I feel like I'm being gaslit by the self employment team (UC)

calcotti

seatbeltnoob said:

Calcotti, do you think the staff are right on the matter as far as they are trained?

I just think the guidance is not clear on this point so, whereas they are often simply wrong and ignorant of the rules, in this case I do understand why there is confusion. There are some posters on this forum who may be able to add further light on the matter.

seatbeltnoob said:

Do you get a custom MIF of £627 from self employment or the full wack £1227.

Good question. Logically if the PAYE were ignored (which would imply the claimant is employed for those hours) then the MIF would have to be calculated on a reduced number of hours for self employment. However I am fairly confident your interpretation is correct but, as I say, I haven’t found guidance that explicitly states this.

See H4499 onwards
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1023406/admh4.pdf
Sadly the examples are only for people who do not draw a salary (which is daft).

sheramber

https://www.taxadvisermagazine.com/article/universal-credit-trading-company

Where the claimant’s circumstances are analogous to a self-employed sole trader (or partnership), the Department for Work and Pensions (DWP) ignores the company structure and ‘looks through’ to what is happening within it. Under the Universal Credit Regulations, SI 2013/0376, reg 77(1), a sole shareholder/director of a limited company will therefore find the DWP treats them as if they are self-employed.
.........................


https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/companies/

https://www.entitledto.co.uk/help/company-directors-and-self-employment#:~:text=Treatment of directors in Universal,even though they are not.&text=Because directors are treated as,income floor in Universal Credit.

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

Reporting your income and expenses

At the end of each monthly assessment period, you’ll need to report:

• how much you earned from self-employment, even if it’s nothing
• any money you paid into a pension
• payments into and out of your business

This also applies to company directors, even those paying themselves by PAYE.

Do this by completing the ‘Report your income and expenses’ section in your online Universal Credit account.

calcotti

Sheramber, all of that is fully understood. The issue at stake is how the 'employed' earnings made through PAYE are to be treated when calculating the MIF. Again, we know what the answer should be, but finding clarification in the official guidance is proving elusive.

Icequeen1

calcotti said:

Sheramber, all of that is fully understood. The issue at stake is how the 'employed' earnings made through PAYE are to be treated when calculating the MIF. Again, we know what the answer should be, but finding clarification in the official guidance is proving elusive.

I think the answer is clear in the legislation. Regulation 62 states that the MIF only applies where the claimant's earned income is less than the MIF amount. Earned income is defined at the start of that section of the legislation as including employment income I would say. https://www.legislation.gov.uk/uksi/2013/376/regulation/52

seatbeltnoob

One thing the jobcentre staff kept going on and on about is how the PAYE earnings are expensed and we come to a zero point. they mentioning that a few times. They don't realise you don't come to a zero point at all. There are 3 transactions in total not two. RTI/PAYE ends up misreporting my earnings twice and this needs to be corrected.

Example below (assume there are no other expenses)

+£800 : Business makes TURNOVER of this amount

+£800 : Claimant receives £800 from business through PAYE

-£800 : PAYE earnings are deducted from turnover to correct this duplication

Claimant made £800 in total and the duplication is removed. Total money coming into the business was £800 and that amount of transferred from ltd company to director through PAYE.

The jobcentre staff seem to be under the impression that PAYE expensing is just reversing the PAYE income, it's not doing that at all. Because PAYE income is a constituent part of the UC award calculation and is never removed. An expense can only subtract from the turnover.

What UC staff are actually doing by disregarding the PAYE as a valid income is the following:

+£800 : Business makes TURNOVER of this amount

+£800 : Claimant receives £800 from business through PAYE

-£800 : PAYE earnings are deducted from TURNOVER correct this duplication
-£800: Jobcentre: We're also going to ignore the PAYE completely we dont believe it's an income.

Claimant made £0

By disregarding PAYE they are effectively expensing PAYE amount twice. So the £800 that came into the business disaappears in their treatment.

The only issue is the UC award calculation doesn't say that, the UC award factors is £800 earnings from PAYE

seatbeltnoob

I hope I can numerically show the miscalculation and not confused anyone further.

seatbeltnoob

Icequeen1 said:

calcotti said:

Sheramber, all of that is fully understood. The issue at stake is how the 'employed' earnings made through PAYE are to be treated when calculating the MIF. Again, we know what the answer should be, but finding clarification in the official guidance is proving elusive.

