Universal credit and dividends

AMR123

Hi, I am a named director on my ex's business (separated but still married). For tax purposes the dividends have always previously been paid into my bank account then I put them straight into his account so I don't actually use the money. 
I have just started to receive UC to top up my low salary since we have separated.
For the Apr 2021- Apr 2022 tax period, I wasn't claiming UC. Tax reporting is due to be handed in for that time period. As I wasn't claiming UC during that tax period, is it OK for me to receive the dividend and then put it into his bank? Or will my UC still be impacted now despite the fact that I didn't claim UC during that tax period?
Thank you 

calcotti

In general a dividend is treated as capital rather than income so a dividend payment would only affect your UC if it took your capital over £6000.

However your situation is complex and I’m not sure if you remain self employed for UC purposes with entitlement to your share of the business profit on a monthly cash accounting basis (regardless of whether or not dividends are paid). Hopefully someone who has actually come across this may be able to be more definitive.

tomtom256

Do you officially have any control of the business, if not then you are not self-employed for business purposes. What does companies house show under people with signifcant control?

The problem will be around why the dividends are being paid to you, if you have no control of the business and by receiving and passing the dividends on, it could be deemed deprevation of capital, depending on the amount received.

You could also fall foul to potential fraud allegations, if you haven't declared you are a registered company director on your claim, but again this will come down to what companies house shows about significant control.

If you have no control, I would send a journal message explaining the situation, so it doesn't come back to haunt you following any data matching exercises.

calcotti

Thanks TomTom, I'd overlooked the possible deprivation of capital issue.

huckster

More explanation is required about involvement (what you could technically do, even if you don't actively do so) in the business as tomtom says above.

Are you registered as self-employed with HMRC ?

calcotti

huckster said:

Are you registered as self-employed with HMRC ?

Is that relevant. A director of a company would not be registered as self employed for HMRC because they would treated as employed for tax purposes. DWP would however treat them as if self employed for UC.

AMR123

Hello all, thanks so much for your comments. 
I literally don't do anything for the company other than take the dividends into my account and then put them straight into my exs account. My ex would have to pay 40% tax if he recieved the dividends, but I get some tax free and then pay 20% tax. His accountant has always said this is legal. I don't do any physical work or paperwork or anything at all for the company other than be named director, along with 2 sister in laws, for tax purposes. 
I have just looked on Companies House and it says I am a company director and the status shows active. 
I'm really worried, I don't want that to affect my UC and get me into trouble. Am I best to phone UC? Feeling anxious about this.
Many thanks for your responses. It is much appreciated! 

AMR123

Also, to reiterate, he takes the money back into his account. I don't keep any of it. 

calcotti

AMR123 said:

Also, to reiterate, he takes the money back into his account. I don't keep any of it. 

That's not the point. 

It is legal but is clearly a way of avoiding tax by your ex but if the money is paid to you then it belongs to you legally. If you then choose to give it back you are depriving yourself of it.

In my opinion it would be better for you to resign as a director and get the company to buy back the shares.

AMR123

Thank you for the advice. 
Would I be depriving myself of it if I could prove that pre UC I always gave it back so nothing has changed? 

poppy12345

AMR123 said:

Thank you for the advice. 
Would I be depriving myself of it if I could prove that pre UC I always gave it back so nothing has changed? 

No, that would make no difference. When you weren't claiming UC it didn't make any difference to you but now it does. It doesn't look good on your Ex's part to have the money paid to you to avoid the higher tax either.