Working Tax Credits - are you eligible as a contractor?

[yorkshire_contractor]

Im confused!

So im married, have a child in nursery 3 days a week, work 40 hours a week. I work as a contractor so get minimal pay and dividend statements monthly. I do not claim any benefits or working tax credit and just pay for the nursery out of my dividend payments.

But ive heard that people submit their minimal pay payslips to WTC and get working tax credits that cover the cost of childcare as they are seen as being on low income (i.e. not taking the dividend payments into account). if you earn say over £50k a year; but the way you get paid can be shown to be low wage etc; Is this legal?

can you claim working tax credits when a contractor?

If not; is there any assistance with childcare (childcare vouchers etc) that you can use as a contractor?

Does anyone 'expense' their childcare costs?

Or as we are on a decent contract rate does everyone just pay it out of their earnings?

[philip@wellwoodhoyle]

Dividends (grossed up) need declaring on the tax credit return in the "other income" section along with interest etc, so they aren't ignored. If your dividends push you over the ~ £50k threshold you aren't eligible.

If your total income (wages, dividends, etc) is so low you could qualify for working tax credits ~ £17k, your wage must be at least minimum wage for the number of hours you claim you are working for which could well mean that you have to increase your wage far higher than the optimum £5.7k p.a.

[Archangel]

You can claim £243 a month from pre-tax income for childcare per earner (not per child).

Search for "Childcare vouchers".

[Archangel]

If your total income (wages, dividends, etc) is so low you could qualify for working tax credits ~ £17k, your wage must be at least minimum wage for the number of hours you claim you are working for which could well mean that you have to increase your wage far higher than the optimum £5.7k p.a.

I thought directors were exempt from minimum wage regulations (if no contract of employment exists)

[chris79]

Tax credits are based on your annual household income.. so if your limited company turns over £150k a year, and you happen to take £12k a year salary (for arguments sake), the Government works it out based on the 12k... in which case you would qualify for tax credits and help towards childcare.

Someone already mentioned in a previous thread last week that they take minimum wage, get a huge help from the government, then plan to plunder the business account when their kids hit 16/18 to pay off their mortgage.

Legal? .. Yes (probably?)... Moral?... Maybe not...

[Support Monkey]

As chris79 said Tax credits are based on your annual household income, so if you pay yourself the minimum wage and the minimum amount of dividend your household income can be below the limit entitleing you to make a claim for tax credits

On the child tax credit form you fill in your employer as your limited company name so its very easy for the DWP/HMRC to check what you have in the bank however it does not ask about savings it is entirely based on yearly earnings for both you and your partner, And as is often advised on here your company money belongs to the company not you so is not included as earnings by the DWP/HMRC (any accountants want to advise if this is incorrect)

Also just on your other points Chris79 is it legal? as far as i can make out yes, regardless of what your company turns over if your combined household income is less than the limit then your entitled to make a claim (this question comes up regularly so come on contractoruk lets get some expert opinion on this issue on the home page)

Is it Moral? I work in the public sector and am regularly on site at a large benefits office where I see people of all nationalities filling in the forms to claim all sorts of benefits, when you see them roll up in their Bmw or their calling their mates on the latest must have mobile phone you think how can they be entitled, well their just playing the system, and then there are the people who do not claim, each year millions of pounds in benefits are not claimed due to the people who say " i have never claimed and am not going to start now" or the ones who simply don't think their entitled.

yorkshire_contractor every week your paying tax and national insurance which funds the benefits system so fill in the form and make a claim if your not entitled you won't get it, and forget all this moral rubbish, if you don,t take it someone else will

just one last point though, you have to ask yourself, if i am earning 40k+ a year do i really want to make my kids live a 20k a year lifestyle just to take a couple of hundred pounds a month in state benefits.