Contractors claiming benefits?

[blacjac]

I would suggest that all the people who are saying it should be illegal and it is immoral haven't thought it through properly.

E.g.

My turnover is x

I need to leave a %age of x in my company every month to ensure continuity of business when clients don't pay on time / the fee earners are not earning etc... lets say 20%.

My remuneration is effectively x-20%


Now if the government says anyone who earns x-20% is entitled to some tax credits - what is immoral about that?

[northernladuk]

I would suggest that all the people who are saying it should be illegal and it is immoral haven't thought it through properly.

E.g.

My turnover is x

I need to leave a %age of x in my company every month to ensure continuity of business when clients don't pay on time / the fee earners are not earning etc... lets say 20%.

My remuneration is effectively x-20%


Now if the government says anyone who earns x-20% is entitled to some tax credits - what is immoral about that?

The fact you have savings in the background and are massaging the numbers to meet benefit requirements is what is immoral. You are in direct control of the money so hiding it away where they can't see it then it's clearly against the spirit of the rule. They have cut offs for savings, equity in house etc so in directly controlled company should also fall in to this.

[kal]

The fact you have savings in the background and are massaging the numbers to meet benefit requirements is what is immoral. You are in direct control of the money so hiding it away where they can't see it then it's clearly against the spirit of the rule. They have cut offs for savings, equity in house etc so in directly controlled company should also fall in to this.

While reprehensible the antics of people like Jimmy Carr and more recently Chris 'Used Car Salesman' Moyles take this to a whole new level (and by inference I am including the whole EBT crowd in this), there's no difference in my book, legal? maybe, ethical? definitely not...

[blacjac]

The fact you have savings in the background and are massaging the numbers to meet benefit requirements is what is immoral. You are in direct control of the money so hiding it away where they can't see it then it's clearly against the spirit of the rule. They have cut offs for savings, equity in house etc so in directly controlled company should also fall in to this.

If you look at the link I provided, the only way that savings are used in calculating entitlement to tax credits is any interest over £300 per year is to be included in income.

Sorry but I just don't see it.
If I had to choose between decimating my business or claiming money that I am entitled to without breaking any rules, then I'd claim.

plus you are not hiding anything, you could tell them that a company you control has £1m in it, but only gives you £2.50 per year. Its the £2.50 that would be used to calculate tax credits.

Remember, even though the title of the thread is benefits, what the OP is actually talking about is tax credits, which is a whole different beast.

If you have given them all the information and the government says you are still entitled to it, there is no legal, ethical or moral dilemma IMO

[jmo21]

The fact you have savings in the background and are massaging the numbers to meet benefit requirements is what is immoral. You are in direct control of the money so hiding it away where they can't see it then it's clearly against the spirit of the rule. They have cut offs for savings, equity in house etc so in directly controlled company should also fall in to this.

Devils advocate....

SHE doesn't have savings.

The company has savings.

We are always quick to point out it is the companies money until withdrawn and treating it as such is an absolute rule and you are always one of the first to point that out to newbies when they are talking about "their money"

We do not know what she is doing with that money, could really be building her business, aiming to hire someone soon etc.

Is it likely? probably not.

Should we rush to judge and say it is immoral? I'm not convinced.

If, in the next tax year, she starts paying out divvies "normally", pay all appropriate tax, and doesn't claim these benefits, she will have done nothing wrong.

[Old Greg]

If you look at the link I provided, the only way that savings are used in calculating entitlement to tax credits is any interest over £300 per year is to be included in income.

Sorry but I just don't see it.
If I had to choose between decimating my business or claiming money that I am entitled to without breaking any rules, then I'd claim.

What if you are able to live quite cheaply. You're a single parent with three kids and you've paid the mortgage off. You're on £500 pd / £110,000 Ltd income p.a. You pay yourself £10,000 p.a. and claim working tax credits (any idea how much you get) and let the money build up in the Ltd until you close it down with Entrepreneur's Relief.

Is that legal?

[northernladuk]

If you look at the link I provided, the only way that savings are used in calculating entitlement to tax credits is any interest over £300 per year is to be included in income.

Sorry but I just don't see it.
If I had to choose between decimating my business or claiming money that I am entitled to without breaking any rules, then I'd claim.

You are not decimating your business. You are withdrawing the money you have earned using the chosen vehicle i.e. ltd co. Benefits does NOT exist for us to claim while we store available money away for a rainy day. I can't see how anyone can argue that is right. It's possible but it's not right. They fact you have used a loophole that HMRC have not yet closed down does not make it right.

You are not entitled to it. Pedantry aside you have available money so are in no need of benefits. It's kinda core to the benefits system.

One thing we haven't done yet is actually find out from HMRC if this is right. We know people that do it and even PC who has been through the JSA still isn't 100% sure if he made them aware of his situation and they actually understood it he would be able to claim. This whole benefits idea work for no other reasons than HMRC haven't closed a loophole and also the staff dealing with this do not fully understand the situation. I am sure if they did this would die a rightful death.

[northernladuk]

Devils advocate....

SHE doesn't have savings.

The company has savings.

We are always quick to point out it is the companies money until withdrawn and treating it as such is an absolute rule and you are always one of the first to point that out to newbies when they are talking about "their money"

We do not know what she is doing with that money, could really be building her business, aiming to hire someone soon etc.

Is it likely? probably not.

Should we rush to judge and say it is immoral? I'm not convinced.

If, in the next tax year, she starts paying out divvies "normally", pay all appropriate tax, and doesn't claim these benefits, she will have done nothing wrong.

Good points but the question was is it immoral. The answer is clearly yes as you are well aware you are using fudges to meet criteria.

And on the first point...

The key point for limited company contractors to bear in mind is that their limited company’s business assets will be considered ‘capital’ and added to their personal assets and capital when they are means tested. Until combined funds and capital in the business and held personally fall below £16,000, the contractor will not be able to claim JSA.

In addition, if the contractor regularly pays large dividends, these and any cash in the business will be considered part of the contractor’s savings limit of £16,000. So Jobcentre Plus will want to see detailed company accounts and financial records, and may wish to access the contractor’s accountant when making any eligibility assessments.

What is going wrong is the Jobcentre are NOT asking for this information in either the OP's case or in PC's. If they did I am sure the outcome would be very different.

[blacjac]

What if you are able to live quite cheaply. You're a single parent with three kids and you've paid the mortgage off. You're on £500 pd / £110,000 Ltd income p.a. You pay yourself £10,000 p.a. and claim working tax credits (any idea how much you get) and let the money build up in the Ltd until you close it down with Entrepreneur's Relief.

Is that legal?

Yes, totally.

But the year you close the company down then you get nowt.

We might not agree with it, but the whole point of tax credits is to enable parents to work while little Johny goes to childcare.
If you won the lottery this weekend but spent it all by the end of the year, You'd still be entitled to tax credits next year as long as:
a) You are working and ;
b) You are paying a registered child carer to look after little Johnny while you do.

[simplicity]

I guess maybe it's ok seeing as the company money isn't actually her money. Not sure that she's trying to be dishonest as 45k isn't much when it's one income.