Company directors and universal credit

Romie

Hi all, I’m looking for advice please.

My partner and I have two children, I’m currently on maternity leave and my partner is a Company Director for a LTD company.

I would like to claim universal credit while I am off work once my maternity pay stops (as I intend to take a year off). However I can’t get my head around how this works with my partner being a company director.

My partner is one of three directors and they do not have any other enployees, it is a small company. They are all paid a monthly salary and receive around £2000 dividends each a year.

How do we go about claiming UC and will they just look at his salary or are they going to want monthly statements of business profits? If they look at business profits will they take into account that it goes 3 ways between the other directors?

Any advice will be much appreciated.

calcotti

As a company director he will be treated as self employed and DWP will want details of all income and expenditure for the business each month and will take his share of the difference as his income.


See https://www.gov.uk/self-employment-and-universal-credit

Romie

calcotti wrote: »

As a company director he will be treated as self employed and DWP will want details of all income and expenditure for the business each month and will take his share of the difference as his income.

]

Ok so if the company earned £4000 profit in one month, had £1000 expenditure such as rent and phone line etc. Then the remaining £3000 would be split 3 ways. DWP would take it as £1000 income?

I’m just curious as to how the declaring and then calculating bit works on their side. It doesn’t seem reasonable for them to take all of the profit into account as it’s shared 3 ways so want to ensure that would be the case.

Thanks for replying.

calcotti

Yes that's right - it's his share (in this case one third) that is used. For UC purposes the calculation is based on cash accounting so it is all income actually received in the month and all expenditure actually spent in the month.

pmlindyloo

calcotti wrote: »

As a company director he will be treated as self employed and DWP will want details of all income and expenditure for the business each month and will take his share of the difference as his income.


See https://www.gov.uk/self-employment-and-universal-credit

I think this link is misleading.

If you read H3 in this link - 3006/3007 and H4 - 4360

https://www.gov.uk/government/publications/advice-for-decision-making-staff-guide

I think in the OP's case that her OH will be regarded as employed.

I think it is when there is only one director of a company and they are treated as a sole trader that they are treated as self employed.

I know DWP employees get this wrong so it might be useful to have the Advice for Decision Makers to quote.

calcotti

I think you're right pmlindyloo, the page I quoted is an over simplification.

I think it depends on whether the director is also an owner of the company.

If one is simply employed as a director by a company then remuneration would be treated in the normal way as for any employee.

However if one is an owner/director I think this would be 'analogous to being a partner' and then one would be treated as self employed. (I am reading H4361 as 'sole trader' or 'partner' - not as 'sole trader' and 'sole partner'.) I believe this is logical because the purpose of these rules is to prevent someone who has control over their remuneration manipulating it in order to claim benefit.

I interpreted the OPs post as being the case of an owner/director because he gets dividends and OP says there are just the three directors.

TELLIT01

calcotti wrote: »

As a company director he will be treated as self employed and DWP will want details of all income and expenditure for the business each month and will take his share of the difference as his income.


See https://www.gov.uk/self-employment-and-universal-credit

Are you sure about being treated as self-employed? Under ESA / JSA rules a company director would have been treated as an employee. It's entirely possible that the rules changed under UC so I'm just asking.

calcotti

TELLIT01 wrote: »

Are you sure about being treated as self-employed? Under ESA / JSA rules a company director would have been treated as an employee. It's entirely possible that the rules changed under UC so I'm just asking.

See further analysis contained in previous two posts by pmlindyloo and myself.

Romie

To clarify, he also is part owner of the company.

Icequeen99

The legislation is here: https://www.legislation.gov.uk/uksi/2013/376/regulation/77/made (the left hand column has the latest version, although this regulation has only changed slightly)

The purpose is to look through the limited structure - the only way he can get out of this rule (and be treated as an employee) would be to argue that he doesn't stand in a position analogous to a sole owner or partner.

I doubt many people have been caught by this provision yet and it is a departure from tax credits and other benefits.

IQ

calcotti

Icequeen99 wrote: »

The legislation is here: https://www.legislation.gov.uk/uksi/2013/376/regulation/77/made (the right hand column has the latest version, although this regulation has only changed slightly)
IQ

Thanks for that link which confirms the legislation behind the information in Advice to Decision Makers.