Set aside income as business assets

penners324

Why not open a secondary business account for tax elements?

Starling and Monzo business accounts allow for this with pots

ElwoodBlues

Or a business savings account. Can get about 2% interest at the moment. Only issue is that the work coach might try to tell you that it's an investment rather than working capital, and therefore not eligible to be disregarded.

mommyof3

penners324 said:

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?

During the first meeting, my husband had submitted his HMRC accounts plus his PNL as prepared by his accountants, as proof of earning and expenses.  These were refused by the work coach.  They insisted this was not proof, with the mantra that DWP and HMRC are different.   They made a few choice, derisive words about my husband's accountant saying 'they have done enough damage already'.  Now after reading H4, I understand that the accounts could be used if backed with statements and receipts, which we have prepared. 

So far, the work coach had been hostile but careful not to note any instructions or (wrong) decisions given to my husband in writing.  We are now ensuring my husband writes what they asked him to do (i.e. enter lump sum income with zero expenses, deducting legitimate business expenses) in his journal as way of confirmation.  The irony is the work coach kept saying they are trying to help him and it will be worse for him if they escalate his case to the next step.  They kept insisting the next band of DM will be more strict. 

@e@ElwoodBlues. yes, I think the way forward is to have a dedicated 'pot' with his current business account to make it more transparent.  I will suggest this to my husband.  At the moment, as reflected his PNL, he is really just breaking even so I don't think there will be massive amounts of savings so to speak. It is more of an exercise for him to make sure he set aside 20% for the VAT bill that comes quarterly.

Murphybear

We joined the Federation of Small Businesses (FSB) when we ran our own business.  They are very helpful and provide help and training.  

ElwoodBlues

mommyof3 said:

penners324 said:

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?

During the first meeting, my husband had submitted his HMRC accounts plus his PNL as prepared by his accountants, as proof of earning and expenses.  These were refused by the work coach.  They insisted this was not proof, with the mantra that DWP and HMRC are different.   They made a few choice, derisive words about my husband's accountant saying 'they have done enough damage already'.  Now after reading H4, I understand that the accounts could be used if backed with statements and receipts, which we have prepared. 

The irony is the work coach kept saying they are trying to help him and it will be worse for him if they escalate his case to the next step.  They kept insisting the next band of DM will be more strict. 

UC can't accept standard company accounts because UC isn't calculated on that basis. UC have their own accounting principles, which are totally different and incompatible - cash basis Vs accruals basis. For tax purposes a business can claim any legimiate expense, but for UC, you can only deduct expenses that they decide are reasonable.

Normally, businesses only produce p&l accounts for HMRC on an annual basis, but UC require cash accounts on a monthly basis.

I don't know why the work coach would want or ask for traditional business accounts, because they're basically a foreign language when it comes to calculating uc.

But they are mentioned in h4:

H4191 A person may submit a set of accounts as evidence of S/E earnings. Accounts provide some, but not all, of the information required by the DM to decide the amount of the actual receipts and expenses paid for.

It goes on to explain that claimants still need to provide cash accounts or other evidence of actual receipts and expenses. So I'm not sure what benefit there is to supplying traditional accounts?

H4194 If accounts are submitted as evidence the S/E person should be asked to provide evidence of actual amounts received and expenses paid so that the evidence can be converted into a cash flow basis. The S/E person can do this by providing

accounts that are calculated on a cash flow basis or

evidence of the actual receipts and expenses paid.

I think the best/simplest way to satisfy UC is to work through the business bank statement for the ap and allocate each item into a category. Split receipts between capital and income, and outgoings between allowable expenses, non allowable expenses and capital repayments. If you can export your bank transactions into a spreadsheet it should be relatively easy to do.

If you're confident you've accounted correctly for UC, then call the work coaches bluff - ask them to escalate it to someone who knows what they're doing! The next band might be more strict, but if your claimed expenses are legit they are more likely to know the rules and apply them correctly.

