Self Employed and Universal Credit

Maidinbritain

I am having 1 heck of a headache with Universal Credit. We are a Husband/Wife team owning a small Limited Company Business providing Children's Parties and Parent & Baby Groups. We were forced to migrate from Child Tax and Working Tax Credit earlier this year.

Now, although we are Directors, we are also on a PAYE and take a set wage every month. No extras, no bonuses, no dividends, no shares, nothing extra. 

However, we ran an Event in October which brought in bumper sales. 

As we are classed Self Employed, we have to report all of our income and expenses of the business. Because of the bumper sales, Universal Credit seem to think those profits go straight into out personal bank. They don't, they sit in our Business Account to cover periods that will be quiet. 

It is the same as if I worked for Tesco and they had bumper Christmas Sales, I wouldn't suddenly see a huge payout or share of those bumper profits in my wage packet. 

I cannot get them to see that the Business account is separate to my Personal account. My Work Coach understands but doesn't know how to apply it to my award. We escalated it and got a bog standard reply that says because we have excess profits my award has been reduced. 

So, now this month they have slashed my award from £900 to £35. This will cause me a great financial headache, I won't be able to pay my mortgage and other bills. 

We never had these problems with Child and Working Tax Credit. Trying to get them to understand is frustrating beyond belief. I have escalated to my MP but in the mean time it's me that has to deal with bounced bills and threats of losing my home. 

Has anyone else experienced this and been successful in making UC understand the situation.  

tomtom256

You where not forced to migrate, you chose to, you could have opted not to migrate. Yes your benefits would have stopped, but that was the options you had.

As the company directors there is nothing stopping you using the money in the business at any time and the legislation is specifcally written, to prevent benefits being used to fund a lifestyle that a business cannot/will not support.

This was one of the main reasons they wanted to do away with tax credits, its legislated and the only way to change is to get Universal Credit regulations changed. Until then any profit of the business, will be treated as your earnings, this information is freely available on gov.uk.

Dazed_and_C0nfused

We were forced to migrate from Child Tax and Working Tax Credit earlier this year.

I don't believe anyone is forced to migrate.  If you didn't want to be on UC there will have been an option to simply end your Tax Credits claims and not engage with UC.

It is a feature of UC that company directors are treated differently to employees.  Loads of threads about this on here.

You have done the right thing involving your MP, they are the people who can arrange for the legislation to be changed to suit you.  Just don't hold your breath.

kaMelo

Maidinbritain said:

I am having 1 heck of a headache with Universal Credit. We are a Husband/Wife team owning a small Limited Company Business providing Children's Parties and Parent & Baby Groups. We were forced to migrate from Child Tax and Working Tax Credit earlier this year.

Now, although we are Directors, we are also on a PAYE and take a set wage every month. No extras, no bonuses, no dividends, no shares, nothing extra. 

However, we ran an Event in October which brought in bumper sales. 

As we are classed Self Employed, we have to report all of our income and expenses of the business. Because of the bumper sales, Universal Credit seem to think those profits go straight into out personal bank. They don't, they sit in our Business Account to cover periods that will be quiet. 

It is the same as if I worked for Tesco and they had bumper Christmas Sales, I wouldn't suddenly see a huge payout or share of those bumper profits in my wage packet. 

I cannot get them to see that the Business account is separate to my Personal account. My Work Coach understands but doesn't know how to apply it to my award. We escalated it and got a bog standard reply that says because we have excess profits my award has been reduced. 

So, now this month they have slashed my award from £900 to £35. This will cause me a great financial headache, I won't be able to pay my mortgage and other bills. 

We never had these problems with Child and Working Tax Credit. Trying to get them to understand is frustrating beyond belief. I have escalated to my MP but in the mean time it's me that has to deal with bounced bills and threats of losing my home. 

Has anyone else experienced this and been successful in making UC understand the situation.  

You cannot compare UC and Tax Credits as they are completely different benefits and unfortunately for you, your current situation is not a mistake, it is just how UC works.
Your current status as directors of your own limited company is, for UC purposes, analogous to that of a sole trader as you are in full control of how much you pay yourself. UC is a monthly benefit, any award you may qualify for is based upon your circumstances within each monthly assessment period and will include not just your PAYE earnings, it will also include any profits (after costs and allowable expenses are deducted) earned in that assessment period too.

You may choose to leave those profits within the company to cover your PAYE income in quieter periods, you could also choose to pay yourself the entire monthly profit and retain that money in your personal bank account to cover those quieter periods. Your profits would naturally be lower during the quieter months which may lead to an increased award of UC in those assessment periods. 

I'm sure many businesses have had the same experience as you, UC can be challenging for seasonal businesses but as I said earlier, it's not a mistake it's just how it works and to change it, as UC is primary legislation, would require an act of Parliament..  If you're short of money then you can always use the retained profit in the company.

huckster

Why not come up with change to business strategy to increase business earnings?

