Set aside income as business assets

mommyof3

Hello all, I had posted earlier about my husband’s case with his self employment work coach.  Thank you for all your replies.

Please can we have sone advice on the following?

1. The work coach had been very strict with the expenses my husband can offset against his incone. He is an electrician by trade and  she had struck off the following, saying it cannot be claimed:

Public liability insurance for his work
Parking when he visit clients
Subsistence
Flat rate for utilities, broadband, mobile phone and rent

Our home address is rhe business address.  He has a dedicated office and large storage space for his mateials

2.  She had also struck off quite a number of invoices fron our accountant for their services.  She was working from a spredsheet we provided for her and she insisted these entries were duolicatea or in her words, we paid too much.  This is despite we could physically show the invoices and paynent out from the business bank account to the accountants.  She refused to look at them.

3.  Our bounce back loan was recorded as income.  Payments back to the loan are not considered as cash out.

4. When he gets paid by his clients, my husband put aside a percentage of the income for upcming trade invoices, VAT and any other bills for the business, into another account. It is something he does to makw sure he has the money to pay the bills as above. He transferred the amount back to the business account when the bill arrived and paid it.

The work coach treated the transfer into the business account as new income. My question is :  is this considered double counting the income?  In all intents and purposes, that money had already been recorded as income in previous AP.  Should it be considered as business cash in bank or business asset instead?

Added to this, the ‘saving pot’ cash out was not regarded as cash out by the work coach. They were disregarded as expense or loan repayments.

My husband had tried explaining to the work coach but she was very hostile and refused to consider what he was saying.  Throughout, she kept threatening to escalate to Risk and Fraud.

After the last meeting, she rang up today saying that we did not declare £36,000.  She told my husband to declare two lots of £18,000 income.  There is no way we had earned this knd of money.  She threatened that if he does not do so, she will escalate this up to Risk and Fraud.

We are at our wits end. He is extremely stressed and have health problems.  I am trying to help him with this.

At this point, since the work coach refused any verbal explanations during the meetings, we are going to write in the journal seeking clarification and written confirmation that:

1. Bounce back loan should not be treated as income

2.That he cannot claim public liabilty insurance as an expense (even though sone of his cleints require this)

3. Genuine Accountants’ invoices that she struxk off from expenses

4. whether the transfer of savings into the business account should be treated as business assets/cash in bank. (Quoted H2022 and the guidance policy on self employment).

Please can anyone shed any light on this, or give ideas how else we could tackle this?  Thank you for readinf this right to the end.

calcotti

There is some guidance here

https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide
And
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128000/admh4.pdf

tomtom256

Bounce back loan isn't treated as income and was disregarded as a business asset. Only interest of up to £41 can claimed per assessment period for any loans/credit being repaid by the business.
Public liability insurance is a permitted expense.
Accountants fee's re permitted expenses.
Savings are savings, transferring them to be a business asset could be seen as deprivation of capital.
Any business premise expeneses are permitted expenses.
Business parking is a permitted expense.
Food isn't permitted, as it's not solely incurred by the business, as he would have to eat regardless of being at work.

Any declared expense has to be solely incurred by the business and be reasonable.

calcotti

Am puzzled that the bounce back loan is being raised, I thought it was nearly two years since any bounce back loans had been given. See however

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.

mommyof3

Thank you all for your responses. I’ve been trying to reply to each conment but it is not showing up here.

@calcotti. Thank you for the handy link of ADM Chapter 4.  We will get in touch with the jobcentre.  At the monent, they are counting the capital receipts as actual receipts/earnings and this really skewed my husband’s figures.

As previously posted, the work coach told my husband to declare £36,000 income by keying them online.  She did this verbally over the phone. It is not written instruction nor did she explained how she come to this figure.

Can we refuse to do this and request for how they reach this amount?  We can prove that at least £9900 are in error.

The work coach is threatening to escalate our case to Fraud if my husband does not do as told. Can this be considered as threatening or bullying behaviour? 

I am only asking this because I am trying to persuade my husband to request for a new work coach and to contacf the job centre manager via the Journal.  However, he is afraid that the current work coach can read about this in his journal and make the situation worse.

Thank you

huckster

Suggest contacting the Job Centre Customer Services Manager to ask for another Work Coach who is self employed trained to review the claim, as some of the information the previous Work Coach has advised is incorrect. This request can be made in the journal or by calling 0800 328 5644.

ElwoodBlues

It is somewhat terrifying that these work coaches wield such power yet clearly don't know the rules properly.
BBL and money transferred between business and personal accounts as you've described should all be capital and no income (don't forget that the interest on the BBL is a claimable expense though), so they should be left out of income and expense calculations.

If he trading through a Ltd co, then the cash held personally is classed as personal capital, but transfer it to the business (through the director's loan account), and becomes business capital, and should be disregarded. BUT, now the business is seen to owe you that amount of money, UC still add that amount to your personal capital, as they consider is a 'right to capital'.

