Managed migration has left us with zero - advice

Peas83

Me and my partner were claiming WTC and CTC and have been for several years. We have just undergone the managed migration with transitional protection process to UC and after our first assessment period we are considering closing the claim as we've been left with zero.

Our situation is that I work full time and my partner works part time, we are both self employed. Her business is based around a small 2nd property she owns (with a BTL mortgage). We live in an area of high tourism and she runs this as a holiday let, she does everything herself and it by no means makes mega bucks, about the same as an equivalent part time job would do for similar hrs, the benefit is obviously that it's flexible around childcare and school runs etc. The property was built and designed for this purpose so it's not feasible to rent it long term on say, an AST.

Anyway, this was all fine under tax credits with the capital allowances and tapering etc. We didn't get lots of TC... But it all helps, right?

However, since we've been moved to UC they have classed it as an asset and even with the transitional protection of £16000, our claim was reduced to 0 for the first period. Nothing income wise is going to change drastically so it's going to get reduced to 0 again and again.

When I asked on the journal how we have gone from some award to none, despite transitional protection... I was told to write to my MP 😅

So are we better off avoiding the hassle of monthly income/expenses and just closing the claim? Been as it would be ended after 3 months of zero award. 

Yamor

In your situation, the only likely reason not to be getting at least as much as you were getting on tax credits is if your current monthly income is higher than the annual equivalent which your tax credits was based on.

A second point to consider is whether your partner is really self-employed or simply has some property income. Almost certainly (unless it is run more like a hotel or B&B), it is simply property income, in which case UC are correct to treat the property as an asset. (Only if it is a true trade does the disregard for business assets apply, which isn't limited to 12 months.)
The disadvantage of this is that you won't be entitled to any benefit after 12 months on UC (as the transitional capital disregard only applies for 12 months of UC entitlement).
There is however a significant advantage in that the income is not counted for UC purposes, and should not be declared as self-employed income each month. It sounds like you have declared it as self-employed income, so this would need to be corrected.

If you want further advice re. the transitional element, we would need more details of what you were getting on tax credits, and what income your tax credits were based on.

huckster

Agree the 2nd property let out as as holiday let is probably not self employment, so the income should not be declared as such. Any income would be counted as capital.

So your partner may be expected to search for employment and attend Job Centre appointments . But this depends on your income level.

Newcad

Check your UC statement for 2 things in particular:

Does it show a Transitional Element? Even if it says zero it should be there in the (first) statement.

Does it show a Child Element?

Either/both of of those may not have been included yet in the first UC monthly statement.

The Child Element usually gets added quickly once you point out that it isn't there, the TE may take longer.

(However if they are currently missing then even when added in it may be that your earnings wipe them out again under the 55p/£ UC rules - which are different from TC rules).

Peas83

Thanks for the replies. She has passed all the 'tests' to qualify for being self employed as per UC. She went in and showed that she is running it as a business etc. To the point that the work coach was satisfied and has not made her look for additional work or attend job centre appointments.

They are not counting the income from it as capital, that's being classed as her self employed earnings. It's the capital asset value of the property itself that's causing us to now be reduced to zero award. Yet this wasn't t the case under TC.

E2a - I see more of your point after re-reading. So, the money she makes from letting the flat out shouldn't be classed as self employed earnings? So are we in a situation where UC are reducing our reward for the capital value of the property and also reducing it by saying the income from it is self employed earnings... Rather than property income, which wouldn't reduce the award?? 

To the other point raised... Yes, the annual/monthly difference between UC and TC is not helping. Her income is incredibly seasonal, so from about now until end of September she earns the majority of her income. In the winter months it's barely anything... Which all ironed out with TC requesting an annual income figure, akin to self assessment. Not so much with UC and monthly incomes.

Newcad

Unfortunately even though the capital value above £16k is disregarded for 12 months following a Managed Migration from TCs the value between £6k and £16k is still counted - and that means a £174 deduction from UC each month.

