Director of ltd company. Benefits. Try again.

[Immortalmatt]

Hi,

Old thread was locked after I had a lot of abuse from people thinking that I was trying to cheat the system. I’d like to start again and ask the same question, with more info on my goal.

I have worked since the age of 13 (helping with a milk round, 3am starts, on to school at 8:30am), right up until 18 where I worked in Casinos for years (long hours, night shifts, weekends etc). Due to certain circumstances, I couldn’t hold down a full time job (personal family issues at home that I won’t go into). Has certainly been hard and no picnic. I had no choice but to go self employed and work 25hrs a week due to my family issues.

I have a decent idea that I’m certain will work BUT I can’t do it without help. If I wanted to, as scummy as it is, I could pretend I’m unemployed and get paid in cash and claim everything but that’s not me and not what I want to do. I have pride. The question I originally asked was this…


If I was to set up a limited company, and paid myself nothing FOR A SHORT TIME, as a director, could I claim housing benefit, council tax benefit and tax credits? That’s not a lifestyle choice as my work history must show. I like work. I love providing but I’m also realistic and know that I would need investment to make my idea work. The investment would come from me taking no salary for a short while. I tried calling the local council and also the tax credit helpline and got mixed answers and blatant lies from the council that I know not to be true. Where can I find out? This potentially could be amazing and I’m the pittance in help that I get from the government would likely be paid back many times over. I need to find out, factually, if I could be a director, pay myself nothing as I won’t have an employment contract, “work” 40hrs a week from home and be entitled to the above as I have no income and the company doesn’t have enough to pay me a salary from the off.

Obviously once I start to build money up, I would pay myself a wage and come off benefits totally as I have pride and don’t want somebody else paying for my family.
Matt

 

[japancool]

If the company genuinely can't pay you a wage, because it is reinvesting to grow, I don't see a problem. Many startups are in that situation, with directors/owners unable to take any money out for the first months or even years. In the long run, it's better for the system anyway. You're still paying corporation tax on your profits.

I don't know the rules for working tax credits, but on universal credit, you would be assumed to earn a certain amount (called the minimum income floor) as a self-employed person - if you don't earn that much, your business might not be considered viable and you would be expected to look for work. There's a one year exemption in which the minimum income floor doesn't apply though.

 

[Mr D]

If on universal credit when starting up they will look at the business income on an ongoing basis and adjust payments up and down over the year. Then after 12 months you have the minimum income floor applied, basically regardless of what you earn if its less they treat you as earning minimum wage for your age and hours worked.
So even if you earn £200 a month you can be classed as earning over a grand a month.

Reinvesting to grow is your decision, don't expect the benefits system to fund that for you.

Things used to be a LOT simpler and easier for new business owners several years ago, much tougher now.
I'm an experienced business person, I'd struggle to get a profit of £15k a year on a business from a standing start in just 12 months. Plenty of people inexperienced at business start and drop the idea before 12 months is up.

 

[Immortalmatt]

If the company genuinely can't pay you a wage, because it is reinvesting to grow, I don't see a problem. Many startups are in that situation, with directors/owners unable to take any money out for the first months or even years. In the long run, it's better for the system anyway. You're still paying corporation tax on your profits.

I don't know the rules for working tax credits, but on universal credit, you would be assumed to earn a certain amount (called the minimum income floor) as a self-employed person - if you don't earn that much, your business might not be considered viable and you would be expected to look for work. There's a one year exemption in which the minimum income floor doesn't apply though.

Thanks for the reply. Any idea on how I can get info on this to be 100% sure I can’t get in trouble for doing this?

 

[Immortalmatt]

If on universal credit when starting up they will look at the business income on an ongoing basis and adjust payments up and down over the year. Then after 12 months you have the minimum income floor applied, basically regardless of what you earn if its less they treat you as earning minimum wage for your age and hours worked.
So even if you earn £200 a month you can be classed as earning over a grand a month.