Have you asked about local business advice services?

alocin77

Maidinbritain said:

I am having 1 heck of a headache with Universal Credit. We are a Husband/Wife team owning a small Limited Company Business providing Children's Parties and Parent & Baby Groups. We were forced to migrate from Child Tax and Working Tax Credit earlier this year.

Now, although we are Directors, we are also on a PAYE and take a set wage every month. No extras, no bonuses, no dividends, no shares, nothing extra. 

However, we ran an Event in October which brought in bumper sales. 

As we are classed Self Employed, we have to report all of our income and expenses of the business. Because of the bumper sales, Universal Credit seem to think those profits go straight into out personal bank. They don't, they sit in our Business Account to cover periods that will be quiet. 

It is the same as if I worked for Tesco and they had bumper Christmas Sales, I wouldn't suddenly see a huge payout or share of those bumper profits in my wage packet. 

I cannot get them to see that the Business account is separate to my Personal account. My Work Coach understands but doesn't know how to apply it to my award. We escalated it and got a bog standard reply that says because we have excess profits my award has been reduced. 

So, now this month they have slashed my award from £900 to £35. This will cause me a great financial headache, I won't be able to pay my mortgage and other bills. 

We never had these problems with Child and Working Tax Credit. Trying to get them to understand is frustrating beyond belief. I have escalated to my MP but in the mean time it's me that has to deal with bounced bills and threats of losing my home. 

Has anyone else experienced this and been successful in making UC understand the situation.  

I completely sympathise, as we are in a very similar position and UC seem to think all self employed income goes straight into your personal bank account, which it obviously doesn't. My husband and I get so frustrated about it all. We were also forced to migrate to UC from Tax Credits - if we'd had any choice, we'd have stayed on Tax Credits. I don't know how to help, but wanted to let you know you are not alone - we totally get where you're coming from, and agree that the UC system has no idea how self employment actually works! Very frustrating.

For all those saying people didn't have to migrate to UC, we did. The Tax Credit system came to an end last year forcing all remaining Tax Credit claimants to migrate to UC. It was not our choice.

kaMelo

Tax credits may have ended but no one was forced to claim UC, that was entirely your choice to do so.

I would also argue they fully understand how solo limited company directors can choose to pay themselves (or not) hence the rules being written as they are.

peteuk

alocin77 said:

Maidinbritain said:

I am having 1 heck of a headache with Universal Credit. We are a Husband/Wife team owning a small Limited Company Business providing Children's Parties and Parent & Baby Groups. We were forced to migrate from Child Tax and Working Tax Credit earlier this year.

Now, although we are Directors, we are also on a PAYE and take a set wage every month. No extras, no bonuses, no dividends, no shares, nothing extra. 

However, we ran an Event in October which brought in bumper sales. 

As we are classed Self Employed, we have to report all of our income and expenses of the business. Because of the bumper sales, Universal Credit seem to think those profits go straight into out personal bank. They don't, they sit in our Business Account to cover periods that will be quiet. 

It is the same as if I worked for Tesco and they had bumper Christmas Sales, I wouldn't suddenly see a huge payout or share of those bumper profits in my wage packet. 

I cannot get them to see that the Business account is separate to my Personal account. My Work Coach understands but doesn't know how to apply it to my award. We escalated it and got a bog standard reply that says because we have excess profits my award has been reduced. 

So, now this month they have slashed my award from £900 to £35. This will cause me a great financial headache, I won't be able to pay my mortgage and other bills. 

We never had these problems with Child and Working Tax Credit. Trying to get them to understand is frustrating beyond belief. I have escalated to my MP but in the mean time it's me that has to deal with bounced bills and threats of losing my home. 

Has anyone else experienced this and been successful in making UC understand the situation.  

I completely sympathise, as we are in a very similar position and UC seem to think all self employed income goes straight into your personal bank account, which it obviously doesn't. My husband and I get so frustrated about it all. We were also forced to migrate to UC from Tax Credits - if we'd had any choice, we'd have stayed on Tax Credits. I don't know how to help, but wanted to let you know you are not alone - we totally get where you're coming from, and agree that the UC system has no idea how self employment actually works! Very frustrating.

For all those saying people didn't have to migrate to UC, we did. The Tax Credit system came to an end last year forcing all remaining Tax Credit claimants to migrate to UC. It was not our choice.

As pointed out you did have a choice, tax credits was floored and to close the loop holes when UC was introduce the aim was always to close TC.  At the point of transition you had a choice, apply or not to apply.  

In transition you would have been given a years start up transition for being self employed, regardless of the age of the buisness.

huckster

Tax Credits and Universal Credit are both flawed.

Too many people claiming, when some who may not need help, are claiming as they feel entitled.