Accountant's fees for the business accounting are an allowable expense, but I expect that for personal tax return matters they aren't? If he's self employed rather than a trading as a ltd co (can you clarify which?), you'd have to try and separate those two costs, which the work coach may have attempted to do.

Whilst ADM Chapter 4 is a very useful guide (because it's what the UC decision makers should refer to), also check carefully the legislation that backs it because I've seen a few things in the ADM which appear to have misinterpreted/twisted the legislation.

mommyof3

ElwoodBlues said:

It is somewhat terrifying that these work coaches wield such power yet clearly don't know the rules properly.
BBL and money transferred between business and personal accounts as you've described should all be capital and no income (don't forget that the interest on the BBL is a claimable expense though), so they should be left out of income and expense calculations.

If he trading through a Ltd co, then the cash held personally is classed as personal capital, but transfer it to the business (through the director's loan account), and becomes business capital, and should be disregarded. BUT, now the business is seen to owe you that amount of money, UC still add that amount to your personal capital, as they consider is a 'right to capital'.

Accountant's fees for the business accounting are an allowable expense, but I expect that for personal tax return matters they aren't? If he's self employed rather than a trading as a ltd co (can you clarify which?), you'd have to try and separate those two costs, which the work coach may have attempted to do.

Whilst ADM Chapter 4 is a very useful guide (because it's what the UC decision makers should refer to), also check carefully the legislation that backs it because I've seen a few things in the ADM which appear to have misinterpreted/twisted the legislation.

Thank you very much for this. It is reassuring to know that the money transferred should be considered capital.  He is working through a limited company.  I'm afraid the work coach is not familiar with Ditector's Loan. She is assuming that any loans is not permitted in UC (hence the confusion about BBL as well).  

As for accountancy fees, the invoices are for the limited company.  It's mainly for monthly accounting, PAYE and VAT return  The work coach did not even look at the invoice to check; so I don't think she was trying to separate between business or personal tax returns.  He had tried to physically show her the invoices during the meeting (he brought paper copies) but she refused to look at them. She said since he is paying his fees monthly; hence she should only allow 12 invoices and not any more than that.

Thank you for the heads up abput ADM Chapter 4. Apparently actual receipts are not defined in legislation but the ADM does spell out what is considered as actual and capital receipts.

From my research, I did come across a few references to "DWP have confirmed that money that has been put aside to pay a tax bill can be disregarded as personal capital (and so won’t count towards the £16,000 capital limit). They may ask for evidence of this, especially if the money is not held in a business bank account. This is because business assets are disregarded as personal capital" 

https://www.litrg.org.uk/tax-guides/self-employment/how-do-i-work-out-my-profits-universal-credit

Does this ring a bell?  It would be helpful if I can explore this further.

ElwoodBlues

The legislation is clear (and it's in the decision maker's guide too). Capital being moved between personal accounts and business accounts is not to be treated as income (or expenditure, when going the other way). Because your monthly business profits are taken into account for that month's UC claim, they've already been taken into consideration for your benefits, so any profits that are retained (beyond the end of the next month). In the same way, if you (or anyone else) loans the company money, that's not business income, it's an injection of capital.

But bear in mind that capital owned by the business is also considered to be personal capital owned by the owners of the company (proportionally by SHAREHOLDERS, not directors). Except that working capital of the business can be disregarded. So value of stock and tools, van etc is disregarded, as is 'working' cash. But there's no clear explanation of how much cash they'll consider working capital, which is concerning. I suspect it's a case of you being able to convince them successfully that it's needed (to pay a future bill, buy new equipment etc). What they're trying to avoid is UC claimants hiding their personal wealth within the business. 

It would probably be best to avoid taking money out of the business and just to hold on to it in personal accounts and put back later (if you know the business will need it again), because that's clouding the matter. And clearly it doesn't take much to confuse these simple work coaches! You want to avoid the DL going into debit whatever.

If you've fully acquainted yourself with ADM H4, also look at the other chapters - in particular H1 - Capital, and H2 (H2021 to H2027 in particular), business assets to be disregarded.

And also:
H1874 - H1884 
H1885 - H1902

Anyway, H4190 is crystal clear - Capital receipts (inc loans from business owner or a third party), does not form part of the businesses receipts. 

And to counter capital coming in - H4260 repayment of capital should not be considered as an expense.

I'm not sure about 'actual receipts' not being defined in legislation, but s52 defines earned income: https://www.legislation.gov.uk/uksi/2013/376/regulation/52 . I think that makes it pretty clear that transferring capital into the business is not earned income.

Maybe we need to take a paper copy of the entire ADM in to every meeting with a work coach?

mommyof3

@ElwoodBlues. Thank you so much. I am very grateful for all the help I am getting here.  I'll swot up on H1 and H2.

We have added a message to the work coach in the journal, informing them that capital receipts had been mistakenly included as income. I think we definitely need to bring a paper copy for the ADM for future meetings!

 

penners324

Lodge a complaint about the work coach, they obviously have no idea what they're talking about. Do they understand self employment?

Why doesn't the work coach accept the accounts submitted to hmrc by your accountant?