Can I set up a limited company as an attempt at Permitted Work while on ESA Support Group?

DressingDown

Hi,
Have been on ESA Support Group for about 3 years. Have a terminal illness but am stable.

Cannot get a normal job as cannot stand, cannot walk, cannot be public facing or work anywhere where there are other people due to neutropenia (no cells to fight infection). But I am bored and depressed and feel like jumping off a cliff with the frustration of being on benefits and not being any use to anyone. Have volunteered but it only takes about an hour a month and everything else I've been offered is office based or shop based or involves moving things physically eg bags of clothing, which I cannot do. 

But I CAN use a computer. I have an idea for being self employed and just working when I feel well enough. This might be up to 15 hours a week sometimes but zero other times. The work would be sitting at a computer and typing etc which does not contradict the physical disability reasons why I got ESA in the first place.

I know there is a Permitted Work scheme to try to get disabled people back into work.

I went to see some good accountants to discuss options and they strongly recommend setting up a limited company (for reasons that aren't to do with ESA/benefits) rather than being a sole trader.

But I need to know - can I set up a limited company and be the director of it (holding the voting shares) when I am on ESA Support Group? Do they allow this, or does it contradict some rules? If so, do I need to be an employee of a limited company instead and find myself a family member who could be its director?

I know that I would not be able to do any of the financial paperwork etc but the accountants have already said they will do it all for me and all I have to do is keep my receipts and invoices, (which I could do) and they would do all the other calculations. Before they said that I was just too overwhelmed and scared of the paperwork to even contemplate it. They also mentioned doing the paperwork for a limited company is not much more than for a sole trader anyway and they've given me a really good price to do it all.

I don't trust the ESA helpline as there are so many call takers who don't have a clue about the basics, so thought I would ask here instead as you all seem very knowledgable. Does anyone know, if I set up a limited company and become its director, does this mean I will lose my ESA? NB: I am also on Child Tax Credits.

Many thanks

DressingDown

PS. I know about the form I have to send for Permitted Work. I've sent it off previously intending to do the same sort of permitted work and they've never objected but I have never been stable enough to actually do anything about it. It's the limited company question which is worrying me now. 

DressingDown

PPS. I receive ESA (Cont) not IR. 

I've found this on Google: DMG Chapter 50. 

Directors of limited companies: A director of a limited company is an office holder in the company and is an employed earner (see DMG Chapter 49). 

Does this mean I would be treated by ESA as an employed earner, and therefore able to work Permitted Hours???

calcotti

DressingDown said: Does this mean I would be treated by ESA as an employed earner, and therefore able to work Permitted Hours???

I don't think it matters either way. I am not aware of any restriction that says permitted work cannot be self employed work. 

DressingDown

calcotti said:

DressingDown said: Does this mean I would be treated by ESA as an employed earner, and therefore able to work Permitted Hours???

I don't think it matters either way. I am not aware of any restriction that says permitted work cannot be self employed work. 

Thanks Calcotti.

I have found out that self-employed work itself is fine, and that for ESA (Cont) that I am on, it's only the earnings from Permitted Work that they are interested in.

But I have a choice between becoming a sole trader, and being a director of a limited company. I'm advised by the accountant to do the latter.

I've found guidance (above, post 2) that states "a director of a limited company is an office holder in the company and is an employed earner" but am concerned there must be some other obscure rules and regulations that I would fall foul of in setting up a limited company and wanting to only work a few hours a week and therefore remain on ESA (Cont) as a backup. 

calcotti

DressingDown said: I have found out that self-employed work itself is fine, and that for ESA (Cont) that I am on, it's only the earnings from Permitted Work that they are interested in. 

The hours are also relevant. It ceases to be permitted work if you do 16 hours or more and ESA entitlement would end.

DressingDown

calcotti said:

DressingDown said: I have found out that self-employed work itself is fine, and that for ESA (Cont) that I am on, it's only the earnings from Permitted Work that they are interested in. 

The hours are also relevant. It ceases to be permitted work if you do 16 hours or more and ESA entitlement would end.

Thank you Calcotti. Yes I do understand this. I am not well enough to do more than 16 hours per week. 

I'm still wondering where I can find out for sure whether setting it up as a limited company with me as director won't somehow penalise me. I'm so distrusting of ESA having been on the receiving end of their bodge-ups / poor training of their operatives one too many times! 

MovingForwards

Why would you set up a limited company, which costs a fair bit to file the accounts each year, rather than a normal self-employed role which is a lot cheaper. See how you get on for a few years, then if you're making enough money and off benefits, consider turning it into a Ltd one. 

DressingDown

MovingForwards said:

Why would you set up a limited company, which costs a fair bit to file the accounts each year, rather than a normal self-employed role which is a lot cheaper. See how you get on for a few years, then if you're making enough money and off benefits, consider turning it into a Ltd one. 

As explained in my OP, this has been strongly recommended by some accountants whom I trust and it's for reasons not relating to ESA or benefits that I won't go into here. It won't cost me any more than a sole trader, I believe.

soolin

DressingDown said:

MovingForwards said:

Why would you set up a limited company, which costs a fair bit to file the accounts each year, rather than a normal self-employed role which is a lot cheaper. See how you get on for a few years, then if you're making enough money and off benefits, consider turning it into a Ltd one. 

As explained in my OP, this has been strongly recommended by some accountants whom I trust and it's for reasons not relating to ESA or benefits that I won't go into here. It won't cost me any more than a sole trader, I believe.

Many accountants like limited companies as they can charge you more for dealing with them, and yes there are ongoing costs associated  with being one. I am a sole trader, I have no costs associated with becoming one, I pay no fees for any registration and I do all my own easy cash basis accounts which take very limited effort. 

However income is treated differently depending on how you are set up so you might want to investigate that . 

pmlindyloo

You might like to read this from the Decision Maker's Guide.

DMG ch 41 ESA conditions of entitlement (base-uk.org)

Scroll down to 41186 onwards.

Company directors are usually treated as employees.


Since your hours and earnings are not going to be predictable this may your eligibility more difficult to assess under Permitted Earnings but is not impossible.  


I am presuming that you are using a limited company for other reasons (liability etc) and, in effect, will be run very much as if you are self employed.  

They may ask for regular records (rather like if you were self employed)

I would complete the Permitted Work form and then ring and ask for an appointment to speak to a work coach about your particular circumstances.

Good luck with it all.

PS.  Do you have to report Permitted Work earnings to Child Tax Credits?????