Universal credit for limited company director

Spoonie_Turtle

ADM H4 does mention pension contributions but my brain is mush and I don't trust my comprehension of it.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

ElwoodBlues

Spoonie_Turtle said:

ADM H4 does mention pension contributions but my brain is mush and I don't trust my comprehension of it.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

Yes, it's in H4 (H4158), but they've lifted it from the legislation and made it unreadable. Makes a bit more sense there, but still incredibly complicated to understand: https://www.legislation.gov.uk/uksi/2013/376/regulation/57/2020-05-21

For regular employees UC is calculated on net earnings (after personal pension contributions have been deducted). I'm not sure if that's the case for company directors, or if their pension contributions are deducted before the MIF is applied (which s57 suggests is what happens for self employed). The entitledto benefit calculator doesn't seem to handle the MIF part at all. Turn2us one does, and increasing personal pension payments reduces the deduction due to income, even below the MIF. But I'm not sure that the 3rd party calculators can be relied upon with all the finer details of UC?

calcotti said:

ElwoodBlues said:

I use my company credit card quite a lot for business purchases. When do those purchases get counted in the UC system - the day the card payment for the goods is made, or the day the credit card bill is paid from my business bank account?

I don't know.

ElwoodBlues said:

Gov.uk website says: You must report your self-employed earnings on the last day of your monthly ‘assessment period’.
Do they really expect businesses to have their accounts fully up to date and complete to the very day? 

You have to report on the last day otherwise your entitlement for that month cannot be worked out so you will not be paid.

ElwoodBlues said:

My company has a covid bounce back loan. Bank only provides annual statements for it, so I can't provide the monthly interest figures (to claim the expense) for up to 12 months later. How am I supposed to enter that in the AP expenses?

Am not clear - when do you pay the interest? (The total amount of interest you can claim each month is capped at £41/month see H4217.)

ElwoodBlues said:

How do employer and employee pension contributions get factored in to the UC calculation? (I've read the legislation, but it made my brain start to melt! https://www.legislation.gov.uk/uksi/2013/376/regulation/57/2020-05-21) It appears as though employer contributions get taken off as a business expense? But for employee's pension contributions are deducted from the persons income figure, is the MIF applied before or after this deduction?

I can't see guidance on that either!

How do I find out how they treat credit card purchases, as that's something I really need to know? It's becoming obvious that UC for company directors is walking a tightrope, engineering business cash flow to get a fair UC payment each month.

How is it logistically possible for a trading company to submit monthly accounts before the end of the AP month? Same day is preposterous. I use accruals accounting for my business, creating cash accounts is going to take hours of extra work every single month. All lost productivity, and unworkable in the real world. If I spend all working day on it, submit the figures and then a payment enters or leaves my account in the evening, what happens then?

Interest on my bounceback loan is calculated daily and added monthly. I make monthly repayments, and the interest varies slightly each month, reducing as the balance decreases. But I get no notification of what the interest is (or even what the next repayment will be, until they take it by DD), until I receive the annual paper statement (no online or telephone  access, and bank won't provide more frequent statements than annual).



Actually, I can work it out each month as the capital repayment is fixed, so the remainder has to be the interest.

Spoonie_Turtle

ElwoodBlues said:

Spoonie_Turtle said:

ADM H4 does mention pension contributions but my brain is mush and I don't trust my comprehension of it.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

Yes, it's in H4 (H4158), but they've lifted it from the legislation and made it unreadable. Makes a bit more sense there, but still incredibly complicated to understand: https://www.legislation.gov.uk/uksi/2013/376/regulation/57/2020-05-21

For regular employees UC is calculated on net earnings (after personal pension contributions have been deducted). I'm not sure if that's the case for company directors, or if their pension contributions are deducted before the MIF is applied (which s57 suggests is what happens for self employed). The entitledto benefit calculator doesn't seem to handle the MIF part at all. Turn2us one does, and increasing personal pension payments reduces the deduction due to income, even below the MIF. But I'm not sure that the 3rd party calculators can be relied upon with all the finer details of UC?

I don't understand, does it make a practical difference?  If your pension contributions take you below the MIF then you'll be treated as having earned the MIF amount anyway - how much you're below is irrelevant, they'll use the MIF aount to calculate your UC payment.  If they take you to at or above the MIF then they'll use your actual earnings to calculate your payment and the MIF is irrelevant that month.

NedS

Spoonie_Turtle said:

ElwoodBlues said:

Spoonie_Turtle said:

ADM H4 does mention pension contributions but my brain is mush and I don't trust my comprehension of it.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

Yes, it's in H4 (H4158), but they've lifted it from the legislation and made it unreadable. Makes a bit more sense there, but still incredibly complicated to understand: https://www.legislation.gov.uk/uksi/2013/376/regulation/57/2020-05-21

For regular employees UC is calculated on net earnings (after personal pension contributions have been deducted). I'm not sure if that's the case for company directors, or if their pension contributions are deducted before the MIF is applied (which s57 suggests is what happens for self employed). The entitledto benefit calculator doesn't seem to handle the MIF part at all. Turn2us one does, and increasing personal pension payments reduces the deduction due to income, even below the MIF. But I'm not sure that the 3rd party calculators can be relied upon with all the finer details of UC?

