Universal Credit - LTD company director - Please Advice

maki68

I'm an only director and employee of my own Ltd. (small coffee shop and retail bakery)

After my wife's cancer treatment in 2019 she applied for universal credit (which is of course joined) so I gave them all those required information for that joined application they have requested and they set up the UC account for us.

Since the beginning of our UC claim on 3.April 2019 I have always been full time employee of my own Ltd as a company director.

My legal status as employee has never changed over the claiming period and I am still holding the same job position.

A couple of month ago my wife has a UC review. Few weeks later the UC contacted me over the phone and made me to change my status to self-employed explaining to me that something have changed in their regulations.

Later on I received appointment at local Job Centre stating: As you have reported you are self-employed we require an appointment to established if this is gainfully self-employed and set you up sop you can report any earnings from self-employment each month

As I did not understand why is all this happening so I called back to UC office to urge then that there have been no changes in my work position since the start of the UC claim in 2019 and my “legal status” still an employee of Ltd as a company director and I’m on PAYE.

Unfortunately they told me that according the DWP rules that status is right and I am a self-employed.

As I did not agreed with their explanation I went on my UC account and reported “change of work details” and changed back my status to employee and back-dated to 2019 adding a Journal message explaining the situation and repeated myself that there were no changes in my employment status since the start of the UC account in 2019.

I have to still attempt the UC appointment at the local Job Centre where they told me that they will from now on treat me as a self-employed according my Ltd structure and my position.

Copy from the UC Journal - As discussed the letter attached confirms you are found to be gainfully self-employed with a start-up period. You will need to report your self-employment earnings and expenses on the last day of your assessment period each month, this is the 3rd of the month to let them know your self-employed earnings. A to-do will appear in your to do list to help you do this

Then for unknown reason they have ask me to fill out report income and expenses for each month all the way back from April 2019.

Now we received a letter that according their calculation (using those monthly records of Ltd.’s money in and out) I have been overpaid by nearly £12000 and on the top I have to pay a civil penalty of £50.

The “income” they calculated was not my income as I did not use the money for myself.

As the law stated:
    A limited company is separate from the individual director – the company is its own legal entity. Money that is paid to the company for work done belongs to the company, not to the director(s).

There are three ways that directors can take money out of their limited company:              

•   Dividends – this is a payment made by a company to its shareholders if it has made a profit
•   Salary – if the director is also an employee of the company, they may receive a salary. The company will be their employer and in most cases the salary will be run through a normal payroll
•   Director's loan – if a director takes out more money than they put into a company and it is not salary or a dividend, it is called a directors loan.

Now it come my questions:

I do understand the DWP decision to treat me as a gainfully self-employed.

I don’t understand why as from this month they changed my status and gave me even start-up period but recalculating all past years. Is that right?  

Also I don’t understand why they did not treated me as analogous at the time they set up the UC account for us in 2019 even they have the all information in hand and there were no changes since. The only explanation came to me is that they made a mistake.

That raises my next question – Why should we pay a civil penalty for something we had no control with?   

Cen we please ask you for help to understand our rights in that matter and possibly suggest our options?  

We are apologise for such long  thread

Grumpy_chap

maki68 said:

I'm an only director and employee of my own Ltd. (small coffee shop and retail bakery)

After my wife's cancer treatment in 2019 she applied for universal credit (which is of course joined) so I gave them all those required information for that joined application they have requested and they set up the UC account for us.

Since the beginning of our UC claim on 3.April 2019 I have always been full time employee of my own Ltd as a company director.

My legal status as employee has never changed over the claiming period and I am still holding the same job position.

A couple of month ago my wife has a UC review. Few weeks later the UC contacted me over the phone and made me to change my status to self-employed explaining to me that something have changed in their regulations.

Later on I received appointment at local Job Centre stating: As you have reported you are self-employed we require an appointment to established if this is gainfully self-employed and set you up sop you can report any earnings from self-employment each month

As I did not understand why is all this happening so I called back to UC office to urge then that there have been no changes in my work position since the start of the UC claim in 2019 and my “legal status” still an employee of Ltd as a company director and I’m on PAYE.

Unfortunately they told me that according the DWP rules that status is right and I am a self-employed.

As I did not agreed with their explanation I went on my UC account and reported “change of work details” and changed back my status to employee and back-dated to 2019 adding a Journal message explaining the situation and repeated myself that there were no changes in my employment status since the start of the UC account in 2019.

I have to still attempt the UC appointment at the local Job Centre where they told me that they will from now on treat me as a self-employed according my Ltd structure and my position.

Copy from the UC Journal - As discussed the letter attached confirms you are found to be gainfully self-employed with a start-up period. You will need to report your self-employment earnings and expenses on the last day of your assessment period each month, this is the 3rd of the month to let them know your self-employed earnings. A to-do will appear in your to do list to help you do this

Then for unknown reason they have ask me to fill out report income and expenses for each month all the way back from April 2019.

Now we received a letter that according their calculation (using those monthly records of Ltd.’s money in and out) I have been overpaid by nearly £12000 and on the top I have to pay a civil penalty of £50.

The “income” they calculated was not my income as I did not use the money for myself.

As the law stated:
    A limited company is separate from the individual director – the company is its own legal entity. Money that is paid to the company for work done belongs to the company, not to the director(s).

There are three ways that directors can take money out of their limited company:              

•   Dividends – this is a payment made by a company to its shareholders if it has made a profit
•   Salary – if the director is also an employee of the company, they may receive a salary. The company will be their employer and in most cases the salary will be run through a normal payroll
•   Director's loan – if a director takes out more money than they put into a company and it is not salary or a dividend, it is called a directors loan.

Now it come my questions:

I do understand the DWP decision to treat me as a gainfully self-employed.