UC allow you to present your income and expenses inclusive or exclusive of vat (as long as you do it consistently). If you present your figures exclusive of vat then you don't put your vat bill in later as an expense.

mommyof3

Thank you @ElwoodBlues. Yes, he presented the PNL initially and we understood it is not enough infor.  We then backed it with bank statements and receipts.

We’ve prepared a cover spreasheet, accounting for all incoming transactions in the bank statementswith supporting invoices.  At this point, we were told all incoming payments should be considered incone.

We also provide a list of all business expenses, categorised as materials, tools, bank charges etc. with hard copies of the invoices.  The work coach went through the list and struck off expenses for business parking, accountant, heat, lighting, broadband, telephone, flat rate premises rental and public liability insurance. 

Thank you so much for all the information and support.  

ElwoodBlues

mommyof3 said:

Thank you @ElwoodBlues. Yes, he presented the PNL initially and we understood it is not enough infor.  We then backed it with bank statements and receipts.

We’ve prepared a cover spreasheet, accounting for all incoming transactions in the bank statementswith supporting invoices.  At this point, we were told all incoming payments should be considered incone.

We also provide a list of all business expenses, categorised as materials, tools, bank charges etc. with hard copies of the invoices.  The work coach went through the list and struck off expenses for business parking, accountant, heat, lighting, broadband, telephone, flat rate premises rental and public liability insurance. 

Thank you so much for all the information and support.  

I suppose traditional business accounts/P&L/balance sheets from previous years might be useful to prove that you are 'gainfully self employed' at the outset of a UC claim. It's fair enough that they'll want to satisfy themselves you aren't just trying to claim a hobby business as a livelihood and take advantage of the 12 months MIF free UC. But beyond that I'm sceptical of their significance for UC. I won't be willingly providing mine, but am prepared to answer whatever questions they put to me.

I'm in a similar position to you, and just learning about the UC system for business owners myself. I do my own book keeping, vat returns and self assesment, and my business is actually involved in the finance/audit sector, so I've got a decent understanding of basic accounting, and I'm reasonably confident at checking the rules out. But don't rely purely on my comments, make sure you satisfy yourselves that your interpretation of the rules matches mine. There seem to be plenty of knowledgeable people on here who will hopfeully step in and correct me if I'm completely wrong.

From all I hear, it seems that the 'work coaches' are really nothing of the sort - they aren't there to help you, their main aim is to minimise your claim and DWP's expense. More akin to an inusurer's loss adjuster. Detecting and preventing fraud is one thing, but this is another level of awkwardness. 

If you're sure you're right (and, being facetious, if you don't have anything to hide!), then don't fear disagreeing with them. Sounds like many claimants have to resort to mandatory reconsideration process to get their proper entitlement. So that's probably something else to familiarise yourself with: https://www.gov.uk/mandatory-reconsideration

mommyof3

@ElwoodBlues. I understand completely. Advice or comments on this forum are meant to guide only.

In all seriousness, I am just very grateful to you and other posters who had left a comment.  I don’t feel so alone in a sense - at least, I know I was not wrong in certain parts!  

It does feel like a bit of a witch hunt but putting that aside, I think the best way to get some resolution is to be factual and go back to the ADM and legislation. We are resigned on going to the Mandatory Reconsideration route if the work coach refuse to work with us

mommyof3

Update:

Just a huge thank you to all who had replied and guided us with this. The work coach did not respond with further requests for clarification on the capital receipts. 

She also stopped our payments, saying my husband have not declared two months of income and expenses.  Her verbal instructions to my husband was to declare £36k income for both months.  When we asked for written confirmation this was what she wanted us to do, she did not respond. 

We wrote to the jobcentre manager (via reporting service issue on the journal and sending a signed for letter to the centre). We had rapid response from thr manager who allocated my husband a new work coach.

My husband attended the appointment with all his paperwork, invoices and receipts (about 4 lever arch files). The second work coach was much better.  He explained how he should present his accounts for future appointments and actually listened to what my hisband had to say.  He checked the two months that that previous work coach flaggef up and it was all ok now.

Very relieved! Thank you all for reading this far and for helping.