Universal Credit wants to know all my business income and expenses every month

[Muva14]

I run a very small LTD company for over 2 years. I had always paid myself a set amount of £1000 per month through HMRC and then would claim Universal Credit for whatever they decided I was entitled to, for example rent, childcare etc.

Last year, they decided I had to declare ALL my business income and expenses. I was a little confused as I was told something completely different for the first year, and now felt it would be extremely time consuming to report all my income and expenses every month. I also feel it is none of their business what the Ltd company is bringing in if I am only paying myself a set amount out of it. I was not taking dividends.

They have put my payments on hold for the last few months and so I have been struggling financially a little since then. I am worried they might say I am making "too much" in the company and also because I cannot be asked to sit there and waste time writing out all the income and expenses.

I am looking to come off Universal Credit completely as I would like to apply for a mortgage in the next few months, however I am not getting any support with childcare of anything. I'm worried I may be missing out from support/ other benefits. I can't seem to get my head around it all. Is there anyone that can advise?

I'm also not sure if I can apply for a mortgage whilst still on Universal Credit?

Hopefully they don't calculate you've been overpaid UC.

But if you are claiming benefits which vary according to income, I don't see why you would not expect some scrutiny?

You should have had an initial Gateway intervention appointment with your work coach and three monthly reviews in your first year of being self employed. The information here should have been uploaded to your account - you can also click through for more information on reporting your income and expenses https://www.gov.uk/government/publications/universal-credit-and-self-employment-quick-guide/universal-credit-and-self-employment-quick-guide

You should always have been reporting all income and expenses there is no difference for the first year.

Hello

Whistle blower explains new job title and tactics to basically hold people’s claims stop claims and freeze any funds you may be entitled to wether you payed your taxes you whole time and need help now or wether you’re disabled they are trained with tactics to stop benefits it’s the tax payers money to decide not a employer in the job centre they have a simple nvq 3 business what costs £390 done online in a couples of hours and there calling them selves investigators and then think they can make decisions on the£ money people who need the help these people may possibly have forgotten more than they no the system is set to cause mental illnesses and it will be raising crime probably in the better to do areas. Understandably. People will be more aggressive towards the ordinary office worker if people hafto decide to sit with nothing because of the decision maker sat at home on a computer in a crisis like this and put these tactics into place and use them tactics on people who need help after paying their tax for years they come along and stop it for nothing it’s in humane what they’re doing

Apparently as SE you have to actually speak to an adviser every Friday and submit earnings for that week. Not use the online portal employed claimants use... And if you can't get through it goes down as you aren't eligible for UC that week. Obviously hoping this is incorrect... Who has time for that?

Thats not true, I submitted my self employed earning through the same online portal - it literally takes 10 minutes.

@FriendlyNeighbourhoodAccountant

This is mostly nonsense. Under accounting and tax rules the OP could quite legally pay herself 1k a month, leaving 100k in the company's bank account if she chose to. The remaining money is accounted for and taxed via corporation tax as it's own entity, not via income tax as an employee or director would be. UC's rules are nothing to do with any tax returns.

So you are saying the taxpayer would effectively be paying UC to enable a business owner to build their company's profits by declaring a low income and ploughing income into the company?

Does this not seem unethical?

Surely it is not the taxpayers responsibility to build up a private company by tipping up their meagre income thus allowing the money to go into the business.

Even if the company is paying tax it is still only as profitable as it is due to the taxpayer paying the wages through UC

Exactly, so if the owner then ‘closed’ the business what happens to the ££ in the bank that they’ve assessed while claiming UC because they chose to pay themselves a low wage?

Surely that can’t be legal or ethical?

Two separate issues.

Accounting wise the cash is withdrawn, tax is paid and profits reported via the company's own CT600 and accounts and the company is closed down.

UC, however, will take into account the money in the bank each month to make sure someone isn't paying themselves a purposely low wage, and they'll only pay UC based on the whole picture (not just what someone is paying themself), because they don't follow the same processes as accountancy where everything is reported after the company's financial year end.

This. We were on TC but have stopped claiming now we are moving to UC due to running a Ltd company.

What are the problems with being self employed and claiming UC?

You have to provide returns to HMRC and Companies House every year for your business. That includes the difference between income and expenditure. So why don’t you have that??

