Self employed changed to ltd company last year

nharris1000

Hi,
My husband has been self employed for about 6 years and has all of his accounts. He was advised by his accountant to change to a limited company last year and so the bulk of his income was paid by dividends for the tax year 2018/2019. Will all 3 years be taken into account as he is still a sole electrician working and nothing has changed apart from the legal status of the company? We're not sure what support he is eligible for. Many thanks.

Jeremy535897

I am afraid that this change will preclude him from obtaining a self employment grant. This is because he will not meet the eligibility criteria:
"You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19".

He will not meet bullet points 3, 4 and 5. If he pays himself a salary and is on a payroll with HMRC, and cannot do any work for the company, he might be able to furlough himself under the job retention scheme, but dividends don't count in establishing what his pay is.

Hermann

If he has no PAYE earnings furlough is not available.

The self employed criteria are....

You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:

• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

Hermann

Note the more than half your income must be from self employment element.

nharris1000

Thank you. Is there anything he is eligible for? This seems so unfair. We don't qualify for UC as I work.

Hermann

What is the answer to the main employment question SE or PAYE.

Hermann

And also note the option for three year averaging in the criteria.

nharris1000

He's self employed but transferred to ltd company a last year. No PAYE - just dividends. We've got all the books for previous years - same business - just himself working as an electrician. It looks like we are going to get no support whatsoever!

mobilejo

nharris1000 said:

He's self employed but transferred to ltd company a last year. No PAYE - just dividends. We've got all the books for previous years - same business - just himself working as an electrician. It looks like we are going to get no support whatsoever!

Being a director doesn't make you self-employed. Its possible to be self-employed, and (separately) be a ltd company director (two different businesses) but that's not the impression I'm getting here.

It sounds like he is now a ltd company director, in respect of the same work for which he used to be self-employed? If thats the case, then he is not self-employed anymore, he is now only a director of his company. And with no PAYE, he cannot claim anything.