Managed migration has left us with zero - advice

kaMelo

Yamor said:

kaMelo said:

AET is not relevant to people deemed gainfully self employed, they have the MIF instead.
If part of a joint claim then both parties have their own individual MIF and a combined MIF (both MIF added together).
If both parties earn less than their individual MIF then the combined MIF is used to calculate UC. If both parties earnings are higher than their individual MIF then their actual earnings are used to calculate UC.
Importantly, and rather painfully, there is no offsetting of earnings between the couple If one party earns less than their individual MIF and the other party earns more than their individual MIF. In this situation UC is calculated using the individual MIF of the person who earned less, added to the actual earnings of the person who earned more.

This isn't correct. If one is earning more than their MIF, and the other less, then they would use the higher of combined real earnings or the two MIFs added together.

I hate UC and self employed, no matter how many times I read it it just doesn't seem to go in.
You are of course correct so thank you for correcting me, Reading the ADM Chapter H4 again and, whilst complicated, it's actually quite clear how it works. For some reason, that I can't explain other than I've misunderstood, I failed to include the reduction of the individual MIF equal to the excess earnings above the combined MIF 

Rather than rewrite I'll copy and paste the example given.

A couple are in receipt of UC as joint claimants. Both are in gainful self-employment. For the purposes of UC, the husband has earned income for the current assessment period of £500 and his wife has earned income for the assessment period of £1,200. Their combined earned income is therefore £1,700. The couple threshold is £1,900 (each individual threshold of £950 x 2). The minimum income foor applies.
The husband is initially treated as having earned income of £950. This gives a total earned income amount for the couple of £2,150 (£950 + £1,200) which is £250 in excess of the couple threshold. Because the combined earned income the couple are treated as having is above their couple threshold of £1,900 then the amount of earned income the husband is treated as having for the assessment period is reduced by the amount that the couple’s income exceeds £1900. The husband is treated as having earned income of £700.
This means that for the assessment period the husband is treated as having earned income of £700 which when added to his wife’s actual earned income of £1,200 gives a combined income of £1,900.

huckster

See H4376 below.. Says H4374 does not apply to property business.  

Not convinced 1 holiday let should be counted as gainful self-employed under UC. Yes the claimant may take care of the property for up to 20 hours per week and I can understand the Work Coaches thought process for decision, but the decision does not appear to comply with the UC guidance.

"Earned income

H4374 Where H4360 applies to a company which is carrying on a trade1

1. the income of the company or the person’s share of that income has to be treated as the claimants S/E

income and calculated in the same way as S/E earnings and

2. the person has to be treated as in gainful self-employment (see H4020 et seq) if their activities in the

course of the trade are their main employment.

Note 1: the S/E earnings in 1. are in addition to any earnings the claimant may have received in their

position as a director or employee of the company2

.

1 UC Regs, reg 77(3)(b) & (c); 2 reg 77(4)

Note 2: a company director may receive earnings and also income from shares, dividends or capital in

that company. For the defnition of a company director see DMG 27010,

Note 3: a company director can be self employed and an employed earner, This should be determined in

the usual way.

H4375 If H4374 2. applies then the minimum income foor has to be applied if the claimant’s earnings

under H4374 1. are below the minimum amount1

.

Note: If applicable, the start-up period can be applied in place of the minimum income foor (see H4000

et seq).

1 UC Regs, reg 77(3)(c)

H4376 H4374 does not apply to a property business1"

.

Yamor

huckster said:

See H4376 below.. Says H4374 does not apply to property business.  

Not convinced 1 holiday let should be counted as gainful self-employed under UC. Yes the claimant may take care of the property for up to 20 hours per week and I can understand the Work Coaches thought process for decision, but the decision does not appear to comply with the UC guidance.

"Earned income

H4374 Where H4360 applies to a company which is carrying on a trade1

1. the income of the company or the person’s share of that income has to be treated as the claimants S/E

income and calculated in the same way as S/E earnings and

2. the person has to be treated as in gainful self-employment (see H4020 et seq) if their activities in the

course of the trade are their main employment.

Note 1: the S/E earnings in 1. are in addition to any earnings the claimant may have received in their

position as a director or employee of the company2

.

1 UC Regs, reg 77(3)(b) & (c); 2 reg 77(4)

Note 2: a company director may receive earnings and also income from shares, dividends or capital in

that company. For the defnition of a company director see DMG 27010,

Note 3: a company director can be self employed and an employed earner, This should be determined in

the usual way.

H4375 If H4374 2. applies then the minimum income foor has to be applied if the claimant’s earnings

under H4374 1. are below the minimum amount1

.

Note: If applicable, the start-up period can be applied in place of the minimum income foor (see H4000

et seq).

1 UC Regs, reg 77(3)(c)

H4376 H4374 does not apply to a property business1"

.

I do agree (as per my earlier posts in this thread) that it is very unlikely to be self-employment, however this specific guidance is only relevant where the property is held via a company. My understanding is that the OPs partner owns the property directly.

There isn't as clear guidance in the ADM for this situation, but see the references to "trade, profession or vocation" in H4010 and H4012. From a tax law perspective it is clear that owning property without providing very much by way of ancillary services would not be considered a "trade".

See here (specifically from the section headed "Case law" until the bottom of the page):

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4300

Peas83

Thanks for all the replies. I must admit, some of it is starting to go a little over my head but I get the jist.

