got a letter on Monday with a final award notice for 6th Aptil 2016 to 6th April 2016 showing I was entitled to £18 and had been overpaid by about £10,000.

I phoned tax credits and they said the system is showing a £25,000 overpayment and all employment details since I lost my job in February 2016 had been removed from my claims and without employment I'm not entitled to tax credits.

I explained to the person on the phone about the documents I sent in and was told they could not see them but they can see they were received. They have forwarded my details to the 'case worker' for them to phone me back.

The issue (I believe), is that the company can only afford to pay me £500 per month at the moment, but HMRC don't require businesses to register as an employer if they don't pay anyone more than £113 per week, so to keep things simple, my wage is £113 per week (£489.66 per month). As the company doesn't need to register as an employer, it doesn't need to file the wage with HMRC and I think this is where the issue has come about, because HMRC have no record of my wage/employment.

But, what I'm wondering is, is there any help available while HMRC are looking at this? I can't pay a mortgage, childcare costs, food, electric, gas, water, council tax, etc, out of £489.66 per month and while that's my issue and no-one elses, I just wonder if there's anything I can turn to (a crisis loan perhaps) that I can pay back when HMRC sort my tax credits claim out.

Darksparkle

It's £113 per week or more so you should be registered for PAYE. This would also allow you to get your Class 1 NIC credits.

https://www.gov.uk/register-employer/y

Technically as a company director you should also be registered for self assessment.

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

BorisThomson

You're paying yourself less than £3.50 an hour, closer to £3 if you base it on proper full time hours. This, in combination with the other issues, is going to raise questions as to whether you are in meaningful employment.

Is it time to look for paid employment, before WTC decide to end your claim?

gazfocus

Darksparkle wrote: »

It's £113 per week or more so you should be registered for PAYE. This would also allow you to get your Class 1 NIC credits.

https://www.gov.uk/register-employer/y

Technically as a company director you should also be registered for self assessment.

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

I get £489.66 per month which is just below the £490 per month stated on the gov.uk website. I do complete a self assessment and sent that to tax credits (and my pay slips) when they asked for proof of my employment.

BorisThomson wrote: »

You're paying yourself less than £3.50 an hour, closer to £3 if you base it on proper full time hours. This, in combination with the other issues, is going to raise questions as to whether you are in meaningful employment.

Is it time to look for paid employment, before WTC decide to end your claim?

The company is relatively new and its turnover is increasing every few months so it's something I feel I should stick at (every new company starts somewhere so I don't think it's time to give up).

sheramber

As an employee you need to be paid National Minimum Wage which is £7.50 at present, goes up to £7.85 on 1 April.

How many hours are you claiming you work? 16 hours @ £7.50 = £120 .

https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0118180#IDAKKGSE
.........................
If the director is also employed by the company then they must receive at least the NMW for the hours worked as an employee. In either case, remuneration is taxed under the Income Tax (Earnings and Pensions) Act 2002.

System

Looks to me like youre calling ebay selling a job and 'employing' yourself but trying not to pay any tax or ni and claiming as much as possible in tax credits.
Youre probably a landlord too and not paying any tax on that income either. You cant have it all ways. You want to earn not enough to pay tax but enough to claim tax credits? Just try getting a real job.

gazfocus

sheramber wrote: »

As an employee you need to be paid National Minimum Wage which is £7.50 at present, goes up to £7.85 on 1 April.

How many hours are you claiming you work? 16 hours @ £7.50 = £120 .

https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0118180#IDAKKGSE
.........................
If the director is also employed by the company then they must receive at least the NMW for the hours worked as an employee. In either case, remuneration is taxed under the Income Tax (Earnings and Pensions) Act 2002.

This is where it gets confusing....

Taken from https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0118080

Note: Directors of limited companies are classed as office holders but their earnings are classed as employment income. Employment income for tax credit purposes

The thing is, when I lost my job and started working for my own company full time, I phoned and made the Ganges to tax credits on the phone. Was honest about income and hours worked and that I was the director, etc so how can they then decide later that that’s wrong?

gazfocus

tessiesmummy wrote: »

Looks to me like youre calling ebay selling a job and 'employing' yourself but trying not to pay any tax or ni and claiming as much as possible in tax credits.
Youre probably a landlord too and not paying any tax on that income either. You cant have it all ways. You want to earn not enough to pay tax but enough to claim tax credits? Just try getting a real job.

Excuse me but that is most definitely not the case. I am running a full time business, we have commercial print equipment, business premises that we pay rent for, etc. The business at present makes enough per month to pay the companies bills and pay me the wage I get paid.

I’m not and never have been the sort to scrounge and that is why I decided to take a different approach when I saw how little there was in terms of jobs that I was qualified for rather than claiming jSA. It’s not a bad thing to rely on tax credits that are there to help people on low wages.

BorisThomson

gazfocus wrote: »

This is where it gets confusing....

Taken from https://www.gov.uk/hmrc-internal-manuals/tax-credits-manual/tcm0118080



The thing is, when I lost my job and started working for my own company full time, I phoned and made the Ganges to tax credits on the phone. Was honest about income and hours worked and that I was the director, etc so how can they then decide later that that’s wrong?

HMRC will give you a period to establish yourself, a period of test trading. After that they will review if the business is viable in the long term. If you can only pay yourself £3 an hour after two years, they are going to ask questions. Can you demonstrate to them how your situation will improve in the near future?

gazfocus

BorisThomson wrote: »

HMRC will give you a period to establish yourself, a period of test trading. After that they will review if the business is viable in the long term. If you can only pay yourself £3 an hour after two years, they are going to ask questions. Can you demonstrate to them how your situation will improve in the near future?

The business is improving and has only began turning a regular profit over the past 12 months, so things are going the right way, but they have said they’ve ‘removed my employment’ from the last two years.

I’ve also read on gov.uk that directors are exempt from NMW if there’s no ‘contract of employment’ which there isn’t. All so very confusing.

Darksparkle

gazfocus wrote: »

The thing is, when I lost my job and started working for my own company full time, I phoned and made the Ganges to tax credits on the phone. Was honest about income and hours worked and that I was the director, etc so how can they then decide later that that’s wrong?

Because the adviser on the phone simply updates your changes. They don't see your business records in order to make a decision on your claim, that's what the compliance staff is for.