Universal Credit as Self-Employed and Directors Salary

[ArabianNights]

A friend from Uni is now self employed and has his own company. He is on Universal Credit at the moment and he has minimum income floor applied. He has to declare his income and expenses monthly to Universal Credit, from his business. He asked me for advise about this but I have zero clue.

He now takes the minimal salary from his business as a sole director, so does he have to call universal credit and declare that he is now employed as an employee for his own company? I don't think it makes much difference because they already know he is claiming as a self employed person, and he declares his income and expenses, so i doubt it will make any difference to his claim, but thought to ask experts here! I do know that his salary costs are classed as business expenses for UC, but thats all I know!

Thank you!

 

[UKSBD]

Does he take the minimal salary from his business through choice so as to pay less tax and claim UC or because that's all the business can afford to pay him?

 

[ArabianNights]

Does he take the minimal salary from his business through choice so as to pay less tax and claim UC or because that's all the business can afford to pay him?

I don’t think he is on UC out of choice. He is on the minimal salary to be tax efficient, that’s for sure.

 

[DWS]

As far as I know for UC it is the Company income minus expenses and because the Directors salary is also counted as an expense that gets added back on.

 

[ArabianNights]

As far as I know for UC it is the Company income minus expenses and because the Directors salary is also counted as an expense that gets added back on.

Yes that’s what I was thinking too - so no use in declaring to DWP that he is now an employee. Thank you

 

[Newchodge]

A friend from Uni is now self employed and has his own company. He is on Universal Credit at the moment and he has minimum income floor applied. He has to declare his income and expenses monthly to Universal Credit, from his business. He asked me for advise about this but I have zero clue.

He now takes the minimal salary from his business as a sole director, so does he have to call universal credit and declare that he is now employed as an employee for his own company? I don't think it makes much difference because they already know he is claiming as a self employed person, and he declares his income and expenses, so i doubt it will make any difference to his claim, but thought to ask experts here! I do know that his salary costs are classed as business expenses for UC, but thats all I know!

Thank you!

In the first place he is NOT self employed. He needs to make that clear to UC, although I believe they treat Director only Ltd company people the same as self employed.

He has to tell UC everything. Presumably his salary is going through payroll? In that case UC will be aware of it, so he MUST tell them.

 

[ArabianNights]

In the first place he is NOT self employed. He needs to make that clear to UC, although I believe they treat Director only Ltd company people the same as self employed.

He has to tell UC everything. Presumably his salary is going through payroll? In that case UC will be aware of it, so he MUST tell them.

Would be interesting to know how you came up with the assumption that he is not self employed.

Yes, his salary is going through payroll and his company is registered as a PAYE employer.

 

[Newchodge]

Would be interesting to know how you came up with the assumption that he is not self employed.

Yes, his salary is going through payroll and his company is registered as a PAYE employer.

Someone who is a sole trader is self employed. Someone who works through a company is either (or both) a Director or an employee.

 

[ArabianNights]

Someone who is a sole trader is self employed. Someone who works through a company is either (or both) a Director or an employee.

Oh I see, thanks for clarifying. As you mentioned, as far as DWP are concerned, he is self employed. Probably not to the advantage of the claimant. I guess this is why you have the stance that he is not self employed, but employed.

How could one ‘fight’ this for lack of better term, with the DWP? He started his company whilst on UC, after he lost his job.

 

[Newchodge]

Oh I see, thanks for clarifying. As you mentioned, as far as DWP are concerned, he is self employed. Probably not to the advantage of the claimant. I guess this is why you have the stance that he is not self employed, but employed.

How could one ‘fight’ this for lack of better term, with the DWP? He started his company whilst on UC, after he lost his job.

You can't fight 'it'. Whatever 'it' you wish to fight?

 

[ArabianNights]

You can't fight 'it'. Whatever 'it' you wish to fight?

I don’t think he wants to ‘fight’ anything ?????? I only asked that question because you stated that he is not self employed. So if he isn’t, then how does one prove that to DWP, if he wanted to? As far as I am concerned he is self employed since he owns the company to which he is Director of - but according to you he isn’t. So I assumed (maybe incorrectly) you meant it’s worth taking a case to DWP to prove he isn’t if so - on what basis is he NOT self employed?

 

[DWS]

I don’t think he wants to ‘fight’ anything ?????? I only asked that question because you stated that he is not self employed. So if he isn’t, then how does one prove that to DWP, if he wanted to? As far as I am concerned he is self employed since he owns the company to which he is Director of - but according to you he isn’t. So I assumed (maybe incorrectly) you meant it’s worth taking a case to DWP to prove he isn’t if so - on what basis is he NOT self employed?

He is not self-employed as he is a Director of a Ltd Company, however as he is the sole Director then he is treated the same way as someone who was self employed for UC purposes because he has access to all the profits.

 

[Newchodge]

He is not self-employed as he is a Director of a Ltd Company, however as he is the sole Director then he is treated the same way as someone who was self employed for UC purposes because he has access to all the profits.

