Reply to: Contractors claiming benefits?

[riffpie]

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We are always quick to point out it is the companies money until withdrawn and treating it as such is an absolute rule and you are always one of the first to point that out to newbies when they are talking about "their money"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

Devil's other advocate: SHE owns shares in a company that has assets, and a net worth.

[simplicity]

I don't think she claims JSA as she is working - most likely tax credits

[northernladuk]

But the same still applies. Someone can earn £1 million blow it all on booze, drugs, and women and then claim JSA. Someone who works hard to save, does without but saves £20K will be told they can't claim a bean. Bit unfair.

Absolutely. Can't factor stupidity in to the rules unfortunately. Also seems a tad unfair you pay in all your life and can't claim but someone that does f'all expects to get it. We could go in to them breeding more offspring who expect the same yadda yadda but that's for another thread.

[TheCyclingProgrammer]

Depends on how much you are taking out of the company at the time.
If you are hovering around the 30k per year mark, or below, the difference can be quite startling.

E.g. according to current tables, earning 30k per year and paying 300 per week in childcare for 2 kids = tax credits of £11,930 per year.

Ah OK, TIL. I assumed they were equivalent. Much easier to just get YourCo to pay or issue vouchers IMO. For the record, I'm not a fan of claiming benefits just because you're on an artificially low salary. Having your cake and eating it spring to mind...

[malvolio]

Just as an aside, and before people get too hung up on the "Company Money is entirely out of scope" argument, let's not forget who owns the shares in the company and who therefore owns the total assets of the company...

You may not choose to pay out company money but if you own the company, it's still a personal asset.

[psychocandy]

Ah, well that settles it then. It is clearly illegal.

Not sure why we are even discussing morality of it then?

Seems fair. After all, to hold back the dividends is a little off.

In my case before Xmas though, they didn't even ask about company accounts. I think they should have by the sounds.

But, I'd paid out all the profit in dividends the week before. i.e there was no profit left all the money in the account was for vat or CT. So all the same.

But the same still applies. Someone can earn £1 million blow it all on booze, drugs, and women and then claim JSA. Someone who works hard to save, does without but saves £20K will be told they can't claim a bean. Bit unfair.

[jmo21]

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.

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.

Ah, well that settles it then. It is clearly illegal.

Not sure why we are even discussing morality of it then?

[psychocandy]

Did you not read this bit?

No I didnt. My fault there.

If thats the law then that changes things. So how did the person mentioned in the original post get around this one then?

[blacjac]

Is there really any difference in claiming tax credits for childcare or getting YourCo to pay for the childcare directly or via childcare vouchers?

Depends on how much you are taking out of the company at the time.
If you are hovering around the 30k per year mark, or below, the difference can be quite startling.

E.g. according to current tables, earning 30k per year and paying 300 per week in childcare for 2 kids = tax credits of £11,930 per year.

[northernladuk]

Anyway.... It's getting in to detail and I have lost the point of this. There is evidence that company money goes towards personal contribution so that kills the company money argument stone dead.

Can anyone else but a contractors get away with squirrelling money away while claiming benefits? No.. so why is it right for us? It's just a loophole. If people genuinely don't have enough savings and genuinely meet the criteria then go and fill your boots. I am probably ruining the thread by not understanding the different benefits so will quietly slink out of this one.

Peace out....

[TheCyclingProgrammer]

Is there really any difference in claiming tax credits for childcare or getting YourCo to pay for the childcare directly or via childcare vouchers?

[blacjac]

I am sure I am and don't want to get in to the details as I don't know. I just know these excuses about hiding money in the company and claiming is just not right. In fact, it's gone on so long I am really not sure what I am arguing.....

See your post -1

Incidentally back in 2010 I did try to claim JSA too when the warchest began to run out.
That was the most soul destroying experience of my life and I chose to not go back to find out if I was entitled to anything.
The highlight of the experience was the chav threatening to '******* kick the tulip' out of the security guard for asking him to sign in.

[psychocandy]

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.


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.

But being immoral is a sliding scale. A lot of people would think the way contractors avoid tax is immoral too.

In my case, the jobcentre had all the information they needed at the time.

[northernladuk]

Now first off I'll say this is a bit borderline even for me. Wish I'd though it first mind. But as others have pointed out, there is a distinction between company money and personal money - there has to be.

It might well be a loophole but I dont see how it can be closed. It would be impossible to 'force' companies however big or small to do what the government wanted with the companies money. IR35 I guess tries it though!

I really don't see how this person could ever be done for fraud. Its not fraud. OK so what she's done:-

1. As owner of company, decided to pay employee A (herself) £x amount per year. Perfectly legal. We all pay ourselves the salary we want for out purposes (mainly to be the most tax efficient)

2. As owner of company, has decided not to pay out any dividends. Perfectly legal. We all pay dividends as and when it suits us again maybe taking into tax years etc.

3. As a person, has claimed benefits based on her income which is the salary. Again perfectly legal.

To be honest, it aint right but I don't think us as contractors are the ones to criticise. Remember the old saying, tax avoidance is legal, tax evasion is illegal. This is the same sort of thing.

Did you not read this bit?

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.

[northernladuk]

I know someone doing the dodgy overseas avoidance scheme who used to do exactly this. Not me BTW - won't touch it.

Erm, yeah thanks for that. Have another beer.