Ltd company UC issues

Trogdor_2002

So I have a Ltd company and have been furloughed at 80%.

My accountant told me they submitted my payslip with the payslip stating 100% (£732) 80% furloughed amount £585.60.

UC refuse to accept all bank statement evidence that I received £586.50 80% and not the £732 100% amount 

I explained that if my accountant applied for £586.50 (which is the 80% amount) I would only get 80% of £586.50 (£469.20) but they would still base my income as £586.50.

I escalated this to Mandatory Reconsideration along with Bank statements from personal and business accounts but was denied and the original decision stands.

This has had further impact by council tax denying any support based on my “earning” of £732 plus UC of £250.

Actual furloughed earnings are £586.50 and UC of £250 (although I believe UC should be £350ish)

It’s all getting very confusing, am I in the wrong here?

neilmcl

As the director of the company it's up to you to decide how your PAYE is handled and instruct your accountant accordingly. At the moment your payslip is set up with the assumption you (your LTD) will be topping up the pay to 100%, if you're not doing this then you need to instruct your accountant to give you a payslip showing your exact net pay of 80%.

calcotti

I don't really understand what your first post is saying in respect of what your payslip shows. If you have reported to HMRC through PAYE that you were paid £732 then that is the figure UC will use.

If you only intended to pay yourself the £586.50 you would get from CJRS then your payslip should show that amount as the salary for the month. 

Trogdor_2002

calcotti said:

I don't really understand what your first post is saying in respect of what your payslip shows. If you have reported to HMRC through PAYE that you were paid £732 then that is the figure UC will use.

If you only intended to pay yourself the £586.50 you would get from CJRS then your payslip should show that amount as the salary for the month. 

It seems it’s been a mistake by my accountants secretary, she hasn’t stated I was only receiving the furloughed amount and not topping up to the 100%.

Trying to get it rectified now!

dunstonh

Most directors are still drawing the primary threshold for 20/21 (£792pm if no employees)  or the secondary threshold (£732pm if you have employees taking you above the employment allowance).  And then reclaiming furlough at 80% of the 2019/20 salary.  Your posts suggest two issues.

If your payslip shows £732pm, then that indicates you have employees and are using up the employment allowance as they are using the secondary threshold and not the primary threshold.  Is that correct?  If you have no employees then you should be set to the primary threshold of £792.      (I have already seen errors this year with an accountant using the secondary threshold by mistake with a director)

This leads to the second issue.  £585.60 is 80% of £732.  However, you cannot take 80% of your 2020/21 secondary threshold.  You should be furloughing 80% of your 2019/20 salary.  The primary threshold and secondary threshold were both £719 in 2019/20.   So, 80% of £719 is £575.20

So, the furlough figure you are being paid is too high.  i.e. if you are taking 80%, then you should be paid £575.20  not £585.60

Grumpy_chap

How does UC assess the retained funds within a business when the business is one person as owner, employee, Director?

It strikes me that if someone is drawing, say £9k per year as PAYE salary plus dividend at, say £20k per year.  To draw a £20k dividend from listed companies would need a significant capital investment (£400k at 5% yield). So, is the value or retained earnings of the employee's own Ltd Co taken into account somewhere within the UC claim?  

If not, it looks like a massive path to skew things incorrectly.  Each month, the Director makes a decision to pay a low salary then once a year makes a decision to pay a bonus / dividend.

Assessing the value or retained earnings within the Ltd Co. as savings is no different to assessing the value of a property BTL as savings for a landlord, who night have no rent income during this period but also get no UC as it is cancelled by the equity in the property deemed as savings above £16k.

calcotti

Grumpy_chap said:

How does UC assess the retained funds within a business when the business is one person as owner, employee, Director?

It strikes me that if someone is drawing, say £9k per year as PAYE salary plus dividend at, say £20k per year.  To draw a £20k dividend from listed companies would need a significant capital investment (£400k at 5% yield). So, is the value or retained earnings of the employee's own Ltd Co taken into account somewhere within the UC claim?  

If not, it looks like a massive path to skew things incorrectly.  Each month, the Director makes a decision to pay a low salary then once a year makes a decision to pay a bonus / dividend.

Assessing the value or retained earnings within the Ltd Co. as savings is no different to assessing the value of a property BTL as savings for a landlord, who night have no rent income during this period but also get no UC as it is cancelled by the equity in the property deemed as savings above £16k.

UC works solely on a cash basis. Self employed earnings are the difference between business income and business expenditure during the assessment period as reported by the claimant. In the case of a director the PAYE will be reported through RTI and the employed earnings taken into account as such. The salary paid (plus any NI, tax and pension contributions etc) is recorded by the claimant as business expenditure when reporting the business income/expenditure.

Dividends are a mechanism for disbursing retained capital. They have no impact on the UC calculation. This doesn't skew the UC at all because the business income required to build up the capital available to pay the dividend has already been accounted for at the time it was received.

Grumpy_chap

So, say an individual has a Ltd Co for which they are the only employee, Director and shareholder.  Own Ltd Co, and not self-employed sole trader.
It has been doing quite well, so they have accrued £20k of retained earnings (above the UC cap), and this accrued even though the Director had been paying themselves £40k per year through PAYE plus dividends, at whatever interval the Director chooses.
Now, there is no income to the business since 1st April because of coronavirus, but the Director decided to use CJRS and claimed £600 per month through the Ltd Co, which was paid on to the Director as salary.
The Director has decided not to use the £20k under their control to continue to pay towards top-up of furlough or dividends.

BUT someone who owns a BTL has the value of the BTL equity considered as part of their savings, even though thsi is defintely not liquid.
Someone who is self-employed sole trader with £20k of accrued earnings has this treated as savings in the UC assessment
Someone who is PAYE employee of any normal company and has £20k saved up, the savings are assessed.

It seems inconsistent that a one-man Ltd Co can have high equity available but that is ignored in the UC assessment.

Trogdor_2002

Grumpy_chap said:

So, say an individual has a Ltd Co for which they are the only employee, Director and shareholder.  Own Ltd Co, and not self-employed sole trader.
It has been doing quite well, so they have accrued £20k of retained earnings (above the UC cap), and this accrued even though the Director had been paying themselves £40k per year through PAYE plus dividends, at whatever interval the Director chooses.
Now, there is no income to the business since 1st April because of coronavirus, but the Director decided to use CJRS and claimed £600 per month through the Ltd Co, which was paid on to the Director as salary.
The Director has decided not to use the £20k under their control to continue to pay towards top-up of furlough or dividends.

BUT someone who owns a BTL has the value of the BTL equity considered as part of their savings, even though thsi is defintely not liquid.
Someone who is self-employed sole trader with £20k of accrued earnings has this treated as savings in the UC assessment
Someone who is PAYE employee of any normal company and has £20k saved up, the savings are assessed.

It seems inconsistent that a one-man Ltd Co can have high equity available but that is ignored in the UC assessment.

From my personal standpoint,

I had nothing in my business account so was unable to “top up” my furlough claim.

it just seems it was an accountancy error that I’m currently trying to sort.

dunstonh

it just seems it was an accountancy error that I’m currently trying to sort.

Have you looked at my earlier post as you seem to have other errors as well.

Trogdor_2002

dunstonh said:

it just seems it was an accountancy error that I’m currently trying to sort.

Have you looked at my earlier post as you seem to have other errors as well.

It was the lower amount for March (£719) and changed for April onwards to £732 according to my accountant?