Reinvesting to grow is your decision, don't expect the benefits system to fund that for you.

Things used to be a LOT simpler and easier for new business owners several years ago, much tougher now.
I'm an experienced business person, I'd struggle to get a profit of £15k a year on a business from a standing start in just 12 months. Plenty of people inexperienced at business start and drop the idea before 12 months is up.

This isn’t my goal. I’m not trying to get the government to increase my bank balance. I’m asking that the government gives me a fair shot at starting. If it turns out well then they reap the rewards in taxation. If it doesn’t then it’s likely I would be getting tax credits anyway if on low income.

I know somebody who went to University as a mature student. The council classed all his student loan as income despite him spending over a third of it on rail fare. In the end he had no choice to stop the degree despite him getting a first in the first year. He pleaded with the benefits section at his local council and was just met with “sorry they are the rules”. What a waste. If he had completed the course, it’s highly likely that he wouldn’t be sat in a job he detests, earning low income and claiming every benefit known to man.

I don’t want a free ride. I just want to start a business properly and ask for some support whilst I try.

 

[japancool]

Thanks for the reply. Any idea on how I can get info on this to be 100% sure I can’t get in trouble for doing this?

On WTC or UC?

 

[Lucan Unlordly]

This isn’t my goal. I’m not trying to get the government to increase my bank balance. I’m asking that the government gives me a fair shot at starting. If it turns out well then they reap the rewards in taxation.

First it's disappointing that things don't appear to have changed much since I faced a similar situation nearly 30 years ago! The benefits system is based on the precept that all claimants are essentially untrustworthy, that they don't want to work and even if given the chance, will not declare any income picked up on the side. So they don't!

The strange world that we live in where clever businessmen and even smarter accountants are able, by law, to 'put things through the business' is not an ethos that is applicable to those at the other end of the scale.

 

[Mr D]

This isn’t my goal. I’m not trying to get the government to increase my bank balance. I’m asking that the government gives me a fair shot at starting. If it turns out well then they reap the rewards in taxation. If it doesn’t then it’s likely I would be getting tax credits anyway if on low income.

I know somebody who went to University as a mature student. The council classed all his student loan as income despite him spending over a third of it on rail fare. In the end he had no choice to stop the degree despite him getting a first in the first year. He pleaded with the benefits section at his local council and was just met with “sorry they are the rules”. What a waste. If he had completed the course, it’s highly likely that he wouldn’t be sat in a job he detests, earning low income and claiming every benefit known to man.

I don’t want a free ride. I just want to start a business properly and ask for some support whilst I try.

By giving you a fair shot at starting it would be helping your bank balance.
The odds are your business won't grow enough to give them a reward in taxation - the chances of any business going under in first few years is high.
Perhaps something to do with the 100 hour weeks for 50p an hour , no holidays and working while sick....

Hence government changed things a few years back.

I went as a mature student, council treated it as income. Which it was.
Expenses of course need paying - think most of mine went on my mortgage and utilities. Two grand a term doesn't go far when over half of that could be spent just on mortgage.

Luckily for the person you know the benefits staff had no discretion. They have a set of rules to work to and those are applied across the board. Person A and person B with exact same circumstances get the same help, the same benefit.
Not depending on being nice to the staff or on how someone looks. Simply treated equally.

Nothing stopping people doing distance learning. Open university. Or a university closer to home.

Back to your situation. You can use the benefits system however it is rigged against you. May get something, may get nothing. Cannot hurt to look at them.
They treat you as self employed even when employed as a director.

There is support available, some of it is age specific some may be area specific. Just don't expect much from the benefits system.

 

[Mr D]

First it's disappointing that things don't appear to have changed much since I faced a similar situation nearly 30 years ago! The benefits system is based on the precept that all claimants are essentially untrustworthy, that they don't want to work and even if given the chance, will not declare any income picked up on the side. So they don't!

