Universal credit for limited company director

Galfonso

Hi.

I have a small business and am trading via a limited company. I am paying myself a modest salary which is normally (but not always!) lower than my company's earnings.

I am also claiming UC as our household's income is far from enough to cover the rent and the basic expenses. 

I had really tough periods but now, touch wood, things are better businesswise. I don't know how long this will last though - my goal was to have a bit of spare capital in the company as a cushion when I hit bad times again so I could continue to pay myself a salary until things get better.

Since day 1 I had made clear to the UC people what my circumstances are and was led to believe that only my salary (and my partner's of course) was supposed to be taken into account when calculating our HB entitlement. At my latest interview at Jobcentre Plus I was told this wasn't actually the case and I needed to include the monthly profits of the company as well. Now I have to update my records for the previous 6 months accordingly.

Obviously this will result in an overpayment which I cannot imagine how we would be able to cover, even in installments. I am sure they won't be interested that it was at least partially their fault that I was misled initially.

All this simply does not make any sense to me. What happens if I don't make any profit for a month or two and cannot even afford to pay myself a salary? I was planning to buy a van for example (which I guess I will have to forget about now). How do you account for something like this? What if the combined capital of ourselves and the business is found to have been be above the threshold for HB for a period of time? What if I actually made a loss for a particular reporting period? So many questions... I don't even know where to start from.

I am quite desperate to be honest and any advice and clarification will be very, very welcome.

Rubyroobs

The rent element of UC  ( it is not the same as housing benefit )is just one element of Uc along with your standard couples element, children's elements if you have kids. These elements combined make up your total Uc award which is then reduced by capital and earnings in your monthly assessment period. It is not just about rent.
Self employment on UC can be complicated, so I'm sure someone else will be along to explain that side of things.

HillStreetBlues

Galfonso said:

Hi.

I have a small business and am trading via a limited company. I am paying myself a modest salary which is normally (but not always!) lower than my company's earnings.

I am also claiming UC as our household's income is far from enough to cover the rent and the basic expenses. 

I had really tough periods but now, touch wood, things are better businesswise. I don't know how long this will last though - my goal was to have a bit of spare capital in the company as a cushion when I hit bad times again so I could continue to pay myself a salary until things get better.

Since day 1 I had made clear to the UC people what my circumstances are and was led to believe that only my salary (and my partner's of course) was supposed to be taken into account when calculating our HB entitlement. At my latest interview at Jobcentre Plus I was told this wasn't actually the case and I needed to include the monthly profits of the company as well. Now I have to update my records for the previous 6 months accordingly.

Obviously this will result in an overpayment which I cannot imagine how we would be able to cover, even in installments. I am sure they won't be interested that it was at least partially their fault that I was misled initially.

All this simply does not make any sense to me. What happens if I don't make any profit for a month or two and cannot even afford to pay myself a salary? I was planning to buy a van for example (which I guess I will have to forget about now). How do you account for something like this? What if the combined capital of ourselves and the business is found to have been be above the threshold for HB for a period of time? What if I actually made a loss for a particular reporting period? So many questions... I don't even know where to start from.

I am quite desperate to be honest and any advice and clarification will be very, very welcome.

AFAIK If it's small eg only you  or you and a partner then UC should class you as you are self employed even thought you are not.
So it should be about your profit / loss  per month, not the wages you take out. They is why they will be asking for the profit.

All UC overpayment is recoverable no matter who is at fault, so even if they gave you wrong info, they can get any overpayment back.

You do call  it HB  that's housing benefit, with UC it's HE  housing element.
 

calcotti

I suggest you read the guidance on self employment and UC. He should be making returns to UC on the last of each UC assessment giving details of your business income and expenditure.
https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide

Galfonso

HillStreetBlues said:

Galfonso said:

Hi.

I have a small business and am trading via a limited company. I am paying myself a modest salary which is normally (but not always!) lower than my company's earnings.

I am also claiming UC as our household's income is far from enough to cover the rent and the basic expenses. 

