Universal Credit Ltd Director

chocouk

Hello all

Just after some advice / experiences on claiming UC whilst being a director of a LTD company. We’re talking UC Regulation 77.

‘Where a person stands in a position analogous to that of a sole owner or partner in relation to a company which is carrying on a trade or a property business, the person is to be treated, for the purposes of this Part, as the sole owner or partner’

I totally understand why these exist, but done some research and not too clear in this case. If I was a director with no share holding, held just for responsibility and recompensed based on salary / perks only (no dividend as no shares); then would these rules apply to me?

I did not incorporate the company and it’s been running a good few years, I know the regulations would class me as in a partnership (2 other directors), however, as I have no shares / interest and nothing to benefit from the profit, surely I would be exempt?

Especially as the UC calculation on reported income / expenses would be simply be 0 each month (as that would be my share % of those profits?

Slightly worried about it as it’s not too clear; and I suspect explaining this to UC would be a nightmare as they hear the word “director” and jump to: report self employed, gateway interview, need to report, etc…

Thanks

huckster

You would have to declare yourself as employed and self-employed. Then attend a Gateway Intervention appointment to verify self-employment at the Job Centre taking with you all relevant documents about the ltd company business, including anything which clarifies shares/entitlements. 

Some who are self-employed are directors in name only and don't have any legal entitlement to profit share or dividends.  If there is documentation to show this, then I would think the Job Centre would find you not gainfully self employed and they also don't require you to report income and expenses each month as you don't have share of profit or be responsible for business expenses.  But of course they would expect the company to report your pay as an employee to HMRC so that UC receives the pay data via HMRC and depending on monthly pay, may require you to attend Job Centre appointments if the pay is below the required threshold.

Grumpy_chap

chocouk said:

Hello all

Just after some advice / experiences on claiming UC whilst being a director of a LTD company. We’re talking UC Regulation 77.

‘Where a person stands in a position analogous to that of a sole owner or partner in relation to a company which is carrying on a trade or a property business, the person is to be treated, for the purposes of this Part, as the sole owner or partner’

I totally understand why these exist, but done some research and not too clear in this case. If I was a director with no share holding, held just for responsibility and recompensed based on salary / perks only (no dividend as no shares); then would these rules apply to me?

I did not incorporate the company and it’s been running a good few years, I know the regulations would class me as in a partnership (2 other directors), however, as I have no shares / interest and nothing to benefit from the profit, surely I would be exempt?

Especially as the UC calculation on reported income / expenses would be simply be 0 each month (as that would be my share % of those profits?

Slightly worried about it as it’s not too clear; and I suspect explaining this to UC would be a nightmare as they hear the word “director” and jump to: report self employed, gateway interview, need to report, etc…

Thanks

The issue of a sole owner / Director for a Ltd Company is the ability of the individual to massage the timing of payments drawn from the business to qualify for UC.  In such cases, the system "looks through the veil" of the Ltd Company to the underlying income and expense.

It is not clear that situation applies here.  The OP sounds like an employed Director and not an owner or Partner.

Is the OP formally a Director (recorded at Companies House) or a Director in job title only?

chocouk

Thanks for your responses!

Yes I’ve been employed for a few years, currently claiming UC with RTI submitted, and just checking what the state of play would be as this has been discussed as an opportunity before.

I believe I would be an employed director, with it being registered at companies house, with no shareholding and only benefiting from my remuneration package, technically just being paid to grow the business to benefit the staff and shareholders.

The two other directors are currently shareholders. So I would not benefit from any profits / dividends; any pay rises would be picked up via RTI. Also the business wasn’t setup by me, etc so hopefully this would go for me.

I’m one of the cases where it’s just genuine progression and not trying to hide cash and control when I get paid etc… but I’m worried explaining this will be difficult.

Obviously if they offered a share option and I took it, then I’m aware of how that works. I wouldn’t want to really have to dig figures monthly to submit as I feel that’s embarrassing, and would look to close the claim but we’d actually lose money by doing this despite a pay rise.

chocouk

Also, my earnings would be over the MIF from the get go so that’s not a concern.

Newcad

chocouk said:

I believe I would be an employed director, with it being registered at companies house, with no shareholding and only benefiting from my remuneration package, technically just being paid to grow the business to benefit the staff and shareholders.

I may be missing something here; but what do you personally gain from this other that a change of job title (to Managing Director) and a pay rise?

Couldn't you just be doing exactly the same things and getting exactly the same wage as simply a 'Manager'?

I don't see any reason why you need to become a registered director in these circumstances.

