Thanks. I'm going to investigate this further and I'll let you know the outcome. In essence if I pay myself nothing as a director of the company, I should fall within the income support limit as you don't have to work any hours to claim income support. Because of the mortgage interest payment this could be more beneficial for me than WTC / CTC. I don't particularly want to pay myself a salary as I need every penny to fund the business in the start up year.
Let's see if income support people treat the hours worked for zero pay in the same way as the tax credit bods.
Hi Scotty - I think you've hit it with that last sentence. I'm struggling to see how the Income Support people would ignore your working for a limited company that isn't dormant. I don't know much about Income Support, but have applied the following logic: I work for my limited company, have no employment contract, and so if I draw no salary and leave the profits in the company instead then does that mean I too can claim income support? How about... who shall we pick...say Sir Alan Sugar. He runs a largish company, draws no salary, leaves his millions of profit in the company - can he roll up at the benefits office in his Bentley to pick up his income support giro?
I suspect it's a case of the government ignoring any hours you put in for your company when it suits them - when you make a WTC claim then it works in the government's favour to ignore the hours you put in (unless you have a contract of employment), in order to keep you under 16 hours work pw (*flag - see below) and make your claim ineligible; whereas in the case of income support it works in the government's favour to include every piece of work you do (whether under a contract or not, voluntarily, paid or unpaid) in order to get you above the 16 hours work per week threshold above which Income Support claims are scuppered.
*flag - like everything this particular government do, these rules are badly thought out. The government think they are being clever by saying "for you to work 16 hours a week and claim WTC, you need a contract of employment to prove it" whilst knowing full well that, unless you know to put something like the 17 hours a month contract into place (see two paras on) you will trip yourself up on the minimum wage issue and face large fines further down the line. Most people will go for the 30 hour supplement, and fall headlong into Fat Gordon's minimum wage trap. Remember, the Inland Revenue will be out in force on this next year - see previous post and the BERR site. Fat Gordon needs to fine us all billions of pounds for speeding and not meeting minimum wage requirements so that he can lend more money to the banks!
Hmm rant over. Circumvent Gordon's barbed wire for the unwary by taking up simultaneous self-employment (my previous post). That way you can work as many hours as the WTC form requires (ie 30 or more) as a self-employed person without contravening any minimum wage laws ie you will have no need of any employment contract with your limited company. For bonus points, pay yourself £100 per week, and lend it straight back to the company (see next section for why).
Here's some more on the Tax Credits Route:
Paying yourself a salary would work if you go the tax credits route: If you pass up claiming the 30 hour element, you have to work 16 hours for WTC you could have a contract of employment with your limited company to work 17 hours pw at say £6 and still steer clear of contravening the minimum wage rules. It would save your company a £1,000 a year in Corporation tax, as well as get your stamp paid.
You don't have to keep the money you earn - you simply lend it back to the company each month. That way you build up a director's loan account pot, to draw on tax free one day (tax free because it's money you've earned tax free, paid yourself, and then loaned to the company. Ploughed back in, in other words, but the only tax effect is your company saves £1k a year in Corporation tax.
Taking the WTC issue on a stage, if you wanted to go for the jackpot and claim the (£800 or so?) 30 hour element too, then I think simultaneous self-employment is the answer for meeting the hours worked requirement. Cost you £2 a week for a class 2 NI contribution. Try not to make more than a £1k profit each year from your "e-baying" self-employed business (because you can earn around £6k a year tax-free, and paying yourself circa £100 a week through your company, the benefits of which have been outlined above, would use £5k of that).
Anyhow, all that's about the tax credit route. I don't know much about income support, and suspect you are one step ahead of me on this, but I'll ask anyhow: Given that Child Tax Credit (but not WTC) is paid whether you work or not, is CTC paid to top up income support? In other words, could you claim both CTC and income support at the same time, or does one preclude the other?
footnote: anyone following this thread wanting to pay themselves circa £100 pw to save £1k a year in corporation tax and get their NI stamp paid for free (£5k a year of income is too little to affect a tax credit claim) then watch out for the limits. They're published at
http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073790796
Look under the 2008-09 table - and you need to pay yourself MORE than the £90 per week Lower Earnings limit (so don't pay yourself £90 a week - it has to be at least £90.01. And note the same for the monthly equivalent £390 per month - pay yourself just over that. £390 is insufficient. £391 is adequate). Where was I? Oh yes, more than £90 pw or £390 a month, and LESS than the Primary threshold Upper earnings limit £105 per week or £453 per month. (Keep it simple and pay say £450 a month - don't go right up to the wire).
The 2009-10 tables are also published at that link - you have to review each yearl to see whether you need a rise in April to keep you within the thresholds. Those are between £95 pw and £110 pw for 2009-10.
