Universal Credit, Ltd Company Director

FAllenAngel`

Hi all,
I'm transitioning to UC from Legacy benefits. I have been told today that I need to report 50% of the income and expenses of the Ltd Company, rather than my wages, which are paid monthly and PAYE. 
I have a 33% share of the business and no access to the financial side of things. I am a Director as the accountants said it was the best way for me to be paid.
UC say I could just decide to pay myself more - I can't! I am not the business owner, I just do admin and planning.
If I resign my Directorship and get paid as an employee, will this get me in trouble with UC? I can't report the business income and expenditure as I don't have access to it, so this seems to be the way to do it. 
Please tell me if I'm wrong! Thank you

tacpot12

I think you should resign your directorship - you don't have the insight or the control of the company to discharge your duties as a director adequately. You should not have allowed yourself to be named as a director. 

However, if you own a 33% share of the business, then you should be receiving dividends as well as monthly PAYE wages for your services. You would have to give up your share in the business to change how the DWP must treat you for UC, and this might be seen as a deliberate deprivation of capital/assets.

If you aren't receiving dividends, you need to find out why not. It might be because you have a class of shares that doesn't entitle you to dividends. If this is the case, then you can give these shares back to the company as they are worthless.

If you are entitled to dividendds, then then the DWP are treating you somewhat correctly; but you only have to declare 33% of the income and expenses. As a director, you should have access to the financial data for the business. You can't discharge your responsbilities without access to the data. The accountant should provide you with this each month. 

The accountants and other directors don't seem to know what they are doing, so I would urge caution, and perhaps come back to MSE for any further advice you need. 

huckster

Why report 50% of the income and expenses when you only have a 33% share.  Did you tell them that you only own 33% ? Are there company documents that reveal your share ?

Yes you can resign as director and declare that you are no longer self-employed on your UC claim. You would have to complete necessary processes with HMRC, companies house.  You would not get into trouble with UC as being a director is a choice you made.

But speak to the accountants first. I don't think it is purely about it being easier to pay you as employee.  Have come across similar situations, where the accountant has advised for a spouse partner to be a joint director, when they had little to do with the business. Is this about spreading liability risk ?  Others on this site who know more about company accounts, tax liabilities etc. may offer further comment.

HillStreetBlues

If you no access to the financial side of things, then it's madness to be a Director, also I believe it's against Companies Act (S388)

FAllenAngel`

Thank you everyone!

I have one share and the company owner has two. He is the one who is qualified in the work that the company does, without him there would be no company. I do the admin and planning to allow him to do the actual work. The shares are different types - we both get a small dividend each month, the same amount, and he takes more when he needs to.

I didn't tell UC this as to be honest they didn't ask what my share was, and it's only via my journal today that I've realised what they meant - at the meeting on Wednesday it was explained very badly. They could see my monthly pay on their screens, and just said that I'd need to record that as an expense. They said nothing about recording the business's income - even when I said, but me reporting it as an expense will cancel out my earnings and look as if I earned nothing? They said, don't worry, you'll see what we mean when you do it...

It's not that I have no access to the financial side, I explained that badly. I transfer the wages to our accounts every month and can access the bank account to see what's happening whenever I want, although there's only one card which the owner uses on a daily basis, so its dependent on getting that from him. I could have a card of my own but didn't bother as I only use it to log on and do wages. I meant that you have to report income and expenditure within a very small window, and if the Owner is away working I won't have access to the card in that time.

The bit about deprivation of assets - the company has none, it's a service rather than a product.

Sorry to be so crap at explaining, please ask if there's anything else unclear and again thanks so much for all your advice!

FAllenAngel`

Also should have said - the message I got today said that they use income and expenditure of the business rather than "whatever I choose to pay myself" but I don't have the power to decide to pay myself more or take extra dividends. I've been paid the same pretty much all the time I've been employed by the company and what I'm paid is the owner's choice.

DullGreyGuy

You are also a significant company owner given you have more than 25% of the companies capital. The other person is a co-owner with you not "the owner". 

I struggle to understand how you can fulfil your legal duties as a statutory director without having access to the financial information of the company. 

Are there other employees or is it just the two of you? Sounds like it was a convenient way for you to reduce your taxes and for them not to have to a pension scheme

huckster

Report business income and expenses to Universal Credit if you are self-employed - GOV.UK (www.gov.uk)

If you only own 33% of the company, then for the income and expenses to-do that you complete at the end of each assessment period, you enter 33% of the amount the business has received in income for the period.  And you record 33% of the expenses the business has paid out (edited . See further replies below)

You will need access to company accounts at the end of the UC assessment period, so you can add up the income received and the expenses paid out during the UC assessment period dates.

Grumpy_chap

tacpot12 said:

you don't have the insight or the control of the company to discharge your duties as a director adequately. 

However, if you own a 33% share of the business, then you should be receiving dividends as well as monthly PAYE wages for your services. 

I understand the point you are making but is it really plausible that an individual would own a third of a business yet have no insight to the finances of that business?

I also question (and it is a genuine question as I do not know), if the OP relinquishes the Directorship yet retains ownership of the shares, would a DM while accepting the OP as no longer being "self-employed" Ltd Co. Director but then holding shares which are deemed to have some value and counted as capital?

(I acknowledge the difficulty of valuing shares in a privately held Ltd Co.)

Yamor

DWP are fixated on directors, although it usually makes more sense to look at shareholdings.

In this case, from what the OP says, it's very possible that they are not in a position similar to a "partner". It is also very possible that the shares are worth virtually nothing. However, DWP could argue that any (so-called) dividends are actually more akin to wages, and should be taken into account for the UC award.

huckster said:

Report business income and expenses to Universal Credit if you are self-employed - GOV.UK (www.gov.uk)

If you only own 33% of the company, then for the income and expenses to-do that you complete at the end of each assessment period, you enter 33% of the amount the business has received in income for the period.  And you record 33% of the expenses the business has paid out, apart from your personal earnings paid by PAYE, where you enter the full amount, so your PAYE earnings are not double counted.

You will need access to company accounts at the end of the UC assessment period, so you can add up the income received and the expenses paid out during the UC assessment period dates.

I disagree with this. They would report 33% of the entire wage bill of the company, including their own salary.

huckster

Yamor yes I agree, as their partner would be reporting the other 66% of those PAYE earnings.