^^ What they said.

However, if they are taking a salary from the ltd company, that salary reduces the Ltd profits, but increases the individual's income, so must be declared to UC.

 

[ArabianNights]

He is not self-employed as he is a Director of a Ltd Company, however as he is the sole Director then he is treated the same way as someone who was self employed for UC purposes because he has access to all the profits.

Thank you - makes sense

 

[ArabianNights]

Yes. He already will be declaring the salary as an expense. So I guess he doesn’t need to call them and report a ‘change of circumstances’ in that he is employed now.

^^ What they said.

However, if they are taking a salary from the ltd company, that salary reduces the Ltd profits, but increases the individual's income, so must be declared to UC.

 

[Newchodge]

Yes. He already will be declaring the salary as an expense. So I guess he doesn’t need to call them and report a ‘change of circumstances’ in that he is employed now.

Please read the advice. YES he does. The salary is both expense and income.

 

[UKSBD]

Is his business making more profit than his Minimum income floor or less?

He has to report everything but if the profit is less than his minimum income floor it won't effect what he receives.

What may effect it is if the company has reserves, which they think should be drawn from the business

 

[JEREMY HAWKE]

Some company this must be if the owner has to claim the dole I had no idea it was even possible
Is he sure it is worth the hassle?

 

[MBE2017]

Best thing ArabianNights, to help your friend, get him to talk to an accountant and not yourself.

No offence intended but you have no idea and are struggling badly with the most simple principles on employment.

 

[WaveJumper]

Best thing ArabianNights, to help your friend, get him to talk to an accountant and not yourself.

No offence intended but you have no idea and are struggling badly with the most simple principles on employment.

You've hit the nail well and truly on the head

 

[ArabianNights]

Please read the advice. YES he does. The salary is both expense and income.

Have since spoken to DWP and asked them. They said that sole director employees of their own company are not classed as employees and that the salary needs to be entered as a business expense and not both salary and business expense. Makes sense, since you cannot count the same cash twice under different labels.

 

[ArabianNights]

Deleted

 

[ArabianNights]

Best thing ArabianNights, to help your friend, get him to talk to an accountant and not yourself.

No offence intended but you have no idea and are struggling badly with the most simple principles on employment.

What ‘simple principles on employment’ are you referring to, mr know it all?

 

[ArabianNights]

Some company this must be if the owner has to claim the dole I had no idea it was even possible
Is he sure it is worth the hassle?

No idea ??‍ and neither do you - so no need to judge something / someone that you have zero knowledge about.

 

[ArabianNights]

Is his business making more profit than his Minimum income floor or less?

He has to report everything but if the profit is less than his minimum income floor it won't effect what he receives.

What may effect it is if the company has reserves, which they think should be drawn from the business

Thanks for the non-assumptive and non-judgemental response that tends to come from most people on this forum.

It’s a good question - I don’t know how much his business makes. I’ll pose that question to him - thank you!

 

[MBE2017]

What ‘simple principles on employment’ are you referring to, mr know it all?

The fact these simple principles have already been explained to you at least a couple of times earlier in the thread, and the fact you still haven’t understood what is being said, proves you are not the right person to help them.

I’m not a know it all, but I appear to know a lot more than yourself. If this person is your friend do the decent thing and suggest they talk to someone who knows what they are talking about. Even your friend who you claim to want to help has told you they are employed, but in your eyes you consider him self employed. In this case, your friend, who you say you wish to help, already knows more than you.

Don’t feel bad, no one is perfect.

 

[ArabianNights]

The fact these simple principles have already been explained to you at least a couple of times earlier in the thread, and the fact you still haven’t understood what is being said, proves you are not the right person to help them.

I’m not a know it all, but I appear to know a lot more than yourself. If this person is your friend do the decent thing and suggest they talk to someone who knows what they are talking about.

Don’t feel bad, no one is perfect.

Feel bad? Condescending much? Patronising?

For your information, mr whatever you think you are, according to the DWP, his salary is classed as a business expense. So a lot of the so called accountants here are actually wrong. What I have said is actually correct and not wrong. But if it strokes your ego the right way, or helps you sleep at night, I’ll sing your praises ???

 

[UKSBD]

Have since spoken to DWP and asked them. They said that sole director employees of their own company are not classed as employees and that the salary needs to be entered as a business expense and not both salary and business expense. Makes sense, since you cannot count the same cash twice under different labels.

Here is an example

For UC purposes If the business makes a profit of £3k in a month but out of that £3k he pays himself £1k, it should be recorded as he has received £3k

 

[UKSBD]

Even your friend who you claim to want to help has told you they are employed, but in your eyes you consider him self employed. In this case, your friend, who you say you wish to help, already knows more than you.

It's not what the OP thinks that is important, it's what UC say.

