Claiming Maternity Allowance while earning?

[Bellebelle]

Okay, so anyone who is better informed on this than me please help me out explaining the risks to my friend:

Good friend has small business which she runs from home to make a bit of extra cash. She is currently expecting DC2 and has applied for maternity allowance which she has been awarded, just needs to let tax office (or whoever deals with this) when she decides to stop working and payments will start. She had arranged for another friend to take over her business during her maternity leave but this has fallen through and she can't find anyone else to do it so rather than loose her regular clients she says she is just going to keep on doing it but not declare the income while recieving the maternity allowance.

So is this benefit fraud, tax evasion or both? I don't think she realizes the implications of what she is proposing and I really want to talk to her to get her to rethink this plan of action but could do with some advice from you wise MNers to back up my argument. In my mind it is morally wrong to do this but I reckon I stand a better chance of changing her mind and avoid damaging the friendship if I go in with a practical argument.

[flowerybeanbag]

It's certainly benefit fraud because MA is a benefit.

It could also be tax evasion, although I'm not a tax expert or an accountant. But my logic tells me that when she fills in her tax return if she only declares the MA not the income received from the business during that time, she will be evading paying tax on income earned. This could apply to corporation tax and personal income tax as well potentially.

It's not just morally wrong, it's illegal, stupid and could have serious implications for her as a business owner.

She can work up to 10 'keeping in touch days' while receiving MA anyway.

The whole point of maternity pay, whether it's MA or SMP, is to compensate in a small way for loss of income while the woman is not working. If your friend is planning to keep on working anyway, she doesn't need it and is not entitled to it.

[Bellebelle]

Thanks flowery. I don't actually think that she has thought about the implications of what she is proposing to do, her immediate response when she was let down by the person meant to be taking over was to not let down her clients. It doesn't seem to have crossed her mind that she will need to give up the MA. I know that she was quite pleased about the MA as she will actually be better off recieving it than she is when earning normally (the tax office has assured her that even though she only takes in about £80 per week that she will get the full rate of over £100 per week bizarrely enough). I know that they struggle financially so the MA was going to take a bit of pressure off them for a while.

I am going to talk to her about this going along the lines of "do you understand the implications if you get found out?" Really hope that she will rethink as it will really make me see her in a different light if she is going to knowingly break the law.

[mafog]

Interesting info here. Some of the problems when you run your own business is that very often you simply can't stop. I'm in a similar predicament, in that I go on ML leave next week and will receive MA. I won't receive income BUT I will still have to answer the phone as my business line is still directed to my home. So what counts as working? Actual work or receiving income? Whilst I'm getting someone in to help, I'm still going to have to oversee their work and ultimately be held responsible for them and the business, which I was planning to do on an unpaid basis. Does that count?

[Bellebelle]

It does seem to be very difficult for anyone running their own business to know what they are and are not entitled to. When my friend had someone in place to do the work for her she was going to pay her 80% of what she took in with the other 20% going into the business account to cover costs i.e. advertising, equipment etc and no one in the tax office could tell her if that was okay or not. I would think that if you aren't taking an income then you should be entitled to the MA.

[flowerybeanbag]

Helpful page from DWP technical guidance here.

[mafog]

So if someone phones me for a 4 minute chat about what I do I have to take that as a full day? Think I'm going to have to get DH to answer the phone!