UC, inheritance and business

worried48

My situation is this: I run a business as a sole trader but qualify for UC most months.  I'm also disabled and classed as not required to look for work (and yes I get PIP but that isn't involved in this question) and therefore I get a higher amount of UC.

My father died and I have inherited two houses.  Unfortunately neither are fit for human habitation.  I am selling one and plan to use part of the proceeds to renovate the other which I will then move into.

After repaying significant debts, that will leave me with around 160k.  I plan to invest some of that into my business which should certainly make that more profitable but that will still leave me with somewhere around 130k.  There is a 12 month period in which you can start a new business - I am thinking of something quite different and I have not started a new business within the five year period.

Does anyone happen to know for sure what the rules are if I invest the money into a new business - is it regarded as a legitimate use of inherited capital or do I immediately lose my UC?  

To make it clear, if it does mean that I immediately lose the UC, fair enough.  I am not trying to avoid losing it by any dishonest means and if my income then rises above the threshold where I qualify for it that's fine.  But there's no point in losing anything I don't have to lose.

marcia_

worried48 said:

My situation is this: I run a business as a sole trader but qualify for UC most months.  I'm also disabled and classed as not required to look for work (and yes I get PIP but that isn't involved in this question) and therefore I get a higher amount of UC.

My father died and I have inherited two houses.  Unfortunately neither are fit for human habitation.  I am selling one and plan to use part of the proceeds to renovate the other which I will then move into.

After repaying significant debts, that will leave me with around 160k.  I plan to invest some of that into my business which should certainly make that more profitable but that will still leave me with somewhere around 130k.  There is a 12 month period in which you can start a new business - I am thinking of something quite different and I have not started a new business within the five year period.

Does anyone happen to know for sure what the rules are if I invest the money into a new business - is it regarded as a legitimate use of inherited capital or do I immediately lose my UC?  

To make it clear, if it does mean that I immediately lose the UC, fair enough.  I am not trying to avoid losing it by any dishonest means and if my income then rises above the threshold where I qualify for it that's fine.  But there's no point in losing anything I don't have to lose.

 You can't claim universal credit with £160k in the bank even if you plan on starting a business with it. 

 Houses can be disregarded for s period as long as you are actively trying to sell them. If you fail to sell them they will also make you ineligible 

Spoonie_Turtle

marcia_ said:

worried48 said:

My situation is this: I run a business as a sole trader but qualify for UC most months.  I'm also disabled and classed as not required to look for work (and yes I get PIP but that isn't involved in this question) and therefore I get a higher amount of UC.

My father died and I have inherited two houses.  Unfortunately neither are fit for human habitation.  I am selling one and plan to use part of the proceeds to renovate the other which I will then move into.

After repaying significant debts, that will leave me with around 160k.  I plan to invest some of that into my business which should certainly make that more profitable but that will still leave me with somewhere around 130k.  There is a 12 month period in which you can start a new business - I am thinking of something quite different and I have not started a new business within the five year period.

Does anyone happen to know for sure what the rules are if I invest the money into a new business - is it regarded as a legitimate use of inherited capital or do I immediately lose my UC?  

To make it clear, if it does mean that I immediately lose the UC, fair enough.  I am not trying to avoid losing it by any dishonest means and if my income then rises above the threshold where I qualify for it that's fine.  But there's no point in losing anything I don't have to lose.

 You can't claim universal credit with £160k in the bank even if you plan on starting a business with it. 

 Houses can be disregarded for s period as long as you are actively trying to sell them. If you fail to sell them they will also make you ineligible 

It may not be that simple.  They have to be "taking reasonable steps to dispose of" the properties for them to be disregarded.

Whether that only means trying to sell in their current state, or whether that can potentially include making them fit for habitation so that they then can be sold, I don't know.  I don't know what view DWP usually take of the latter (if it even happens often enough for there to be a 'usually').

Grumpy_chap

Spoonie_Turtle said:

Whether that only means trying to sell in their current state, or whether that can potentially include making them fit for habitation so that they then can be sold, I don't know. 

I can't comment how this might or might not be viewed by a DM, but any house can be sold in any state.  There will always be a developer ready and willing to invest and either improve the current property or treat the plot as a demolish and rebuild opportunity.

Northern_Wanderer

Inheriting houses, you are immediatley the benficiary, this must be reported to UC straight away. If you are taking reasonable steps to sell one property, that can be disregarded for 6 months, then it is classed as capital, or when you receive the money from the sale it is capital. The other property that you do not live in but intend to renovate is classed as capital now. In any case, you are not currently entitled to UC because the capital is over 16K.

You are allowed to pay off debts and make reasonable purchases for your circumstances, however, any capital is taken into account for UC whilst you have it. You are unlikey to be entitled to UC as I assume any capital is over 16K.

Do you own your own home or rent at the moment? Could you move into the house you intend to live in?

