UC Managed Migration

ElwoodBlues

huckster said:

@ElwoodBlues

Unfortunately, some forms of self employment do not really fit the way UC works.  

  As you state, UC cannot consider your business accounts before you started the claim.  For each monthly assessment period during the 12 month start up period, it will be the net profit for the month that would be used to calculate the UC award. 

Don't forget that you can include any PAYE amounts as an expense when you complete the self employment income and expenses information each month.

After the 12 month start up period, the minimum income floor based on 35 hours at national minimum wage ( assuming you are not primary care of children under 13 or carer for a disabled period)  would apply.  Taking into account the increased NMW rate from April 2023, this would mean that you would be looking at assumed net self employed earnings of about £1400 per month. 

That's what I thought. I'm going to get royally shafted by the timing of all this. Even if I take off my PAYE as an expense (which is exactly how you're supposed to do it) it just shifts the income calculation from the PAYE side to the business profits, so makes no difference.

The dumb reality of it all is that the money is the business is a) not profit, and b) not mine to use as disposable income. But this crazy UC system considers that it is.

And yes, I'm a single parent with 3 children aged between 9 and 13.

It's actually making me think I'd be better off to wind up the business (18 profitable years in my ownership, and 40 before I took over), and claim unemployment or find a simple min wage job instead. And while I'm at it, sell my house and chuck all my capital into a pension. Then I can rent somewhere that's actually big enough for my family to live properly, instead of trying to cope overcrowded in the small house I can afford the mortgage for. And then I'd be eligible for about £800 a month in housing benefit!

poppy12345

If you sold your home and ended up with more than £16,000 in savings there would be no entitlement any means tested benefits. I'm not sure that putting it all into a pension is allowed and whether that would be depriving yourself of capital to claim a means tested benefit. Others will know for sure.

NedS

poppy12345 said:

If you sold your home and ended up with more than £16,000 in savings there would be no entitlement any means tested benefits. I'm not sure that putting it all into a pension is allowed and whether that would be depriving yourself of capital to claim a means tested benefit. Others will know for sure.

On a practical level, it's unlikely someone would be able to sell their house and put all their capital into a pension due to the limits on the amount someone can contribute into a pension in any given tax year - earnings limit (they cannot contribute more than they earn) and the Annual Allowance limit of £40k

With respect to deprivation of capital, I've yet to see a test case for pension contributions, but logically I would argue that by definition, you can only deprive yourself of something that you no longer have. Where a person pays capital into a pension, they still have that capital (therefore deprivation cannot have taken place) and DWP must treat that capital according to the UC regulations... which state the capital must be disregarded whilst in a pension scheme until state pension age.

The confusion comes from the fact you may no longer be able to access those funds immediately, but you do still have them so you cannot have deprived yourself of that capital. Rhetorical question, but if DWP were to try to argue deprivation of capital, which would be to say you no longer have the capital, what would happen in 10 years time when you start drawing down on that pension (capital) that DWP decided you don't actually have? Which illustrates how nonsensical that argument would be - but I have seen DWP try to argue stranger things.

poppy12345

Thanks Neds, that makes sense.

calcotti

NedS said:
With respect to deprivation of capital, I've yet to see a test case for pension contributions, but logically I would argue that by definition, you can only deprive yourself of something that you no longer have. Where a person pays capital into a pension, they still have that capital (therefore deprivation cannot have taken place) and DWP must treat that capital according to the UC regulations... which state the capital must be disregarded whilst in a pension scheme until state pension age.

That is a long standing debate in respect of legacy benefits - unfortunately i can't remember the conclusion (and I don't know if it has been tested).

ElwoodBlues

I can see how this is likely to pan out - as above UC won't consider the stock purchase because it will have been paid for before the first AP. Then I'm going to have several months showing a fairly high income from these two upcoming jobs (because one is paying for a year of service up front and the other is mostly for the hardware that I've just paid for) - UC will see me as making a huge profit in month one - which they'll also carry forward the surplus to subsequent months, and I'll have these fairly large instalments coming in for the first 6 months of my UC.

And the effect of that is that it will most likely decrease my UC entitlement to nothing for several months (and this is all assuming I don't do any other business, which will make matters even worse). But after 3 months of nil entitlement to UC, I'll then loose my transitional protection completely.

At the moment Entitled To's calculator suggests I'd get £25 per week less on UC than my current tax credits. Does that mean that transitional protection would initially qualify me for a £25/wk uplift?

It also says my UC will reduce to zero at net earnings of £2598. So in my first month I could show what UC considers is an £8750 profit from these two contracts alone. Does that mean my UC entitlement will be nil, and I'll have a £6152 surplus profit to carry forward to the next assessment period? And in that next assessment period I'll receive another £2500 instalment payment in addition to that surplus, so will be nil entitlement again for month 2? And then similar in month 3 with the surplus carried forward again (£6054 plus another £2500 'profit')?

At that rate I will absolutely be showing a large surplus for at least 6 months, all because UC has ignored my £9000 stock purchase. So not only will I receive zero benefits for 6 months (when under tax credits I'd have got about £6k child tax credits), but I'll also lose my transitional element and transitional protection going forward?

Hopefully my entitlement to the MIF won't be lost when my claim gets shut down after 3 months of nil entitlement??

Also, this 'profit' that UC seems to think is my disposable income is subject to Corporation Tax at 19%, UC still consider all of it mine until my company pay's the corp tax bill?

The more I look into it the worse it appears to be! I think it'll actually make it impossible for my company to continue trading under my ownership.

huckster

@ElwoodBlues

Have you thought about asking your local MP to raise questions with DWP about this ?

Did DWP consider the issue of self employment stock purchases made before UC claim was submitted, to ensure transitional protection was provided to deal with this ?

If DWP has created this issue, because of their managed migration process from TC to UC, then it would be up to Government ministers to answer for this.

calcotti

huckster said:

If DWP has created this issue, because of their managed migration process from TC to UC, then it would be up to Government ministers to answer for this.

It’s not a managed migration issue, the same issues will arise for anyone migrating to UC. No doubt some have already experienced this.

huckster

calcotti said:

huckster said:

If DWP has created this issue, because of their managed migration process from TC to UC, then it would be up to Government ministers to answer for this.

It’s not a managed migration issue, the same issues will arise for anyone migrating to UC. No doubt some have already experienced this.

But because Government have a policy of transferring all from TC to UC, by a managed migration process with DWP staff being actively involved in the process, then it is reasonable to ask the question specific to the self employment issue raised by the OP.

Yes I agree these issues have occurred before under normal process, but that was when people made the move to UC.

Managed migration is different.

calcotti

Still can’t see that the issues raised are any different for managed migration compared to natural migration. (I’m not saying these are not problems - UC is not self employment friendly particularly for those with variable monthly earnings as described by OP.