Universal Credit Self Employed loan question 10 January at 12:47AM in Benefits & tax credits 16 replies 344 views

tomtom256

A loan is not income, it's capital and disregaded under section 10, I think it is of UC regs.

You can only declare upto £41 pounds I think it is, for interest on any financial products the business has, per assessment period.

calcotti

You’ve had replies based on what someone ‘feels’ is appropriate. That isn’t helpful, what matters is what the rules say and they aren't always logical.

This is slightly long winded reply but it emphasises that guidance is poorly worded and i can see why confusion could arise. (however there is definitive conclusion at the end).

The easily located detailed guidance is here
https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/how-to-report-your-earnings-from-self-employment
You are allowed to claim as an expense interest on a business loan up to a maximum of £41/month. That limit encompasses loan interest, accounting, legal insurance and bank charges. It’s highly restrictive in my opinion and is unreasonably low. However the question of loan interest is not relevant in your case as you have an interest free loan.

The guidance is clear that you cannot claim as an expense capital repayments on a loan.

Unfortunately I can’t see anything in the guidance that states whether a loan should be treated as income or capital. 

The guidance first says:

“You’ll need to keep a record of and report the payments received into and paid out of your business each assessment period. This includes: the total amount your business received…”. and further on

“Your earnings from self-employment are calculated as the total amount your business received in…”. and again

“You must report all money received in by the business.”. and

“You have to report the total amount of of all payments received into the business”, and

“You must report all payments you actually received during your monthly assessment period, regardless of when it is earned”.

All the above could be read to imply that loans received could be treated as income even the list of what could be included as income doesn’t mention loans.

Then looked at this document which is internal DWP guidance:

https://data.parliament.uk/DepositedPapers/Files/DEP2022-0860/132._Self-employed_earnings_V7.0.pdf

This says “The claimant is required to report all payments actually received by the business, not money owed to the business, in the assessment period, including:..”. Loans are not included in the list of what is included but could still be read to be included in “all payments actually received”. 

Both of the above pieces of guidance could be read to support what you were told, that loans should be treated as income.

However if we then look at Advice for Decision Making which is the comprehensive official DWP guidance for Decision Makers the matter is suddenly made clear.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

Capital receipts
H4190 Capital receipts do not form part of the actual receipts of the business. For example, 
1. funds introduced by the owner of the business for the purposes of financing the business and 
2. loan capital borrowed from third parties for financing purposes. 

Completely unambiguous - a loan should not be declared as income.

If you have already reported the loan as income I suggest you post a message in your journal saying that you wish to amend your report for the relevant assessment period. Explain that you included as income the £100 loan because atet is what you were advised to do by the your work coach. Then say that you have now read Advice for Decision Making which includes paragraph H4190 which expressly states that loans should not be included as receipts. Therefore your income for taht assessment period should be £1000 less than previously reported. The error was only made because of the advice you received and ask that UC recalculate your Uc entitlement for that assessment period.

If you haven't reported the loan yet simply send a reply to your work coach quoting paragraph H4190 to them.

It would obviously be helpful if the earlier two pieces of guidance are referred to were clear on this point. I've sent some feedback on the first piece of guidance.

james72

"calcotti" thanks ever so much

Thanks everyone else as well.

calcotti that is perfect - I have printed it off, as I have a meeting with my work coach tomorrow. I will bring this up with him [in a nice way] - and at least now it's not a hunch that what he was saying didn't make sense...

Phew. That's great news.

Thanks again everyone for your time in helping me.

I will come back and add to this - if the work coach sticks to his interpretation. Which I am sure is a possibility - nobody likes to be wrong [hence my wanting to bring this up in a nice way]. Hopefully it goes smoothly

It does make you wonder how many people the WC might have given the wrong advice to.

Thanks again  

calcotti

james72 said:

It does make you wonder how many people the WC might have given the wrong advice to.

Lots of incorrect advice is given out by DWP. Under trained and over worked.

NedS

calcotti said:

james72 said:

It does make you wonder how many people the WC might have given the wrong advice to.

Lots of incorrect advice is given out by DWP. Under trained and over worked.

Self-employment is an absolute minefield and the training given is minimal. DWP place the responsibility on the claimant to understand the legislation and ensure they declare correctly (not dissimilarly to HMRC who place responsibility on UK residents to ensure they pay the right amount of tax). DWP's job is to administer and pay the benefit based on the claimants declaration, much as HMRC's job is to collect tax. Neither are advice services. Many WC's will try to go the extra mile to help claimants, but unfortunately many are ill equipped or trained to do so.

HillStreetBlues

NedS said:

Self-employment is an absolute minefield and the training given is minimal. DWP place the responsibility on the claimant to understand the legislation and ensure they declare correctly (not dissimilarly to HMRC who place responsibility on UK residents to ensure they pay the right amount of tax). DWP's job is to administer and pay the benefit based on the claimants declaration, much as HMRC's job is to collect tax. Neither are advice services. Many WC's will try to go the extra mile to help claimants, but unfortunately many are ill equipped or trained to do so.

One of the reasons to take advise.
If what you are told seems illogical then challenge it, even if you can't pinpoint the precise legislation.