Switch to UC as a company director?

[IndecentFeminist]

We started a business 4 years ago, and our long standing tax credits claim continued.

The business is doing well, it employs DH (who is the company director), me (part time) plus 2 other full time employees.

We have just had the letter through about switching to UC so am trying to get my head around it.

Under TC DH was considered employed as he is an employee of the company we own. Under UC he is considered self employed. Looking at the website, it looks like he has to submit full business accounts every month to show incomings and outgoings, not just what he pays himself. Am I interpreting this correctly? If it goes on the business income we probably wouldn't be eligible as it does well, but the business is a seperate entity to us, has its own overheads etc. We don't tap into it for spending etc, we just pay ourselves, tax, NI etc and that is our income.

I have started the application and had an email saying DH needs to go to the job centre for a work interview, maybe I've inputted something incorrectly?

You and your DH are most likely not entitled to UC.

You can check if you're eligible and read all about UC and who it's for here:

www.gov.uk/universal-credit

"Universal Credit is a payment to help with your living costs. It’s paid monthly - or twice a month for some people in Scotlandd_.
You may be able to get it if you’re on a low income, out of work or you cannot work."

As owners of a profitable company it is within your gift to pay yourselves more and not rely on other taxpayers to fund your lifestyle.

As business owners you are also likely to have over £16,000 in savings or investments (yes, that includes your ISAs and income from renting additional property/ assets).

Looks like when Tax Credits end you won't receive anything and will have to cut your cloth accordingly and grow your business to support yourselves in your new situation.

Yes, you're correct - DH will be considered self-employed and he'll need to do monthly accounts. How much you receive, if anything, will be based on what comes in to your business, minus allowable expenses in each given month. You will not be able to store money inside the business and only draw down a small amount to pay yourself - your claim would be based on everything the business took that month.

Where the business is already holding money; you'll have money deducted if you've got over £6k, and your claim will stop if you have more than £16k at any point.

You'll also want to sort out paying costs such as tax and NI monthly; so you can use them as allowable expenses - you cannot save up and 'disregard' money to pay them once or twice a year on account.

We do everything by the book, all tax and NI for all 4 of us paid monthly as we go along. This is the first year it has 'made' money technically so it is a new phenomenon for us. Even then it is at standard profit margins so unlikely to be loads.

We don't have any other properties, savings etc. The business has money and assets (as in, vehicles and equipment), but we have our house (with a mortgage) and a cheap car. Which is fine and as it should be, I'm just explaining that we're not sitting on a goldmine. If we're no longer eligible that's all fine and I won't bother going through all of the hoops involved, we will talk to the accountant and see if we can afford to pay ourselves any more.

The pp is wrong, a cursory google will tell you that much.

I’m in the similar situation. My understanding is that UC will want you to submit monthly accounts however any assets or working capital held by the business aren’t taken into account, I can’t say for certain how it works as I’ve only just applied. Also the 16k limit only applies to individuals and not business entities. That being said I expect they monitor how much cash reserves are held by the business to ensure UC claims are legitimate.

Your best bet is to contact Citizens Advice with all your figures and they’ll be better able to advise what you’d be entitled to because the online calculators don’t factor transitional protection.

As @SpaceRaiders said, there one year's transitional protection if you want to go down the UC route.

UC is fair more intrusive than Tax Credits.

Transitional protection disregards money in bank accounts over £16,000 for 12 months only.

This is any money held in bank/ building society accounts individually or as a couple. Assessment is based on 'household' income and savings and you do not get an 'individual' allowance. i.e. 1x £16,000 for the couple, not each.

You will still be assessed on any money held in any of your accounts, and between £6,000 and £15,998.99 will attract a tapering tariff of benefit payments.

This is all correct.

I think you may be confusing rules for individuals vs LTD company businesses.

If you are gainfully self-employed your business assets will not be taken into account when you make a Universal Credit claim. Nor will they be considered when we work out how much Universal Credit you are entitled to. Business assets include things like machinery, premises and cash held in your business account.

My understanding is that even if I had 25k worth of business assets, these would be disregarded because they belong to the business and not to me as an individual. This would also apply for working capital held in the business bank accounts. For example, funds earmarked for allowable expenses like legal/professional fees as well as corporation tax would not be included within UC’s calculations therefore in theory the business could have over 16k and that wouldn’t have an impact on my own UC claim. I suspect as long as you were able to prove holding reserves of over 16k was legitimate then you’d have no problems.

Here’s the page If you’d like to check.

Funds held by a Ltd company are out of reach of DWP for initial assessment, but you do need to provide company accounts and other evidence to prove your self employment status and ensure your business meets a minimum income floor. If your business does not meet these criteria you will not be entitled to claim as self employment and would join the Intensive Work Search group with an expectation of 35 hours per week looking for work until you had a job suitable for your individual circumstances. Mostly they want you in full-time PAYE work, wages paid into a bank account (easier to track).

If they have reason to suspect/ believe you are withholding income and hiding it in a company account they will investigate and request records. If you tell your Work Coach that you have a low income and are unable to look for additional hours as you're working 45 hours for the business already this will ring alarm bells. Investigators will be able to look at your company accounts in detail.

Under proposals set out by Jeremy Hunt and Mel Stride (said to be announced in Autumn Statement, and an outline has already been released to press) this will change from individual requests for each bank account associated with your name and company to banks being required to send monthly reports on all accounts held by claimants.

Remember DWP and HMRC operate under very different rules. Tax avoidance and hidden funds are tolerated by HMRC. Hiding income, deprivation of capital, and potentially fraudulent claims are not tolerated in DWP.

Investigators will be able to look at your company accounts in detail.

Just as well that I run everything above board, I have nothing to hide with either HMRC nor DWP.

Likewise, squeaky clean here. Bar occasionally filling the car on the company card if I have forgotten mine.

@IndecentFeminist I think it’s worth migrating even if you’ll only get the years worth of transitional protection. Only issue I foresee here is the admin of preparing figures on a monthly basis, year end is bad enough!