I suspect that if you invested £160k or any amount into your business it would be classed as "Deprivation of Capital" and then notional capital rules would come into play, meaning that UC will act like you still have that capital.

Is there any money due to you from the estate?

TELLIT01

If you have £130k after investing some into the business you will not have any entitlement to UC.  If you have £16k or above all entitlement ceases.

worried48

Northern_Wanderer said:

Do you own your own home or rent at the moment? Could you move into the house you intend to live in?

I suspect that if you invested £160k or any amount into your business it would be classed as "Deprivation of Capital" and then notional capital rules would come into play, meaning that UC will act like you still have that capital.

Is there any money due to you from the estate?

At the moment the house I intend to renovate is not fit for human habitation.  In fact I moved out of there two and a half years ago for medical reasons.  It could not take a stairlift, the bathroom could not be made accessible on any council grant because of the state of the building, no central heating, most doors not working at all, the front lintel held up with acro props, and no money to fix any of it.  I live in a council bungalow which, obviously, I will surrender when the house I intend to live in is fixed up.

Money left was not much more than needed to cover the very simple funeral.  His life insurance amounted to all of £1170.  So I am in UC payment to UC payment survival mode most of the time (the existing business is small and seasonal and this is the "off" season)

The house he lived in is up for sale but again I can't live in it due to no stairlift, no accessible bathroom, and also it's 100 miles away from where I am now.  In fact I have a buyer, the problem is that the chain below her has collapsed twice now.

Yamor

There are two relevant capital disregards here.

One is for the property you intend to sell. That can be disregarded for 6 months from the date you start taking reasonable steps to dispose of it. The 6-month period can be extended if it is reasonable to do so in the circumstances of the case.

The second is for the property you intend to renovate. That can be disregarded for 6 months if you are carrying out essential repairs or alterations required to render the premises fit for occupation. Again, the 6-month can be extended as above.

The first disregard only applies from the date you begin taking steps to dispose of it, and the second only from the date you begin carrying out the repairs or alterations. So, you will have a period of time before you can become entitled again to UC.

Once the property has been sold, you will clearly no longer be entitled to UC, as you will have cash savings.

If you then use that money to invest in your existing business, and/or invest in a new business, then it would depend on whether the 'deprivation of capital' rules apply:
Firstly, it must be that a 'significant operative purpose' of spending the money was in order to become entitled to UC.
And secondly, it must be that it wasn't reasonable for you to spend the money in that way, considering your financial circumstances.

It may well be possible to argue that the deprivation rule does not apply.

One note of caution: you aren't clear what you mean when you say "invest the money into a new business". If you simply mean that you will hold the cash in the bank, and slowly draw down on it as you develop your new business, then you will still have capital until it has all been spent. Simply stating that the money is intended for the business, and even transferring it to a separate business bank account, will not be sufficient.

marcia_

worried48 said:

Northern_Wanderer said:

Do you own your own home or rent at the moment? Could you move into the house you intend to live in?

I suspect that if you invested £160k or any amount into your business it would be classed as "Deprivation of Capital" and then notional capital rules would come into play, meaning that UC will act like you still have that capital.

Is there any money due to you from the estate?

At the moment the house I intend to renovate is not fit for human habitation.  In fact I moved out of there two and a half years ago for medical reasons.  It could not take a stairlift, the bathroom could not be made accessible on any council grant because of the state of the building, no central heating, most doors not working at all, the front lintel held up with acro props, and no money to fix any of it.  I live in a council bungalow which, obviously, I will surrender when the house I intend to live in is fixed up.

Money left was not much more than needed to cover the very simple funeral.  His life insurance amounted to all of £1170.  So I am in UC payment to UC payment survival mode most of the time (the existing business is small and seasonal and this is the "off" season)

The house he lived in is up for sale but again I can't live in it due to no stairlift, no accessible bathroom, and also it's 100 miles away from where I am now.  In fact I have a buyer, the problem is that the chain below her has collapsed twice now.

 The things you mention do not make a house uninhabitable.uninhabitable to you maybe given your needs but not to a buyer or the DWP. 

Uninhabitable means one or more of the following no kitchen, no bathrooms, no stairs, no floors, leaking roof etc etc. As someone else mentioned a house is mostly sellable to many buyers or a developer who intend to do it up or knock it down. 

worried48

One note of caution: you aren't clear what you mean when you say "invest the money into a new business". If you simply mean that you will hold the cash in the bank, and slowly draw down on it as you develop your new business, then you will still have capital until it has all been spent. Simply stating that the money is intended for the business, and even transferring it to a separate business bank account, will not be sufficient.

No, I'm thinking of going into the BTL market.  But I think that's probably not going to take me down to below 16k and that probably I want to hang on to more than that anyway, so I guess the UC will stop as soon as the money hits my bank, which is what I was expecting.

Yamor

Right, ok.

BTLs would virtually never be treated as assets of a trade, so even if you would be left with no cash, you still wouldn't be entitled to UC anyway.