The OP does. But they are for HMRC and Companies House and are done annually, the deadline being 9 months after the end of the company's financial year, so fairly delayed. UC need the income and expenses reported monthly to calculate their monthly UC entitlement.

I'm surprised that anyone can be self employed with a limited company and receive benefits on top.

This explains UC and being an employee of your own limited company https://www.entitledto.co.uk/help/company-directors-and-self-employment

Totally different from monthly totting up of every single payment and expenses for UC. Very few small businesses will do it monthly and many small businesses only have to do truncated reports. Plenty of them outsource this to accountants every year.

You have to be very careful that you haven't committed fraud.

You may have been overpaid UC which they will claim back aggressively.

Go to CAB right away. Take all your paperwork with you.

You can't choose your income for UC!

They will class your business assets as savings (with exceptions). If it's over £16,000 you get no UC at all. If it's between £6-16000 they cut it.

That's just the savings component.

For earnings they will use monthly profit.

UC really isn't compatible with self employment.

But surely there is something recording those that can be pulled from monthly? Bank account? Spreadsheet? Accounting software? If a business is financially worth being set up as a Ltd company it shouldn’t be that hard to do this?

(have been a Ltd company director for 12+ years.)

I started a baking business last year. I wasn't paying myself a wage as it was brand new. I still had to declare my income and outgoings to UC from the business as a whole, regardless of weather the profit was a wage to myself. As it stood, the profit was minuscule, as you can imagine from a new business and it was well below the income floor level ( 35hrs per week at NMW). Because a year later I couldn't even pay myself enough to reach the income floor level, I am now in employment and working 32 hours a week alongside my baking business. After the first year of a new business, you're not exempt from the minimum income floor level. I will be closing my baking business, because it's just not viable.

In UC eyes, you must be earning at least 35hrs x NMW for them to accept you are gainfully self employed, otherwise they will expect you to look for work to top up your income.

Yes, most likely. Bookkeeping records or management accounts. But that wasn't what you asked the OP, you asked why she doesn't have the company accounts or tax return and I was explaining that I'm sure she does but they aren't what's needed here.

I claim UC sometimes and run a business. I think the claim period runs from 19th -19th every month.
You just need a spreadsheet in word or something similar with all your stock costs, rent costs etc. motor/travel, purchases financial costs etc and add them up for the time period. You can add pension contributions as well.
You can do all costs minus vat if you are vat regd.

REcording expenses is something that you should do anyway to help with your VAT or end of year accounts and doesn't take long- after all every expense you forget you will be taxed on as though it's income the end of the year!

Your £1000 per month drawings would not be counted as income but any takings/sales for the period that you earn would.
Even if your profit for that month is more than £1000 you may get some money and I found it pretty straightforward.

I have a relative who is self employed and claims various benefits and have often wondered how they manage. She runs a business online as a sole trader I think, something to do with software development, updating websites etc. It all seems rather complicated after reading this thread!😬

I suspect that is why I have recently noticed my relative has closed down her business in the last few years where she was a sole trader and didn't mind if she made a profit (as she put it!) because she has working tax credits to bump up her monthly income so they have enough money to live on.

Seems like her plan has been foiled and she is now employed instead! I see she now works for the CS.

Of course they need to know. Plenty of ltd companies with sole owners have tried to work the benefits system by paying a low wage but the owner also uses the business account for personal expenses as well. All they want to see is that a your company isn't making higher profits so could afford to pay you a higher income, and b you aren't paying personal expenses out of the business account to increase the expenses on the business account to look like the business is doing worse than it is. If you are all above board you should have nothing to worry about

If you use decent accounting software like Quickbooks, Xero of Freeagent, you can set it up with a bank feed so that your business bank account transactions are "pinged" into the software every day, and set up "explanations" so that the system automatically allocates the transactions to the different income/expenses accounts/headings, i.e. all post office payments go to postage, all Ryman payments go to stationery, etc.

Then you can produce a report automatically each month showing the "in's and out's" which you can use to fill in the UC questionnaire. Minimal effort and time required once set up.

As a limited company, you need "proper" accounting records anyway for the year end, so makes sense to use software that can do most of the drudgery automatically and be dual purpose for both monthly UC and yearly accounts (and also quarterly VAT returns if VAT registered).