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child / working tax credits awards and your accounts

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    #11
    For tax credits you also have to declare "other income" such as dividends....


    If you leave the money in the company, then thats fine - until of course you take it out...
    Cenedl heb iaith, cenedl heb galon

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      #12
      Originally posted by r0bly0ns
      very wise.
      During my first year in business I was honest and open iwth the tax credit's agency.

      They said that they could not take expected earnings into account (dividends) so could only work off guranteed earnings (salary).
      So they kept paying our tax credits.
      I filled in the forms at the end of this tax year, including dividends recieved, they sent me a nice letter saying they had overpaid me and would claw it back by not giving me any tax credits for the next 3 years.

      Suited me as it meant I could keep what I had saved over the last year to pay them back with
      That's what I'm hoping for this year! Haven't filled out the forms yet, but need to sort it out this weekend, I guess and send it back to them...
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        #13
        Sorry if this is a bit off-topic for this entire forum, but I am at the other end of the scale in this situation. A friend and I are planning on forming a Ltd company with both of us as directors. Rather than having to decide how much of our company's income to draw as salary, we have the problem of having no company income at all for the first year or so, while we work on the code. (We are going to live cheaply off of personal savings.) I am thinking that since we will be working for the company full time, but earning little or no income, we should be eligible for Working Tax Credit, under the 30hrs/week category. If we were a self-employed partnership I'm pretty sure this would be fine, simply putting 0 in the self-employed profits box, just like any business on the rocks, but as Ltd Co directors we count as employed not self-employed. What I'm not sure is whether being a company director still counts as "paid work" for the purposes of qualifying for Working Tax Credit even if you take a salary of 0, or a small nominal amount. Is there some minimum salary level that is required for this to be valid?

        Also, does anyone know what evidence a company director would have to provide that he really was working full time for the company? This isn't a scam at all, but I'm kind of concerned that it could appear like one, since our company is going to have a very empty balance sheet for a while. Obviously once the business takes off (weather permitting) our income would grow beyond the point of being eligible, but in these early days that extra bit of cash from the WTC would come in very handy.

        TIA

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          #14
          Originally posted by adrian.t View Post
          Sorry if this is a bit off-topic for this entire forum, but I am at the other end of the scale in this situation. A friend and I are planning on forming a Ltd company with both of us as directors. Rather than having to decide how much of our company's income to draw as salary, we have the problem of having no company income at all for the first year or so, while we work on the code. (We are going to live cheaply off of personal savings.) I am thinking that since we will be working for the company full time, but earning little or no income, we should be eligible for Working Tax Credit, under the 30hrs/week category. If we were a self-employed partnership I'm pretty sure this would be fine, simply putting 0 in the self-employed profits box, just like any business on the rocks, but as Ltd Co directors we count as employed not self-employed. What I'm not sure is whether being a company director still counts as "paid work" for the purposes of qualifying for Working Tax Credit even if you take a salary of 0, or a small nominal amount. Is there some minimum salary level that is required for this to be valid?

          Also, does anyone know what evidence a company director would have to provide that he really was working full time for the company? This isn't a scam at all, but I'm kind of concerned that it could appear like one, since our company is going to have a very empty balance sheet for a while. Obviously once the business takes off (weather permitting) our income would grow beyond the point of being eligible, but in these early days that extra bit of cash from the WTC would come in very handy.

          TIA

          So basically in a nutshell is it okay to run a company, have nothing going in/out, and claim the full whack of tax credits on the basis your household income is £0?... In all honesty I can see it's not illegal or fraud, but it depends I guess on how the authorities see this, not sure really.. I guess technically you're not doing anything wrong, so why be worried?
          The cycle of life: born > learn > work > learn > dead.

          Comment


            #15
            Originally posted by chris79 View Post
            So basically in a nutshell is it okay to run a company, have nothing going in/out, and claim the full whack of tax credits on the basis your household income is £0?... In all honesty I can see it's not illegal or fraud, but it depends I guess on how the authorities see this, not sure really.. I guess technically you're not doing anything wrong, so why be worried?
            You need to work 16 hours a week to get base tax credits, and 30 hours for the next level.

            Also should you deliberately forego income, e.g. if you are being paid £5k to work as a computer programmer and they deem that your employer could afford to pay you the going rate for the job, then the tax credit award would be based on the going rate, not your actual salary. This is 'notional income'

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              #16
              Originally posted by dude69 View Post
              You need to work 16 hours a week to get base tax credits, and 30 hours for the next level.