I don’t understand why as from this month they changed my status and gave me even start-up period but recalculating all past years. Is that right?  

Also I don’t understand why they did not treated me as analogous at the time they set up the UC account for us in 2019 even they have the all information in hand and there were no changes since. The only explanation came to me is that they made a mistake.

That raises my next question – Why should we pay a civil penalty for something we had no control with?   

Cen we please ask you for help to understand our rights in that matter and possibly suggest our options?  

We are apologise for such long  thread

In the way UC works, a Ltd Co Director is considered as self employed and the eligibility for UC considers income (and allowable expenses) of the Ltd Co.  

This is because the individual could game the system otherwise given the amount of control over timings of drawings from the Ltd Co.

There can be a disregard for capital in the Ltd Co.  The rules are a bit complex - essentially working capital for the business.

Spoonie_Turtle

Nothing in the rules has changed, so they were wrong to say that, but this is how you should have been viewed under UC from the start. 

UNLESS you were/are a carer for your wife (or anyone else), or have your own health issues limiting your ability to work, in which case you would still have had to report income and expenses you just (potentially, in the case of having your own health issues) couldn't be deemed to be 'gainfully self-employed'.

I don't know how you dispute the penalty if you can prove you gave them all the relevant information at the start and that it's their mistake.

kaMelo

maki68 said:

I'm an only director and employee of my own Ltd. (small coffee shop and retail bakery)

After my wife's cancer treatment in 2019 she applied for universal credit (which is of course joined) so I gave them all those required information for that joined application they have requested and they set up the UC account for us.

Since the beginning of our UC claim on 3.April 2019 I have always been full time employee of my own Ltd as a company director.

My legal status as employee has never changed over the claiming period and I am still holding the same job position.

A couple of month ago my wife has a UC review. Few weeks later the UC contacted me over the phone and made me to change my status to self-employed explaining to me that something have changed in their regulations.

Later on I received appointment at local Job Centre stating: As you have reported you are self-employed we require an appointment to established if this is gainfully self-employed and set you up sop you can report any earnings from self-employment each month

As I did not understand why is all this happening so I called back to UC office to urge then that there have been no changes in my work position since the start of the UC claim in 2019 and my “legal status” still an employee of Ltd as a company director and I’m on PAYE.

Unfortunately they told me that according the DWP rules that status is right and I am a self-employed.

As I did not agreed with their explanation I went on my UC account and reported “change of work details” and changed back my status to employee and back-dated to 2019 adding a Journal message explaining the situation and repeated myself that there were no changes in my employment status since the start of the UC account in 2019.

I have to still attempt the UC appointment at the local Job Centre where they told me that they will from now on treat me as a self-employed according my Ltd structure and my position.

Copy from the UC Journal - As discussed the letter attached confirms you are found to be gainfully self-employed with a start-up period. You will need to report your self-employment earnings and expenses on the last day of your assessment period each month, this is the 3rd of the month to let them know your self-employed earnings. A to-do will appear in your to do list to help you do this

Then for unknown reason they have ask me to fill out report income and expenses for each month all the way back from April 2019.

Now we received a letter that according their calculation (using those monthly records of Ltd.’s money in and out) I have been overpaid by nearly £12000 and on the top I have to pay a civil penalty of £50.

The “income” they calculated was not my income as I did not use the money for myself.

As the law stated:
    A limited company is separate from the individual director – the company is its own legal entity. Money that is paid to the company for work done belongs to the company, not to the director(s).

There are three ways that directors can take money out of their limited company:              

•   Dividends – this is a payment made by a company to its shareholders if it has made a profit
•   Salary – if the director is also an employee of the company, they may receive a salary. The company will be their employer and in most cases the salary will be run through a normal payroll
•   Director's loan – if a director takes out more money than they put into a company and it is not salary or a dividend, it is called a directors loan.

Now it come my questions:

I do understand the DWP decision to treat me as a gainfully self-employed.

I don’t understand why as from this month they changed my status and gave me even start-up period but recalculating all past years. Is that right?  

Also I don’t understand why they did not treated me as analogous at the time they set up the UC account for us in 2019 even they have the all information in hand and there were no changes since. The only explanation came to me is that they made a mistake.

That raises my next question – Why should we pay a civil penalty for something we had no control with?   

Cen we please ask you for help to understand our rights in that matter and possibly suggest our options?  

We are apologise for such long  thread

Have a read here, 
Company analogous to a partnership or one person business H4360 - H4499
https://assets.publishing.service.gov.uk/media/670cc991080bdf716392f264/dwp-adm-h4.pdf

Whilst you correctly state you are an employee, you are also the company director with total control of how much you pay yourself via PAYE.  This position is analogous to a sole trader so, like a sole trader, your income is the total of both your PAYE income and your share of retained profits within the business in each assessment period. As the sole director your share of retained profits in each assessment period is 100%

huckster

You could dispute the Civil Penalty, if you provided all information in 2019.

Under UC legislation, even if it might have been a DWP mistake, any overpayment is recoverable.

Grumpy_chap

huckster said:

if you provided all information in 2019.

Reading between the lines, the information provided in 2019 may well have been that the OP was employed by OP LTD and then stated the salary drawn, but without the linking fact that the OP was the sole owner and Director of OP LTD.

maki68

Grumpy_chap said:

huckster said:

if you provided all information in 2019.

Reading between the lines, the information provided in 2019 may well have been that the OP was employed by OP LTD and then stated the salary drawn, but without the linking fact that the OP was the sole owner and Director of OP LTD.

If my employment position was/is a company director then it's obvious. 

ader42

I think the key aspect is that you are the sole shareholder of the company, if the company was owned an operated by someone else and you were a non-shareholder director your situation would be different. As owner of the ltd co. you are the ltd co. as far as UC is concerned.