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?

I suppose they are trying to find people who use this strategy to avoid paying themselves properly and in order to claim benefits. Whether they are using business funds for personal bills, that sort of thing.

Tbh I wish they were as keen to get hold of the huge huge tax dodgers! But they're never too keen to go after their friends, family, fundraisers and future employers funnily enough.

as long as your records are good and youre not doing anything dodgy, I think they'll find it tricky to start telling you how much to pay yourself (as long as its above minimum wage) since legally you and your business are separate entities. It's not at all the same as self employment.

I'm self employed and it's very different and every penny in is counted as mine, whether I have it set aside for my business or not.

Exactly. Too many have been taking the piss for years when I receipt of WTCs, not bothering if they turned a profit, just so that they could max out on benefits - wrong! And dishonest. The loophole was there to take advantage of doesn't mean people should carry on regardless.

Just from a common sense & no knowledge whatsoever point of view.

How can a business be profitable if OP pays herself less than nmw every month?
(Obviously there are other factors at play, but I am looking at it as in won't be able to survive without UC)

Surely in y2-3 you'd want to see enough profit to scrape a living or pay nmw?

I actually do agree with @Naptrappedmummy on this occasion as I had a relative doing exactly this in the family (not on my side I hasten to add!). She didn't seem at all bothered about the fact her business in software development wasn't turning a profit. Got loads in benefits. Working from home, working whatever hours suited her for at least 15/17 years.

I agree it's sickening. Misuse of public funds.

Why do you think you should get money from the government ie the rest of us with out proving you are entitled to it.

You could be storing up money in the company meaning you are not entitled to UC.

For god sake grow up .

Another FFS from me.

You really wouldn't believe the sheer number of "sham" businesses that were set up solely to enable a tax credit claim.

I had loads of clients in the noughties who set up "part time" businesses that never had the faintest chance of showing a profit because they were just set up to do the bare minimum of hours and cover their costs, so the "proprietor" wasn't out of pocket, but could ker-ching and cash in with the hefty tax credits. Typical businesses were market stalls, car boot sellers, etc., who'd buy some cheap crap from wholesalers, like bulk cheap sweets, and sell them on stalls for a few mornings/days per week. Likewise a few did cleaning, car washing, window cleaning, odd-jobs, etc., again just to justify the requirement for number of working hours and enough to cover their costs. The whole rationale and "business plan" was to cover costs (so as not to make a loss), but to "live on" the tax credits.

The change to UC and proper checks to ensure businesses were legitimate and had long term prospects of growth and self-sufficiency are long overdue.

Whether or not it’s two separate issues isn’t what I’m asking.

If someone pays themselves a low wage, claims UC and then has profits in the bank where do those funds go if the company is closed down?

Does it stay with the business owner? Do they have to repay the UC they’ve claimed?

If you close the business down with money still in the bank that money is then transferred to the crown. It's no longer yours. It's a mistake a few people make. All monies must be dealt with before a company is dissolved.

If you want to take out all the money from a business then you take it as salary or dividends, and are taxed accordingly at that point. You wouldn't repay UC from prior periods as UC uses "real time" data, but it would affect that current month's claim (and if it was over the savings allowances you may lose your entitlement to UC all together or for the foreseeable). The longer you leave it in the business to build up the more likely this is the case. So it's swings and roundabouts.

The more I read stories of tax credits it just shocks me. So many people have been taking the absolute piss for years!
Absolute thousands in savings, multiple properties. Madness!

I think it seems a lot are in for a shock when moving over to UC

It was the same with covid grants/loans etc.

Over 3 million were excluded from the grants and really struggled, many losing their savings, businesses, and some losing their homes (and a few hundred suicides!).

At the same time, fraudsters were filling their boots with loans for businesses that didn't exist. People who weren't badly affected were claiming grants and loans "just because they could". People were taking out maximum covid loans at very low interest and using them to pay off their mortgages, buy new cars, pay for holidays, etc.

The sheer amount of waste and sheer incompetence, lack of proper scrutiny, tax and benefit fraud is a national disgrace and the civil servants in charge of it all havn't got a clue about how to stop it, or don't care!

Irony of it all is that the relative on DH's side of the family who operated this way as "self employed" raking it in with tax credits is now working for the civil service. Couldn't make it up.

What really infuriates me about this thread is the fact that for UC, the benefits agency has no issue looking behind the wage someone takes out when self employed with a limited company (and apparently that’s the standard procedure) but CMS can’t possibly do anything of the sort when deadbeat dads take a tiny wage and run everything else through the company, leaving their ex and kids with child support of £8 per week.

@CrabbiesGingerBeer

that a disgrace too
but the issue here is the person entitled view.

@GotMooMilk there's different rules for the first year because the government understands that it can take time for a SE person to establish a customer base/set up their business. I was self employed with tax free childcare and for the first year they didn't care how much or little I earned.

@GotMooMilk think about it this way, if you're going through the system this way (whether it's UC or tax free childcare) they know you won't be tax evading and will have to do your self assessment tax returns.

So where is the rest of the profit from your company going. Of course this ridiculous loophole needed to be addressed.

Not that surprising
Perfectly plausible that, say, a single mum of two young children might choose to channel her self employment through a limited company and turn over say, two thousand pounds net profit a month, thus entitling her to UC incl childcare element.

The costs and administrative burden of owning a Ltd company are weighty though. Hard to imagine it is worth it (but have never claimed benefits).

And it’s NOT self employment, which is a completely different legal status.

Normally yes, but UC consider it self employment even though it technically isn't.

OP, elsewhere you refer to having staff. Doesn’t sound like such a small business that you can only afford to pay yourself £1k a month and then need significant support from the tax payer……

forgive me if this has already been said

SE on UC.
For the first year they allow you to earn less as a 'start up' you have to report yout earnings and expenses every month.

After the first year, they assume that you are making the equivalent of minimum wage, at 35 hours per week (which is something like £1,450 per month).
They will then pay out UC only above this sum.

So if your business actually only makes £1,000 that month, tough luck, your UC will be calculated assuming you make the £1,450.
The reasoning is that if your business cannot provide for you at the minimum wage, then you should stop and get a job.

The phrase they use is 'gainfully self emplyed' In other words, you have to earn money doing it. If it is just a pocket money side line, then they won't pay you more UC, they will ask you to start looking for work.

And I am pretty sure that they are interested in profit, and not in how much you pay yourself, if money is being reinvested in the business, that should come under your expenses.

It makes sense though. Even if you’re only taking £1000 a month for yourself what’s to stop you just building up loads of cash within the business and then claiming universal credit? I can completely understand why they need this information although they should probably have asked for it at outset.

And this is why I don’t claim UC. We would probably be eligible for childcare element and it really would help out. I can’t bring myself to make a mistake though. This is why we have an accountant for annual returns. What happens when we make loads one month but not the next. That’s how our business works. It’s just too complicated.

You have my sympathies