Universal credit and dividends

slowcars

whizzywoo said:

Opening Poster have you spoken to the
Accountant who advised you to do this and told them you are claiming UC?

Many Accountants have very little knowledge of how the Welfare Benefits system works and it has probably not even crossed his/her mind that you are claiming benefits. 

I worked for Chartered Accountants for over 40 years before I retired.  In all that time never have I come across a client who has been advised to do what you and your ex are doing.

In my opinion it is money laundering and income tax evasion.  Not only could you and your ex be in trouble with HMRC and DWP, the Accountant in question could be breaking the rules of his/her regulatory body.

I suggest you make an appointment to speak to an independent Chartered Accountant and explain the situation to them and ask for their advice. 

In order to be paid a dividend the wife must hold shares in the company. She need not do anything for the company, but she would still get the dividends by virtue of those shares. This is no different to any other UC claimant that owns shares in say Marks & Spencer's or Tesco. Not actually working she is unemployed.  
The second point. Yes, you are right the dividend for uc purposes is income not capital in her hands. By giving it to her ex of course it will be treated in his hands as a gift/capital. Where is the tax evasion in this? She is quite entitled to give away her income as deprivation does not feature where income is involved - only capital. The recipient (the wife) will bear the tax liability on it so why should it become taxable in her ex's hands? 
This sort of scenario happens quite a lot in that it is even better for their underage offspring (if they had any) to hold the shares and then they make a gift of that money to dad. Or maybe have another offshore company to hold all of the shares and thus receive all of the dividend.
Even Civil Servants have a company that receives their income and then the civil servant/shareholder will not receive a salary etc but a dividend which is an excellent way of avoiding high NI as well as higher rates of taxation. 
The question and test is who owns the shares that the dividend is paid on.

poppy12345

slowcars said:

whizzywoo said:

Opening Poster have you spoken to the
Accountant who advised you to do this and told them you are claiming UC?

Many Accountants have very little knowledge of how the Welfare Benefits system works and it has probably not even crossed his/her mind that you are claiming benefits. 

I worked for Chartered Accountants for over 40 years before I retired.  In all that time never have I come across a client who has been advised to do what you and your ex are doing.

In my opinion it is money laundering and income tax evasion.  Not only could you and your ex be in trouble with HMRC and DWP, the Accountant in question could be breaking the rules of his/her regulatory body.

I suggest you make an appointment to speak to an independent Chartered Accountant and explain the situation to them and ask for their advice. 

The second point. Yes, you are right the dividend for uc purposes is income not capital in her hands.

That's not correct, a dividend is not classed as income, it's classed as capital. as advised here.

calcotti said:

In general a dividend is treated as capital rather than income

slowcars

poppy12345 said:

slowcars said:

whizzywoo said:

Opening Poster have you spoken to the
Accountant who advised you to do this and told them you are claiming UC?

Many Accountants have very little knowledge of how the Welfare Benefits system works and it has probably not even crossed his/her mind that you are claiming benefits. 

I worked for Chartered Accountants for over 40 years before I retired.  In all that time never have I come across a client who has been advised to do what you and your ex are doing.

In my opinion it is money laundering and income tax evasion.  Not only could you and your ex be in trouble with HMRC and DWP, the Accountant in question could be breaking the rules of his/her regulatory body.

I suggest you make an appointment to speak to an independent Chartered Accountant and explain the situation to them and ask for their advice. 

The second point. Yes, you are right the dividend for uc purposes is income not capital in her hands.

That's not correct, a dividend is not classed as income, it's classed as capital. as advised here.

calcotti said:

In general a dividend is treated as capital rather than income

Yes, you are right. for UC it will treated as capital. I confused myself halfway through my posting. Sorry.
If her capital is £6000 before the dividend hits, her best option is to reduce her capital by spending some of it on day to day living costs. Deprivation only is a problem where capital is involved not income.
It all depends on her level of capital.

calcotti

slowcars said:. Deprivation only is a problem where capital is involved not income.

