Universal credit for limited company director

Spoonie_Turtle

People earning enough (either actually earning, or deemed to be because of the MIF) have no requirements to look for work or attend appointments.

People who cannot be in the all work-related requirements group are people such as carers, those with LCWRA, people caring for children under a certain age.  Those people therefore cannot be deemed gainfully self-employed and thus the MIF cannot apply, even if they are doing some self-employed work.

So it's more accurate to maybe say 'people whose circumstances would put them in the all work related requirements group' but a bit long-winded, you can see why they didn't say that

huckster

It might help DWP if they provided additional training to claimants and Work Coaches on Universal Credit Self Employment income and expenses reporting. At the moment, they issue the UCD5 document, provide links to Gov.uk info pages and provide some Work Coach time at first Gateway, plus review appointments during start up period every 3 months.  Some people have very straightforward businesses to report information on and some have complex businesses.

ElwoodBlues

ader42 said:

Reg 55(5) a is quite clear:

https://www.legislation.gov.uk/uksi/2013/376/regulation/55/2020-05-21

(5) In calculating the amount of a person's employed earnings in respect of an assessment period, there are to be deducted from the amount of general earnings or benefits specified in paragraphs (2) to (4)—

(a)any relievable pension contributions made by the person in that period;

(b)any amounts paid by the person in that period in respect of the employment by way of income tax or primary Class 1 contributions under section 6(1) of the Contributions and Benefits Act; and

(c)any sums withheld as donations to an approved scheme under Part 12 of ITEPA (payroll giving) by a person required to make deductions or repayments of income tax under the PAYE Regulations.

Reg 55 is titled "Employed Earnings" though. Self employed earnings are covered instead by reg 57:
https://www.legislation.gov.uk/uksi/2013/376/regulation/57/2020-05-21

ElwoodBlues

As I'm employed by my own company (director and sole shareholder), I have both PAYE income from the business, and now, in the eyes of DWP/UC my company profits are also considered as a 'self employed' income. I've always made employer contributions to my pension until now - so they don't feature on my PAYE wage/payslip at all. According to the ADM H4 (H4214) employers pension contributions are listed as an allowable expense.  

But I can choose to make pension contributions as either employee or employer ones. Employee contributions earn the 25% tax relief, whereas employer ones don't, so that's an attractive prospect. But it's a bit unfair if the MIF prevents my employee contributions from getting taken into consideration by the UC earnings calculation, while for other employee's it is (because they don't have MIF involved). I see that employed people have successfully appealed to have their personal pension contributions deducted, not sure if any company directors have though?

It seems like another part of the balancing act to try and avoid being worse off under UC - not only do I have to try and smooth my business profits over the year, but I also have to work out whether to make an employer or employee pension contribution each month.

The other concern is that despite H4214 saying employer's pension contributions are an allowable expense, H4200 states that they still have to be "incurred reasonably - appropriate, necessary, and not excessive". So someone at DWP could decide that my employer pension contributions are unreasonably high and decide to disallow them?

And just for fun and games, my pension provider only allows contributions above £5000 to be made by bank transfer. I can contribute smaller amounts by a one off direct debit, but they only take DDs on 2 dates per month and with 7 days advance notice. Yet I'm going to need to work out how much I can afford to contribute, and whether it's from employer or employee, on the last day of the assessment period!   

NedS

ElwoodBlues said:

As I'm employed by my own company (director and sole shareholder), I have both PAYE income from the business, and now, in the eyes of DWP/UC my company profits are also considered as a 'self employed' income. I've always made employer contributions to my pension until now - so they don't feature on my PAYE wage/payslip at all. According to the ADM H4 (H4214) employers pension contributions are listed as an allowable expense.  

<snip>

The other concern is that despite H4214 saying employer's pension contributions are an allowable expense, H4200 states that they still have to be "incurred reasonably - appropriate, necessary, and not excessive". So someone at DWP could decide that my employer pension contributions are unreasonably high and decide to disallow them?

I believe the "incurred reasonably - appropriate, necessary, and not excessive" comes from HMRC legislation relating to tax relief. For example, it may be considered excessive and not reasonable to employ a family member as clearer for 1 day per week and make employer pension contributions of £40,000 per year for them. The employer pension contributions should be commensurate with the work being undertaken.

It's designed to prevent a sole trader operating under a limited company from "employing" their spouse and ploughing £40k per year into a pension for them.