Yamor

Peas83 said:

Thanks for the replies. She has passed all the 'tests' to qualify for being self employed as per UC. She went in and showed that she is running it as a business etc. To the point that the work coach was satisfied and has not made her look for additional work or attend job centre appointments.

They are not counting the income from it as capital, that's being classed as her self employed earnings. It's the capital asset value of the property itself that's causing us to now be reduced to zero award. Yet this wasn't t the case under TC.

E2a - I see more of your point after re-reading. So, the money she makes from letting the flat out shouldn't be classed as self employed earnings? So are we in a situation where UC are reducing our reward for the capital value of the property and also reducing it by saying the income from it is self employed earnings... Rather than property income, which wouldn't reduce the award?? 

To the other point raised... Yes, the annual/monthly difference between UC and TC is not helping. Her income is incredibly seasonal, so from about now until end of September she earns the majority of her income. In the winter months it's barely anything... Which all ironed out with TC requesting an annual income figure, akin to self assessment. Not so much with UC and monthly incomes.

The first thing I would say is that just because a work coach, or whoever, has decided that she is "gainfully self-employed" does not mean they are correct. Unfortunately, they get many of these decisions wrong. It is very difficult for a property business to count as a "trade", which is what is necessary for her to be "self-employed".

However, as per your edit, if she is truly carrying on a "trade", and therefore "self-employed" for UC purposes, then the assets used by the trade (including any property) should all be disregarded, and not count as capital. So there's definitely something wrong going on here.

Peas83

Yamor said:

Peas83 said:

Thanks for the replies. She has passed all the 'tests' to qualify for being self employed as per UC. She went in and showed that she is running it as a business etc. To the point that the work coach was satisfied and has not made her look for additional work or attend job centre appointments.

They are not counting the income from it as capital, that's being classed as her self employed earnings. It's the capital asset value of the property itself that's causing us to now be reduced to zero award. Yet this wasn't t the case under TC.

E2a - I see more of your point after re-reading. So, the money she makes from letting the flat out shouldn't be classed as self employed earnings? So are we in a situation where UC are reducing our reward for the capital value of the property and also reducing it by saying the income from it is self employed earnings... Rather than property income, which wouldn't reduce the award?? 

To the other point raised... Yes, the annual/monthly difference between UC and TC is not helping. Her income is incredibly seasonal, so from about now until end of September she earns the majority of her income. In the winter months it's barely anything... Which all ironed out with TC requesting an annual income figure, akin to self assessment. Not so much with UC and monthly incomes.

The first thing I would say is that just because a work coach, or whoever, has decided that she is "gainfully self-employed" does not mean they are correct. Unfortunately, they get many of these decisions wrong. It is very difficult for a property business to count as a "trade", which is what is necessary for her to be "self-employed".

However, as per your edit, if she is truly carrying on a "trade", and therefore "self-employed" for UC purposes, then the assets used by the trade (including any property) should all be disregarded, and not count as capital. So there's definitely something wrong going on here.

I guess the issue would be that if the income from the flat was not counted as her self employed income then her 'self employed earnings' would be too low and they would force her to look for other work. This isn't an option as running the flat, it's lettings, doing all the changeovers, maintenance etc alongside childcare doesn't leave her any time to take on more work. She does some private cleaning on the 3 days both children are in care, this is also declared. Roughly 10hrs per week. The flat can take between 10-20hrs per week depending on season. 

Yamor

How old are the children?

Peas83

Yamor said:

How old are the children?

6 & 4, 4 year old is still at pre-school

tacpot12

I agree with Yamor, the DWP shouldbe regarding the holiday property as a business asset and disregarding it for capital purposes.

You should ask for a Mandatory Reconsideration of the DWP decision to treat the holiday let as capital. It is clearly a business asset if the time taken to look after it it qualifies your partner as being gainfully self-employed.

If it is ever sold, the proceeds would become capital once your partner receives them, and if they stop running it as a holiday let (possibly because of their health), there is a time limit on how long the DWP will disregard the property as capital.