I don't understand, does it make a practical difference?  If your pension contributions take you below the MIF then you'll be treated as having earned the MIF amount anyway - how much you're below is irrelevant, they'll use the MIF aount to calculate your UC payment.  If they take you to at or above the MIF then they'll use your actual earnings to calculate your payment and the MIF is irrelevant that month.

Exactly as @Spoonie_Turtle states above. It would only benefit you to make pension contributions in order to reduce your net income down to the MIF - any lower, and they will treat you as having earned that amount anyway but it may prove beneficial in month's where you have net earnings after expenses above the MIF.

ElwoodBlues

NedS said:

Spoonie_Turtle said:

ElwoodBlues said:

Spoonie_Turtle said:

ADM H4 does mention pension contributions but my brain is mush and I don't trust my comprehension of it.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

Yes, it's in H4 (H4158), but they've lifted it from the legislation and made it unreadable. Makes a bit more sense there, but still incredibly complicated to understand: https://www.legislation.gov.uk/uksi/2013/376/regulation/57/2020-05-21

For regular employees UC is calculated on net earnings (after personal pension contributions have been deducted). I'm not sure if that's the case for company directors, or if their pension contributions are deducted before the MIF is applied (which s57 suggests is what happens for self employed). The entitledto benefit calculator doesn't seem to handle the MIF part at all. Turn2us one does, and increasing personal pension payments reduces the deduction due to income, even below the MIF. But I'm not sure that the 3rd party calculators can be relied upon with all the finer details of UC?

I don't understand, does it make a practical difference?  If your pension contributions take you below the MIF then you'll be treated as having earned the MIF amount anyway - how much you're below is irrelevant, they'll use the MIF aount to calculate your UC payment.  If they take you to at or above the MIF then they'll use your actual earnings to calculate your payment and the MIF is irrelevant that month.

Exactly as @Spoonie_Turtle states above. It would only benefit you to make pension contributions in order to reduce your net income down to the MIF - any lower, and they will treat you as having earned that amount anyway but it may prove beneficial in month's where you have net earnings after expenses above the MIF.

Yes it makes a huge difference to employed vs self employed claimants. Employed could earn £1500 a month, pay £1000 as pension contributions and collect UC based on a net income of £500. If a self employed person does the same, then from what you're saying the MIF means their pension contributions aren't being deducted in the same way?

The Turn2us calculator applies the MIF, THEN deducts personal pension contributions in the same way that it does for an employed person. That seems logically equivalent to how employed claimants are treated, but s57 of the regulations doesn't read like it happens that way in reality?

Also, because I pay myself from the company PAYE, and that cost is subtracted when calculating my 'self employed income' (but added back in for the UC calculation as it'll have been reported to DWP via HMRC RTI), I think personal pension contributions should be taken out of that (H3170)?

And it appears as though company directors who pay themselves a salary by PAYE are treated by UC as being both employed for that element, and then self employed for the see-through part that looks at the company's finances?

Spoonie_Turtle

What is your understanding of the MIF?  It's not 'applied' in any order - either your earnings are below it, or they're not.

ader42

ElwoodBlues said:

Yes it makes a huge difference to employed vs self employed claimants. Employed could earn £1500 a month, pay £1000 as pension contributions and collect UC based on a net income of £500. If a self employed person does the same, then from what you're saying the MIF means their pension contributions aren't being deducted in the same way?

The Turn2us calculator applies the MIF, THEN deducts personal pension contributions in the same way that it does for an employed person. That seems logically equivalent to how employed claimants are treated, but s57 of the regulations doesn't read like it happens that way in reality?

My understanding:

Self employed person earns £1500 a month, pays £1000 into pension, UC should also be calculated on the income of £500. 

Any applicable MIF applies to pre-pension contribution earnings for both employed and self-employed, you either have the earnings or don’t but as it is applied at the start there is no difference. 

ader42

I thought it would probably be helpful to have a fully worked out example.

Say with business income of £3k, £1k of business expenses, step 1 = £2k

No other trade, step 2 = £2k

Take off  £120 NI, step 3 = £1,880

Take off £1k pension contribution, step 4 = £880

No loss to carry forward, step 5 = £880
 
“ If the amount resulting from this step is greater than nil, that is the amount of the person’s self-employed earnings for the assessment period.” So income for UC calculation is £880 and earnings for the MIF test are £1,880. 

Spoonie_Turtle

ader42 said:

I thought it would probably be helpful to have a fully worked out example.

Say with business income of £3k, £1k of business expenses, step 1 = £2k

No other trade, step 2 = £2k

Take off  £120 NI, step 3 = £1,880

Take off £1k pension contribution, step 4 = £880

No loss to carry forward, step 5 = £880
 
“ If the amount resulting from this step is greater than nil, that is the amount of the person’s self-employed earnings for the assessment period.” So income for UC calculation is £880 and earnings for the MIF test are £1,880. 

No, a person's MIF is calculated based on their expected hours times NMW, minus tax and NI.  It's a set amount, it's not worked out based on actual earnings.

huckster

The personal pension deduction issue for self employed once MIF is applied,  is similar to the long running thread on this site about someone who is employed and paying a large sum into their pension each month. UC kept on refusing to allow the pension amount to be applied to UC as further deduction from earnings when calculating UC awards. So they had to submit mandatory reconsideration appeals for a decision maker to allow recalculation of UC award with pension deduction.   UC system does not have any built in process for this additional pension deduction and it has to be done manually each month.