Universal Credit for a Limited Company Director

CharlieR1

I am the director and sole employee of my limited company, paying myself through a combination of salary and dividends (mainly dividends). I applied for universal credit, and as that was being processed, spoke to my accountant r.e. the government 80% furlough scheme. I was advised to pay myself my salary as per normal, as this would impact the furlough scheme if I did not, however this has counter acted universal credit who have now paid me £0.00 due to the salary from the limited company.  
Any ideas?
Thank you

Illusionary

If you're still receiving your usual salary (for which you're reclaiming 80% via the Job Retention Scheme?), I'm not sure why you'd also look to claim Universal Credit - unless you set your salary payments are at a very low level?

Jeremy535897

The salary is irrelevant. For universal credit, you look through sole director companies:
"Company analogous to a partnership or one person business  
H4360 A claimant who is in a position similar to a sole owner or partner in relation to a
 1. company which is carrying on a trade or
 2. property business has to be treated as the sole owner or partner . 1 UC Regs, reg 77(1)
 H4361 The effect of H4360 is that where a claimant has been found to be employed as a company director in a position analogous to a sole trader or partner, the claimants is treated in the same way as a claimant who runs a business or owns a property on their own account. For the purposes of UC, a person trading through a company is treated in the same way as one who has not set up a company to conduct their business. ADM Chapter H1 provides guidance on the treatment of capital in these cases. Note: see DMG 27010 for the definition of a company director.
H4362 Whether a person who has shares in a company is similar to a company director, sole owner or partner in the business of that company is a question of fact in each case . A person who does not work for the company can be like a sole owner or partner . 1 R(IS) 8/92; 2 R(IS) 8/92
H4363 The sole owner of a business has total influence over the day to day running of the business. When a business is jointly owned the number of partners is normally small and the influence a partner has over the day to day running of the business will depend on the terms of the partnership agreement. So for a person to be like a
 1. sole owner in the business of the company that person should have total influence over the day to day running of the company, such as when a person owns 99% of the shares in a company and
 2. partner in the business of the company the
 2.1 number of shareholders in the company should be small and
 2.2 person should have some meaningful influence over the day to day running of the company . 1 R(IS) 13/93; 2 R(IS) 8/92
H4364 A person who has some shares in a company which has a large number of shareholders, such as Tesco, is an investor because such a person has no influence over the day to day running of the company"  

calcotti

If your accountant has processed a salary payment to you through a PAYE that will have been reported to HMRC who will have reported it to UC. It is then taken into account as employed income. You may have chosen not to take the money and left it in a directors loan account - that makes no difference to UC.

As a businesss owner you are are treated as self employed so you have to report your monthly income and expenditure to UC. The salary you paid yourself is part of your business expenditure.

If you are going to get the money from the Job Retention Scheme anyway I don’t see the problem.

Grumpy_chap

Irrespective of what you paid yourself as salary, the CJRS itself may have been sufficient to rule out any UC.
As a company owner, the value of the company is also added to any personal savings - for a small private company, the value of the company really means the assets the company has.  
Also, a partner's position is taken into account.

whizzywoo

Grumpy_chap said:

As a company owner, the value of the company is also added to any personal savings - for a small private company, the value of the company really means the assets the company has.  

I really don't think the value of the company's assets is added to the personal assets of the director.  These are business assets and not available as cash to the director.  Even the sole traders are able to have cash in a business bank account and not have it counted as savings, as long as they can demonstrate it is needed by the business or to pay a tax bill.

Jeremy535897

From https://www.gov.uk/self-employment-and-universal-credit As I said in my earlier post, directors of their own companies are treated as self employed.
"Providing information about your earnings

Everyone claiming Universal Credit needs to report their self-employed earnings at the end of each monthly assessment period. This includes company directors, even those paying themselves by PAYE.

You’ll need to report payments into and out of your business in the assessment period. This includes:

• total amount your business received
• how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, clothing and office costs
• how much tax and National Insurance you paid
• any money you paid into a pension"

Grumpy_chap

whizzywoo said:

Grumpy_chap said:

As a company owner, the value of the company is also added to any personal savings - for a small private company, the value of the company really means the assets the company has.  

I really don't think the value of the company's assets is added to the personal assets of the director.  These are business assets and not available as cash to the director.  Even the sole traders are able to have cash in a business bank account and not have it counted as savings, as long as they can demonstrate it is needed by the business or to pay a tax bill.

There must be some link between a privately owned company with sole Director who is also the sole employee and sole shareholder and the company assets.  Otherwise, this would be open to massive fraud.

If a UC claimant has £16k in personal savings and no income this month, then the savings rule out any claim value.

If a UC claimant runs own Ltd Co., and no income to the business this month, but £100k in the business bank account, that is not consistent with the £16k savings limits.  I agree it is reasonable that the company account would make allowance for taxes due but, say £100k in the account and £20k tax bill due, still leaves £80k  A sole director has lots of discretion over how much and when they pay themselves, and also in some cases the timing of invoices / income to the business.

Jeremy535897

Universal credit specifically caters for cash in a business bank account to be disregarded, although I suspect if you put all your savings into it, they might query it:
"H2006 – H2020 Capital disregarded indefinitely
Business assets
H2021 Assets which are used wholly or mainly for the purposes of a trade, profession or vocation which the person is carrying on, are disregarded indefinitely.  UC Regs, Sch 10, para 7
 Example John owns an amusement arcade in Bournemouth. He stopped working in the arcade on 31 October and claimed UC on 3 November. The assets of the business are a lease on the building, gaming machines and tools used to repair the machines. John states the value of these assets is £45,000. John also states that he is not going to sell the assets because he needs them when he opens the arcade again in the following April. The DM decides that the assets of the business can be disregarded. Note: A different disregard applies if persons are not able to work in the business because they are ill or physically or mentally disabled and are going to start or return to work in the business (see H2117).
Meaning of business assets
H2022 Business assets include standard items such as machinery, vehicles, fixtures and cash held in the bank (including money held following the sale of assets). They may also include items such as customer lists and contacts, current and future contracts and goodwill. "

"H2117 Where a person has ceased to be engaged in that business within the last 6 months
1. and is taking reasonable steps to dispose of those assets or
2. because of incapacity but has a reasonable expectation of being reengaged in that business on their recovery those business assets can be disregarded from the calculation of that person’s capital"  UC Regs, Sch 10, para 8

Grumpy_chap

Thank you @Jeremy535897 - however, that does seem to support or even encourage fraud.  Even in the case of the example, it is not unreasonable that a business owner of a seasonal business takes that into account in their business planning.

Jeremy535897

The underlying legislation simply says:

"Business assets

7.  Assets which are used wholly or mainly for the purposes of a trade, profession or vocation which the person is carrying on.

8.  Assets which were used wholly or mainly for a trade, profession or vocation that the person has ceased to carry on within the past 6 months if—

(a)the person is taking reasonable steps to dispose of those assets; or

(b)the person ceased to be engaged in carrying on the trade, profession or vocation because of incapacity and can reasonably expect to be reengaged on recovery."

You would have to show the cash was wholly or mainly for business purposes. Most people claiming universal credit who are self employed are unlikely to have lots of cash in a separate business bank account. They had to confirm that monies held in reserve to pay tax on profits could exceptionally be disregarded if in a personal bank account.