Universal credit and reporting self employed earnings - I'm sure I'm right, aren't I?

[HedgePigWig]

I'm self employed as a sole trader and claim UC (no earnings or work requirements as I'm also a carer to a family member, I just work as and when I can).

Sometimes I have a good month and earn nearly £1k after expenses, other months I earn next to nothing. It's partly because my work is somewhat seasonal and partly because my caring responsibilities fluctuate. My assessment period is 1st-last of the month (done deliberately to make accounting easier!).

When I've had a good month, UC then reduce my award for that month - but because UC is paid in arrears, that payment comes to me on the 7th of the following month.

So, on a good month, I don't spend most of my earnings in the month I get them. I leave them in my PayPal account and withdraw them to my bank account the following month when my UC award is lower and often I'm not earning as much either. I obviously declare all income the month it comes in, I do my accounts on the last day of the month, enter it all on a spreadsheet, and report the correct figures to UC the same day. I don't declare the income again the next month when it actually hits my bank account though as I've already declared it the previous month!

I've just had a routine claim review (provided bank statements etc), which then prompted a self employment review of some sort, and UC aren't happy with this way of doing things. They wanted to know what the PayPal payments into my bank account were (sometimes for up to £900) and then said I should be declaring it as income during the month I withdraw it to my bank account? But I always thought I should be declaring it as I earn it, not as I spend it? The self employment coach seems clueless and just keeps telling me I'm reporting my earnings wrong, I've insisted it goes to a case manager now and am awaiting their decision. In the meantime can anyone tell me if I'm right or wrong?

The ebb/flow of cash and receiving payment on the 7th based on what happened in the previous month is how UC works. If I worked on zero hours in Maccy D's for a salary that went up/down according to how the hours I could do, or depending time spent caring for a sick relative, I'd be in the same position as you.

Is the money in the Pay Pal account reported in the month it hits that account?

Yeah I know how UC works and that's fine, I understand that the payment I get on the 7th is based on the previous month's earnings.

All income is reported to UC in the month I receive it. Every penny of income and expenditure for the month is entered on a spreadsheet on the last day of that month, and reported to UC.

But say I earn £1k this month, and report it to UC on the 30th. The award I then get on October 7th will be reduced by £550. I might not be able to earn as much in October (I already know I won't be in fact). So I'll save £600 of this month's earnings, and pay it into my bank account in mid-October when I don't have enough money to last the month.

That's fine, right?

So you are recording the income as received when it arrives in your paypal account, you then don’t record it as received when you transfer it into your bank account.

This is correct from an accounting point of view. The transfer from paypal account to current account is effectively just moving the cash from one pocket to another - can you send them details of the movement on your paypal account and show how it reconciles to your reported income?

For simplicity can’t you just start putting the PayPal earnings in your bank account in the month that you earn them? It would have the same effect on your savings wouldn’t it?

Technically (I think) you can do either BUT to me it makes sense to declare the payment once received. I think the point is it's being reported the same consistently. I personally would report earnings are they are received, just like you are doing. After all PayPal is an account. You're just holding your money there. You could always withdraw the money as and when received into a bank account to please them?

@HedgePigWig Still not clear.

If you receive £700 into your Pay Pal next week are you declaring it as earnings in the AP ending 30-09 or in the October one?

I declare it in the month I get it. So if it is paid to me by a customer in September, I declare it in September. But I might then leave it in my PayPal account until October and then withdraw it to my bank, in which case I wouldn't declare it again would I?

@HedgePigWig in that case I think you're right. For UC purposes Pay Pal is like a bank account. If your customer pays you that way rather then to you business account with the bank of bigtown it's the same principle.

Are UC encouraging you to 'hide' cash in Pay Pal.

Yes, you are reporting it correctly. Make a complaint if the person at the jobcentre continues to bother you about this

Your reporting is correct, but UC are obviously worried that you are keeping more money in your paypal account and not accounting for it in the correct month. I suggest showing them statements of the paypal account and point out this would be the same as if you had a separate business account which many SE people do.

I honestly don't know. I did point out that what they suggested means I'd be declaring the same income twice and they said no it wouldn't 😤🤔😂

They've seen my PayPal statements, so they know I'm not stashing thousands away in there!

I think they are just being a bit thick and hopefully the escalation sorts it. Like someone else said PayPal is essentially a bank account and funny thing is if you were declaring it when you transferred it into your bank account and not when you earned it you’d be accused of moving your numbers around to suit your benefit claim!

For easy accounting for you and them though I’d consider transferring your earnings from your paypal balance at the end of each month.

I agree that PayPal is just another bank account - I have outgoings from PayPal (Netflix etc) as well as a balance there.