The strange world that we live in where clever businessmen and even smarter accountants are able, by law, to 'put things through the business' is not an ethos that is applicable to those at the other end of the scale.

Yes, government design the benefits system based on the case studies, claims, and problems they know about.
Of course most people won't have a problem and won't cause a problem. Fraud is know about so methods will be put in place to deal with the known fraud. Which then has a knock on effect on non fraud claims too.

Its much quicker and easier to get a £5k loan from your bank than to get £100 a week from the benefits system.

 

[Immortalmatt]

By giving you a fair shot at starting it would be helping your bank balance.
The odds are your business won't grow enough to give them a reward in taxation - the chances of any business going under in first few years is high.
Perhaps something to do with the 100 hour weeks for 50p an hour , no holidays and working while sick....

Hence government changed things a few years back.

I went as a mature student, council treated it as income. Which it was.
Expenses of course need paying - think most of mine went on my mortgage and utilities. Two grand a term doesn't go far when over half of that could be spent just on mortgage.

Luckily for the person you know the benefits staff had no discretion. They have a set of rules to work to and those are applied across the board. Person A and person B with exact same circumstances get the same help, the same benefit.
Not depending on being nice to the staff or on how someone looks. Simply treated equally.

Nothing stopping people doing distance learning. Open university. Or a university closer to home.

Back to your situation. You can use the benefits system however it is rigged against you. May get something, may get nothing. Cannot hurt to look at them.
They treat you as self employed even when employed as a director.

There is support available, some of it is age specific some may be area specific. Just don't expect much from the benefits system.

It may help the bank balance but they would get corporation tax off that. It’s just really short sighted from the government as by helping somebody to start a business and paying them benefits is actually no different to somebody sitting on their arse at home on lifestyle benefits. They should be championing people who want to further themselves and make something of their life. And don’t get me started on fraud. The parasites in government are the most corrupt, parasitic people in the country.

 

[Mr D]

It may help the bank balance but they would get corporation tax off that. It’s just really short sighted from the government as by helping somebody to start a business and paying them benefits is actually no different to somebody sitting on their arse at home on lifestyle benefits. They should be championing people who want to further themselves and make something of their life. And don’t get me started on fraud. The parasites in government are the most corrupt, parasitic people in the country.

No.
They would get corporation tax if and when you ever made a profit. No guarantee the company will ever pay a penny in corporation tax.

Remember, most businesses don't survive the first 5 years. Government declines to bet on which ones will last.

By all means make something of your life. There is help available, here and there. Just not much in the benefits system.

 

[MarkOnline]

The best advice I can give you is forget the benefits system, it is designed to keep you dependent on the state. If you are relatively young and healthy the only way IMO is work your way out of it, earn money from your job/jobs and save. It may take some time but if you want it you'll get there.

Good luck

 

[Lucan Unlordly]

Yes, government design the benefits system based on the case studies, claims, and problems they know about.
Of course most people won't have a problem and won't cause a problem. Fraud is know about so methods will be put in place to deal with the known fraud. Which then has a knock on effect on non fraud claims too.

I would say they know more about what they actually look out for. The guy who's moonlighting as a decorator who comes in with clean hands but paint on his ears and shoes, claiming he's been bedridden all week.

In contrast I didn't have to sign on and was sent to an executive job club 15 miles up the road....and claim the petrol! One chap who arrived in a new Daimler was only in the system to see the next 18 months out and to get his stamp paid. Others were talking about stocks and shares and dealing in sugar!

I done couple of months 'consultancy' for a guy who's best friend was one of the head honchos at the local benefits office. 'We're not after people who are genuinely trying to find work', is what she'd told him. In fact I had an unexpected knock at the door from the SS (not the Waffen ) told the guy with the important looking briefcase and steely stare what my circumstances were, what i'd had to do and he went on his way never to be heard from again!

Anyway, back on topic. Despite the above I would never condone working outside of the system if starting your own business. You need the freedom to do what you need to do without looking over your shoulder all day.