I had really tough periods but now, touch wood, things are better businesswise. I don't know how long this will last though - my goal was to have a bit of spare capital in the company as a cushion when I hit bad times again so I could continue to pay myself a salary until things get better.

Since day 1 I had made clear to the UC people what my circumstances are and was led to believe that only my salary (and my partner's of course) was supposed to be taken into account when calculating our HB entitlement. At my latest interview at Jobcentre Plus I was told this wasn't actually the case and I needed to include the monthly profits of the company as well. Now I have to update my records for the previous 6 months accordingly.

Obviously this will result in an overpayment which I cannot imagine how we would be able to cover, even in installments. I am sure they won't be interested that it was at least partially their fault that I was misled initially.

All this simply does not make any sense to me. What happens if I don't make any profit for a month or two and cannot even afford to pay myself a salary? I was planning to buy a van for example (which I guess I will have to forget about now). How do you account for something like this? What if the combined capital of ourselves and the business is found to have been be above the threshold for HB for a period of time? What if I actually made a loss for a particular reporting period? So many questions... I don't even know where to start from.

I am quite desperate to be honest and any advice and clarification will be very, very welcome.

AFAIK If it's small eg only you  or you and a partner then UC should class you as you are self employed even thought you are not.
So it should be about your profit / loss  per month, not the wages you take out. They is why they will be asking for the profit.

Hi. Thanks for your answer.

Now I know what the regulations are. What is worrying me is that I will suddenly find myself with a significant amount of debt and feel far for comfortable with this

In regards to the salary, surely I have to report this as income from employment, alongside the "self-enploement" profit?

sheramber

Galfonso said:

HillStreetBlues said:

Galfonso said:

Hi.

I have a small business and am trading via a limited company. I am paying myself a modest salary which is normally (but not always!) lower than my company's earnings.

I am also claiming UC as our household's income is far from enough to cover the rent and the basic expenses. 

I had really tough periods but now, touch wood, things are better businesswise. I don't know how long this will last though - my goal was to have a bit of spare capital in the company as a cushion when I hit bad times again so I could continue to pay myself a salary until things get better.

Since day 1 I had made clear to the UC people what my circumstances are and was led to believe that only my salary (and my partner's of course) was supposed to be taken into account when calculating our HB entitlement. At my latest interview at Jobcentre Plus I was told this wasn't actually the case and I needed to include the monthly profits of the company as well. Now I have to update my records for the previous 6 months accordingly.

Obviously this will result in an overpayment which I cannot imagine how we would be able to cover, even in installments. I am sure they won't be interested that it was at least partially their fault that I was misled initially.

All this simply does not make any sense to me. What happens if I don't make any profit for a month or two and cannot even afford to pay myself a salary? I was planning to buy a van for example (which I guess I will have to forget about now). How do you account for something like this? What if the combined capital of ourselves and the business is found to have been be above the threshold for HB for a period of time? What if I actually made a loss for a particular reporting period? So many questions... I don't even know where to start from.

I am quite desperate to be honest and any advice and clarification will be very, very welcome.

AFAIK If it's small eg only you  or you and a partner then UC should class you as you are self employed even thought you are not.
So it should be about your profit / loss  per month, not the wages you take out. They is why they will be asking for the profit.

Hi. Thanks for your answer.

Now I know what the regulations are. What is worrying me is that I will suddenly find myself with a significant amount of debt and feel far for comfortable with this

In regards to the salary, surely I have to report this as income from employment, alongside the "self-enploement" profit?

Galfonso said:

HillStreetBlues said:

Galfonso said:

Hi.

I have a small business and am trading via a limited company. I am paying myself a modest salary which is normally (but not always!) lower than my company's earnings.

I am also claiming UC as our household's income is far from enough to cover the rent and the basic expenses. 

I had really tough periods but now, touch wood, things are better businesswise. I don't know how long this will last though - my goal was to have a bit of spare capital in the company as a cushion when I hit bad times again so I could continue to pay myself a salary until things get better.