Or are you saying that you are currently a director and shareholder and now want to take a step back to salaried employee?
In which case you could resign your directorship and become an employed manager.

PS. If the salary you will be getting as Manager/Managing Director is comensurate with such a position then isn't that going to take you out of UC anyway?

Grumpy_chap

chocouk said:

I believe I would be an employed director, with it being registered at companies house, with no shareholding and only benefiting from my remuneration package, technically just being paid to grow the business to benefit the staff and shareholders.

The two other directors are currently shareholders. So I would not benefit from any profits / dividends;

Do you know this business and the individuals prior to this job offer arising?

I would be wary of two owner / Directors of a small private Ltd Co. appointing an external individual to be a salaried Director (properly appointed and notified, not just job title).  There could be good reasons, such as approaching retirement, but it is appropriate to be aware that there are legal responsibilities with being a Director and ensure that it is not being a case of being set up to take the responsibility for something inappropriately.

As mentioned above, salary for a Director would often take the individual outside the area where UC remains to be a concern.

chocouk

Yes it’s all good, not being setup in any way but thanks for the concern. Also, regarding the pay of a director taking the claimant over the UC threshold often, yes that’s probably true but everyone’s circumstances are different. Hopefully this thread helps others one day.

I think the options / conclusion is:

a) Appointed as a “de-facto” director with the title but no official appointment at CH.

b) Appointed as a “de-jure” director with official appointment at CH but no shareholding. In which case, as you stand to have no personal profit / gain from the business, the technical “share” of the income and expenses to report monthly is 0. However, the self-employed Gateway Interview should find that you are not required to submit company finances monthly and would base an award solely on the PAYE RTI data, on the basis that you are not “analogous” with a sole owner or partner as the share is 0%.

c) Appointed as a “de-jure” director with official appointment at CH with a shareholding. In which case, you would need to report the monthly income and expenses from the business related to your % of the shares allocated. Which could be 100% for a sole director, or 50% for two equal shareholders. Your salary is added as an expense to avoid double counting; but is still visible from PAYE RTI. This case is simple for some but embarrassing if you work for a more established bigger business. In which case if you could manage without UC it’s the best option and focus on growing the business to get a good dividend.

In cases B and C, you would need to report as self employed to UC (as a company director) but not in case A, as it’s simply a job title with no legal bearing.

In case B, it may be difficult to explain this but in any case of a poor decision, a good letter highlighting the situation and regulations for a mandatory reconsideration would hopefully to get required result.

Grumpy_chap

chocouk said:

Yes it’s all good, not being setup in any way but thanks for the concern. Also, regarding the pay of a director taking the claimant over the UC threshold often, yes that’s probably true but everyone’s circumstances are different. Hopefully this thread helps others one day.

I think the options / conclusion is:

a) Appointed as a “de-facto” director with the title but no official appointment at CH.

b) Appointed as a “de-jure” director with official appointment at CH but no shareholding. In which case, as you stand to have no personal profit / gain from the business, the technical “share” of the income and expenses to report monthly is 0. However, the self-employed Gateway Interview should find that you are not required to submit company finances monthly and would base an award solely on the PAYE RTI data, on the basis that you are not “analogous” with a sole owner or partner as the share is 0%.

c) Appointed as a “de-jure” director with official appointment at CH with a shareholding. In which case, you would need to report the monthly income and expenses from the business related to your % of the shares allocated. Which could be 100% for a sole director, or 50% for two equal shareholders. Your salary is added as an expense to avoid double counting; but is still visible from PAYE RTI. This case is simple for some but embarrassing if you work for a more established bigger business. In which case if you could manage without UC it’s the best option and focus on growing the business to get a good dividend.

In cases B and C, you would need to report as self employed to UC (as a company director) but not in case A, as it’s simply a job title with no legal bearing.

In case B, it may be difficult to explain this but in any case of a poor decision, a good letter highlighting the situation and regulations for a mandatory reconsideration would hopefully to get required result.

I don't think, in case B, you would need to report as self-employed.
I am not an expert, so others may express alternate views or be able to provide references that confirm the position.

In case C, the issue would only arise for a small business.  In the case of "work for a more established bigger business", the UC claim would simply fail once the individual reports their earnings.  It would be the very extreme edge cases where the Director for an "established bigger business" would remain eligible for UC (income related components).

Newcad

I still see no reason to even consider your case B, personally I wouldn't touch that option with a bargepole.

The legal responsibility of a registered director, but with no recompense? You'd be daft to consider it.