For employment laws and tax laws he is an employee, but in UC's eyes, he is treated as self employed

 

[MBE2017]

For employment laws and tax laws he is an employee, but in UC's eyes, he is treated as self employed

Totally agree, this has been mentioned right at the start of the thread, posts 4 and 6 by others. Anyway, hopefully the OP has got his answer, his friend is not self employed, but UC for its reasons treat him so due to his low earnings. Whatever UC say, his friend is legally a Director Owner Employee.

 

[JEREMY HAWKE]

No idea ??‍ and neither do you - so no need to judge something / someone that you have zero knowledge about.

No because you came here and explained a limited amount of facts.
Business is about making money the social system is for those that need it not to fund your business
You came on here asking questions about something you know F££k all about expecting to hear all the answers that you wanted to hear and then you realised your were dealing with real people who actually want to invest their time to help people but this comes at at a cost and that is the truth
So boll££ks to you

 

[DWS]

according to the DWP, his salary is classed as a business expense. So a lot of the so called accountants here are actually wrong. What I have said is actually correct and not wrong. But if it strokes your ego the right way, or helps you sleep at night, I’ll sing your praises ???

Who's wrong?
I have said that the Director's salary is a business expense but for UC it is added back to the profit so that they can determine how much the Director actually earned, simple!
The key thing here is that the Director is not Self-Employed they are an Employee of the Company but the DWP 'treat' them the same as being Self-Employed in order to work out their UC, the key word being 'treat' even though they are not.

 

[Newchodge]

Have since spoken to DWP and asked them. They said that sole director employees of their own company are not classed as employees and that the salary needs to be entered as a business expense and not both salary and business expense. Makes sense, since you cannot count the same cash twice under different labels.

Have you never heard of double entry book keeping? It is an expense of the company and an income of the individual.

 

[GLAbusiness]

Here is an example

For UC purposes If the business makes a profit of £3k in a month but out of that £3k he pays himself £1k, it should be recorded as he has received £3k

THIS

 

[ArabianNights]

No because you came here and explained a limited amount of facts.
Business is about making money the social system is for those that need it not to fund your business
You came on here asking questions about something you know F££k all about expecting to hear all the answers that you wanted to hear and then you realised your were dealing with real people who actually want to invest their time to help people but this comes at at a cost and that is the truth
So boll££ks to you

wow what a nasty person you are! Not surprised! Majority of people in this country have become complete judgemental, assumptive, bitter and rude as you put it "$$$££$$££$" - and yes - I have put a lack of info. Only info needed is what is stated. If you dont like it, then in your own words, you can 'boll££ks' off ?

 

[ArabianNights]

Here is an example

For UC purposes If the business makes a profit of £3k in a month but out of that £3k he pays himself £1k, it should be recorded as he has received £3k

This is exactly what I thought and wanted to confirm.

Shame about the other 'idi££$' here with their heads up their tiny a$$Es. Thank you.

 

[ArabianNights]

Have you never heard of double entry book keeping? It is an expense of the company and an income of the individual.

I don't know what your point is.

According to UC, the person is classed as self employed. The business money and the salary paid from that business is one and the same. I don't know whether you don't seem to understand this, or are just acting like a sarcastic whatever for the sake of it, and neither do I know what you are trying to prove.

You said: "In the first place he is NOT self employed. He needs to make that clear to UC" so please stop trying to backtrack here somehow - because you are WRONG! According to UC, as I mentioned earlier and someone here here has mentioned, the person is classed as self employed. End of.

 

[ArabianNights]

It's not what the OP thinks that is important, it's what UC say.

For employment laws and tax laws he is an employee, but in UC's eyes, he is treated as self employed

According to Cyndy Hodgson, you are wrong. You are correct and this is what I have been saying.

People advertising themselves as providing 'employer services' shouldn't be going around giving incorrect information. Thanks.

 

[ArabianNights]

Who's wrong?
I have said that the Director's salary is a business expense but for UC it is added back to the profit so that they can determine how much the Director actually earned, simple!
The key thing here is that the Director is not Self-Employed they are an Employee of the Company but the DWP 'treat' them the same as being Self-Employed in order to work out their UC, the key word being 'treat' even though they are not.

Since this thread is about UC's 'treatment' of a person in this situation - why not just keep it simple and say "the person is self employed for the purpose of UC' -? Why complicate things?

 

[Newchodge]

I don't know what your point is.

According to UC, the person is classed as self employed. The business money and the salary paid from that business is one and the same. I don't know whether you don't seem to understand this, or are just acting like a sarcastic whatever for the sake of it, and neither do I know what you are trying to prove.

You said: "In the first place he is NOT self employed. He needs to make that clear to UC" so please stop trying to backtrack here somehow - because you are WRONG! According to UC, as I mentioned earlier and someone here here has mentioned, the person is classed as self employed. End of.

My first post:

In the first place he is NOT self employed. He needs to make that clear to UC, although I believe they treat Director only Ltd company people the same as self employed.