I'll ask for a mandatory reconsideration as it's clear that double counting is happening. Either the flat is part of her business and not liable for capital deductions under UC or it is in fact a capital asset and the earnings from it shouldn't used to deduct from the UC award, only her earnings from her other cleaning work should be. We're not too fussed either way I don't think, we just want to get it right.

As a side, I find it strange it is questionable whether it's 'self employment', it's pretty hard work... In high season she could have 4/5 changeovers a week at up to 3hrs per time, 45 minute commute each way, laundry (lots and lots of laundry), being contactable by guests 24/7, keeping up with advertisement, booking calenders, maintenance schedules, insurances, safety certificates, restocking consumables and wear and tear items in the flat, keeping meticulous records and undertaking all the relevant administration. Sounds like any other business to me 🤷‍♂️

huckster

Generally having let properties is not considered as self-employed work for Universal Credit, but it is a bit of a grey area;  If you had more than one holiday let, then yes I think I would agree that it is more likely to be self-employment.

Is having one holiday let just an investment and not a self-employed trade ?  From what I have read, I am inclined to believe it is an investment only, which takes quite a bit of time to look after.

Yamor is far more knowledgeable about all of the relevant legislation, so hopefully they will add a comment, if there is anything more to be said.

Yamor

Not much to add, except that it is important to understand the distinction between a “business” and a “trade”. Your partner is certainly running a “business”, but it is unlikely to be a “trade”.

The terms “trade” and “business” come from tax law, and there is plenty case law there defining them.

Legacy benefits actually used to refer to a “business”, but one of the changes made for UC was limiting self-employment and the business assets disregard to a “trade” (or a “profession” or “vocation”).

There is another category of earned income taken into account for UC referred to as “any other paid work”, and it is not very clear what that includes. In fact, the UC Regulations do not even define how to calculate the income from “other paid work”, despite extensive rules for employed earnings and self-employed earnings.
However, I don’t think it is likely a property business would fall within this category. It is more likely to include earnings from work which is simply not developed enough to count as trading income.

sheramber

Yamor said:

Not much to add, except that it is important to understand the distinction between a “business” and a “trade”. Your partner is certainly running a “business”, but it is unlikely to be a “trade”.

The terms “trade” and “business” come from tax law, and there is plenty case law there defining them.

Legacy benefits actually used to refer to a “business”, but one of the changes made for UC was limiting self-employment and the business assets disregard to a “trade” (or a “profession” or “vocation”).

There is another category of earned income taken into account for UC referred to as “any other paid work”, and it is not very clear what that includes. In fact, the UC Regulations do not even define how to calculate the income from “other paid work”, despite extensive rules for employed earnings and self-employed earnings.
However, I don’t think it is likely a property business would fall within this category. It is more likely to include earnings from work which is simply not developed enough to count as trading income.

Holiday letting is considered a trade  by HMRC

PIM4105 - Furnished holiday lettings: overview

Yamor

sheramber said:

Yamor said:

Not much to add, except that it is important to understand the distinction between a “business” and a “trade”. Your partner is certainly running a “business”, but it is unlikely to be a “trade”.

The terms “trade” and “business” come from tax law, and there is plenty case law there defining them.

Legacy benefits actually used to refer to a “business”, but one of the changes made for UC was limiting self-employment and the business assets disregard to a “trade” (or a “profession” or “vocation”).

There is another category of earned income taken into account for UC referred to as “any other paid work”, and it is not very clear what that includes. In fact, the UC Regulations do not even define how to calculate the income from “other paid work”, despite extensive rules for employed earnings and self-employed earnings.
However, I don’t think it is likely a property business would fall within this category. It is more likely to include earnings from work which is simply not developed enough to count as trading income.

Holiday letting is considered a trade  by HMRC

PIM4105 - Furnished holiday lettings: overview

This is not correct. It is just that certain trading rules apply (for now - they are abolishing this soon). It is not actually a trade.

Peas83

So there's been an update, the local UC office got in contact after my journal message and have admitted there's been an error. It is pretty much as has been mentioned. 

The flat is being counted as capital, causing a £174 deduction to award, but my partner shouldn't have been told to include the earnings from it in her SE earnings. The profit from running the holiday let is disregarded and the only earnings she should be putting forward is the money from her other cleaning work.

However, when we asked what will happen when that income is relatively minor and the hrs she spends doing it (10hrs a week) aren't enough to count as gainfully SE they weren't too sure. They did say she wouldn't be made to look for extra work but I'm not sure I believe that.

It does mean however, that we will receive some award and more importantly that it's being done correctly.

It is a strange grey area that it's not classed as self employed, but I can sort of see why. There's obviously alot of people who just happen to own holiday properties and the income just dribbles in, then there are those like my partner who work very hard to run such a property as their sole income/business. To differentiate the two on a case by case basis would be difficult. 

Yamor I'm interested to know more about the changes to the trading rules you mention, do you have a link so we can get up to date. 

Yamor

It was just announced in the budget, and with the election coming up, who knows if the changes will happen...

Here's a good article to start with, although it's written for accountants/tax advisers, so it is quite technical:

https://www.taxadvisermagazine.com/article/furnished-holiday-lettings-tax-advantages-eliminated