I think the answer is clear in the legislation. Regulation 62 states that the MIF only applies where the claimant's earned income is less than the MIF amount. Earned income is defined at the start of that section of the legislation as including employment income I would say. https://www.legislation.gov.uk/uksi/2013/376/regulation/52

The problem is, if the jobcentre staff dont get a consistent treatment and method together it will give claimants like myself the runaround.

On the one hand they are disregarding my business income I pay myself through PAYE and treating it like a job I have with a third party employer. [if they're not accepting it as self employed, then by logic it has to be employed wages]

So am I employed or self employed? Everything they have told me suggests the PAYE earnings are non self employment income. So I'm employed - under my own company? That goes completely against the fundamentals of of ltd co directors being classed as self employed under UC.

I dont think they're this daft. I think they're deluded with the miscalculations as shown above and think they have correctly accounted for the PAYE and rerversed it when they haven't.

It could mean bouncing me back and forth from employed claimant to self employed claimant. Nobody knows what to do with me.

Icequeen1

seatbeltnoob said:

One thing the jobcentre staff kept going on and on about is how the PAYE earnings are expensed and we come to a zero point. they mentioning that a few times. They don't realise you don't come to a zero point at all. There are 3 transactions in total not two. RTI/PAYE ends up misreporting my earnings twice and this needs to be corrected.

Example below (assume there are no other expenses)

+£800 : Business makes TURNOVER of this amount

+£800 : Claimant receives £800 from business through PAYE

-£800 : PAYE earnings are deducted from turnover to correct this duplication

Claimant made £800 in total and the duplication is removed. Total money coming into the business was £800 and that amount of transferred from ltd company to director through PAYE.

The jobcentre staff seem to be under the impression that PAYE expensing is just reversing the PAYE income, it's not doing that at all. Because PAYE income is a constituent part of the UC award calculation and is never removed. An expense can only subtract from the turnover.

What UC staff are actually doing by disregarding the PAYE as a valid income is the following:

+£800 : Business makes TURNOVER of this amount

+£800 : Claimant receives £800 from business through PAYE

-£800 : PAYE earnings are deducted from TURNOVER correct this duplication
-£800: Jobcentre: We're also going to ignore the PAYE completely we dont believe it's an income.

Claimant made £0

By disregarding PAYE they are effectively expensing PAYE amount twice. So the £800 that came into the business disaappears in their treatment.

The only issue is the UC award calculation doesn't say that, the UC award factors is £800 earnings from PAYE

Hopefully someone else (Calcotti?) might do better at understanding but you've lost me. 

I thought your question was whether the MIF applies to your self-employed earnings or both self-employed and employed earnings and as I stated above the legislation is clear that the MIF is calculated based on the total of both. 

Limited company directors are not technically treated as self-employed under UC, although that is often how it is expressed. The UC regulations say that where a person stands in a position analogous to that of a sole owner or partner, the 'look-through' provisions are activated. Those look through provisions say that any income of the company is to be treated as your income and calculated as if it were self-employed earnings. The companies expenses are treated as your expenses. Your PAYE salary is therefore an expense of the company and is treated as an expense when calculating self-employed earnings. 

Your PAYE income is caught under the definition of employed earnings, the same as it would be if you employed someone separately. 

So you are employed for UC purposes and have self-employed earnings as well. 

So going back to your original post - you are correct that your income is £970 when deciding whether the MIF applies. Not the £170 the person in the jobcentre said. 

seatbeltnoob

Icequeen1 that's useful to know, as long as they are combining the wages from SE and SE profits together to calculate MIF then that will be my back stop if you like.

Qhat I was showing through calculations is that jobcentre staff are effectively disregarding my SE wages completely


They dint count is as employed wages and they disregard it as SE income because they believe its been expensed off.

calcotti

Icequeen1 said: Hopefully someone else (Calcotti?) might do better at understanding but you've lost me. 

No, although i know what OP means, I didn't follow that either!

The problem is that PAYE earnings are defined as employed earnings which are therefore by definition not self employed earnings.

When calculating UC payable all earnings are taken into account.

The guidance says that when calculating the MIF employed earnings should not be taken into account. But that is clearly unworkable because, as OP says, they could be paying themselves through PAYE above the MIF but then still have the MIF imposed which is patently absurd.

For people like OP we have employment (as director) treated as self employment.

Icequeen's reference back to regulation 62 is very useful and suggests to me that the guidance is incorrect (deadly often the case) and taht would explain why OP is getting the runaround.