Not relevant in this situation but wanted to highlight that that statement is not correct. There are provisions that deal with deprivation of income.

Alice_Holt

slowcars said:

whizzywoo said:

Opening Poster have you spoken to the
Accountant who advised you to do this and told them you are claiming UC?

Many Accountants have very little knowledge of how the Welfare Benefits system works and it has probably not even crossed his/her mind that you are claiming benefits. 

I worked for Chartered Accountants for over 40 years before I retired.  In all that time never have I come across a client who has been advised to do what you and your ex are doing.

In my opinion it is money laundering and income tax evasion.  Not only could you and your ex be in trouble with HMRC and DWP, the Accountant in question could be breaking the rules of his/her regulatory body.

I suggest you make an appointment to speak to an independent Chartered Accountant and explain the situation to them and ask for their advice. 

In order to be paid a dividend the wife must hold shares in the company. She need not do anything for the company, but she would still get the dividends by virtue of those shares. This is no different to any other UC claimant that owns shares in say Marks & Spencer's or Tesco. Not actually working she is unemployed.  
The second point. Yes, you are right the dividend for uc purposes is income not capital in her hands. By giving it to her ex of course it will be treated in his hands as a gift/capital. Where is the tax evasion in this? She is quite entitled to give away her income as deprivation does not feature where income is involved - only capital. The recipient (the wife) will bear the tax liability on it so why should it become taxable in her ex's hands? 
This sort of scenario happens quite a lot in that it is even better for their underage offspring (if they had any) to hold the shares and then they make a gift of that money to dad. Or maybe have another offshore company to hold all of the shares and thus receive all of the dividend.
Even Civil Servants have a company that receives their income and then the civil servant/shareholder will not receive a salary etc but a dividend which is an excellent way of avoiding high NI as well as higher rates of taxation. 
The question and test is who owns the shares that the dividend is paid on.

       There are a number of factual errors in this post (i.e. see the above posts by poppy and calcotti). 

       Benefit law can be complex, and forumites need to be careful when assessing posts which appear to be based more in opinion, than from a good working knowledge of the benefit / tax systems.
I also think it is helpful to include links to authoritative sites that confirm any advice given, so that forumites seeking help can gain a broader picture and understand how their exact circumstances might be treated. 
     
     It's a shame that in a forum that is concerned with helping forumites with identifying benefit entitlement, that posts cannot be reporting as containing misleading information, and that it's left to knowledgeable forumites to point out errors of fact.  

whizzywoo

Exactly as @Alice_Holt says and this is why I have advised the Opening Poster to get advice from an Independent Chartered Accountant and not the one who acts for her ex-husband and the family company.

@slowcars my opinions about money laundering and fraud are worst case scenarios but very real.  I have seen the personal devastation caused to clients when HMRC investigate matters, even when clients had nothing untoward to hide.

It is all very well your ex-husband saying that they are going to "take you off as a director" but presumably there are shares in your name.  What class of Shares are these?  If you still hold the shares then dividends will still be due to you for a share in the company profits.  If these shares are to be no longer held by you then what is their value and are you going to be paid for them?  Depending on the assets of the company and the class of share then they could be worth quite a bit of money and just giving them up for nothing could again be seen as deprivation of assets.

Why does your husband need to see your P60?  Is he talking about the P60 from a job you have which is nothing to do with the family company?  Do you know if a wage is being put through the company Payroll for you?  I would assume that Universal Credit would have picked this up but not necessarily, especially if an annual salary is only being declared once a year for Directors.

Please @AMR123 do yourself a favour - book appointments to see a Specialist Welfare Benefits Advisor and a Taxation Specialist or Chartered Accountant, as soon as possible.  The longer you leave this matter the harder it's going to be to unravel and to persuade the authorities that you had no intention to do anything wrong.