              Also should you deliberately forego income, e.g. if you are being paid £5k to work as a computer programmer and they deem that your employer could afford to pay you the going rate for the job, then the tax credit award would be based on the going rate, not your actual salary. This is 'notional income'
              Yeah, but what his original post is insinuating is whether it's possible to 'work' as a Director for x hours, and be paid £0 for doing this for the purpose of claiming tax credits.
              The cycle of life: born > learn > work > learn > dead.

              Comment


                #17
                Perhaps I should clarify my situation a little more. I am not actually contracting out to a 3rd party (hence my appology for this being rather off topic - it's just that I've spent a long time trying to find the info online, and some related issues were being discussed here, so I thought someone might know).

                The only employer involved (at this stage) is my own Ltd. My Ltd has no money to pay me a salary, I'd be working solely for the promise of future profits (weather permitting). Since my "employer" can't afford to pay me I'm hoping this will get around the deemed/notional income issue for the work that I do.

                My question was, given this situation, can work being done on a zero-salary profits-only basis as a company director be classed as "paid work" as far as meeting the hours per week requirement of the Working Tax Credit. The HMRC website WTC FAQ states that a Co Director counts as "Employed" rather than "Self-Employed" for WTC purposes. There are also references to certain expenses being included as income for Directors. So I know that Directors can get WTC in principle. It also talks about Self-Employed income being £0 if your company makes a loss (or I presume exactly £0 profit). I also know that Directors can decide how much salary (vs dividend or retained profits) they get from their company, and that £0 is a valid (though usually not tax optimal) choice. The question is, if you put these facts together, can you extrapolate that such a zero-salary Director, whoes business also happens to not be making any profit at the moment, is still deemed to carrying the required amount of "paid work" to be eligible for WTC.

                The other issue that arrises from my lack of a 3rd party client/employer, is that I don't have any sort of contractor's time sheet etc, so there is no evidence beyond my own word of how many hours I am working. So my other question is what evidence would they require, if any, from a company Director to show the hours he is working, or do they simply take your word for it. One of the examples in the HMRC hours calculation FAQ is for someone who is Self-Employed and has no current client, so is just doing his own thing in the mean time, trying to find a client and preparing for it. In this example there seems to be no problem with them taking his word for it on how many hours he is doing, although this situation was only for 2 weeks in the example, rather than for a whole year.

                It's interesting to note that the income threshold for getting full WTC is about 5k for 1 person, but if you were working 30hrs /wk on minimum wage this would be nearly 8k. So only Self-Employed (or sudo Self-Employed) people could ever get this. Other websites I've seen talking about WTC also imply that it is intended to support people starting new businesses/going through a rough patch. I'm hoping that this is true, and that it extends to Ltd Co Directors as well as Sole Traders/Partnerships.

                Thanks for the replies so far.

                Comment


                  #18
                  Originally posted by chris79 View Post
                  Yeah, but what his original post is insinuating is whether it's possible to 'work' as a Director for x hours, and be paid £0 for doing this for the purpose of claiming tax credits.
                  Ermm, no. It's not exactly means tested, but doing any kind of work at less than some kind of market rate is frowned on; what they will do is assess your tax credits against what you should be earning, not what you actually do, if your stated income is clearly below par. Of course there have to be safelty belts for the genuinely unemployed/low paid - but they tend not to be directors of limited companies.

                  That said, the whole system is so incpmpetently run I wouldn't be at all surprised if you could claim them anyway!
                  Blog? What blog...?

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                    #19
                    Originally posted by chris79 View Post
                    Yeah, but what his original post is insinuating is whether it's possible to 'work' as a Director for x hours, and be paid £0 for doing this for the purpose of claiming tax credits.
                    No it's not possible. The company can afford to pay you more, and the going rate is more, so they assess you at the going rate, not 0.

                    http://www.hmrc.gov.uk/manuals/ntcma...c0320050.htm#6
                    "Claimants providing services to other persons for less than full earnings "

                    The only way round it is to get paid in the form of pension contributions, which don't count as income but do count as remuneration.

                    Comment


                      #20
                      Originally posted by dude69 View Post
                      No it's not possible. The company can afford to pay you more, and the going rate is more, so they assess you at the going rate, not 0.

                      http://www.hmrc.gov.uk/manuals/ntcma...c0320050.htm#6
                      "Claimants providing services to other persons for less than full earnings "

                      The only way round it is to get paid in the form of pension contributions, which don't count as income but do count as remuneration.
                      I'm not sure. Whilst working at less than the "going rate" will generally cause one to be assessed on the going rate there are exemptions. One of those is the inability to be paid the going rate due to financial constraints. The poster would appear to potentially fit into this category.

                      Equally in my case in the year of winding up my company I had income from it of nil. This raised no query (which might just been because nobody bothered to check of course).

                      As usual it's always a simple question, but the answer isn't.

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