Since day 1 I had made clear to the UC people what my circumstances are and was led to believe that only my salary (and my partner's of course) was supposed to be taken into account when calculating our HB entitlement. At my latest interview at Jobcentre Plus I was told this wasn't actually the case and I needed to include the monthly profits of the company as well. Now I have to update my records for the previous 6 months accordingly.

Obviously this will result in an overpayment which I cannot imagine how we would be able to cover, even in installments. I am sure they won't be interested that it was at least partially their fault that I was misled initially.

All this simply does not make any sense to me. What happens if I don't make any profit for a month or two and cannot even afford to pay myself a salary? I was planning to buy a van for example (which I guess I will have to forget about now). How do you account for something like this? What if the combined capital of ourselves and the business is found to have been be above the threshold for HB for a period of time? What if I actually made a loss for a particular reporting period? So many questions... I don't even know where to start from.

I am quite desperate to be honest and any advice and clarification will be very, very welcome.

AFAIK If it's small eg only you  or you and a partner then UC should class you as you are self employed even thought you are not.
So it should be about your profit / loss  per month, not the wages you take out. They is why they will be asking for the profit.

Hi. Thanks for your answer.

Now I know what the regulations are. What is worrying me is that I will suddenly find myself with a significant amount of debt and feel far for comfortable with this

In regards to the salary, surely I have to report this as income from employment, alongside the "self-enploement" profit?

When self employed you do not have a salary. It is all profit from the business which you assessed on. 

HillStreetBlues

You can be both employed and self employed.

But if it's your own small limited company that is your employer,  then under UC you are just self-employed

calcotti

HillStreetBlues said:

Galfonso said:

In regards to the salary, surely I have to report this as income from employment, alongside the "self-enploement" profit?

What should be reported is profit  without the wages being taken out.

For example: instead of reporting no profit after £500 wages are taken  you report £500 profit.

This depends on how this is set up. If the wage is being paid through PAYE then the wage will be reported as income through RTI. The earnings therefore don’t need to be reported by the claimant, they are employed earnings. 

When reporting the self employed income and expenditure the PAYE expenditure (which will include the gross salary and employer NI) is included as a business expense.

The claimant is both employed and self employed.

HillStreetBlues

calcotti said:

This depends on how this is set up. If the wage is being paid through PAYE then the wage will be reported as income through RTI. The earnings therefore don’t need to be reported by the claimant, they are employed earnings. 

When reporting the self employed income and expenditure the PAYE expenditure (which will include the gross salary and employer NI) is included as a business expense.

The claimant is both employed and self employed.

Thanks for the correction, have updated / deleted post.

ElwoodBlues

Depending on the nature of your business, you will likely find you get completed shafted by the benefits system. It simply isn't designed for it, so they've put a square peg in a round hole and they pretend that you're self employed instead.

It will likely make running a limited company (all but the most basic one) whilst claiming UC untenable from a cashflow perspective. You can't build up cushion inside the business for seasonal variations, not even for quarterly VAT bills, nor annual corporation tax. Nevermind saving towards capital purchases for new equipment to operate the business. The only way it could work is if you run on a cash accounting basis, have minimal stock and equipment, and your business income and expenses are regular month in month out. Best option is likely to be to wind up the business and get a min wage job elsewhere unfortunately.

It's highly likely from what you've said that there will be a considerable overpayment when they go back and recalculate on a self employed basis. If it's on record that you told them you're operating through a limited company then you should argue that they're at fault for not requesting your monthly cash accounts for it. Maybe they'll give you a bit of tolerance if they accept some responsibility.

I'm in a similar position (although not yet switched from tax credits to UC), and it's a complete minefield. There might be a few relevant bits in this thread for you to consider:
https://forums.moneysavingexpert.com/discussion/6427280/uc-managed-migration/p1

 

Spoonie_Turtle

ElwoodBlues said:

If it's on record that you told them you're operating through a limited company then you should argue that they're at fault for not requesting your monthly cash accounts for it. Maybe they'll give you a bit of tolerance if they accept some responsibility.

Unfortunately all overpayments are recoverable, even those due to official error - they specifically wrote it into the UC legislation, it was not the case for legacy benefits.