Effect of running a Limited company on IS/CA

Hello everyone

This is the first time I have come across this and it has really thrown me! Any help will be much appreciated.

Claimant is in receipt of IS and CA. She has two children and is also in receipt of CB, CTC, DLA, HB and CTS.

She would like to start her own business and has been successfully building some momentum for a while now. An accountant has advised her to setup a Limited company. She has been told that this will allow her to build the company until there is enough money in the kitty to take a wage. In the meantime she will be working full time hours but either unable or choosing not to take a wage.

How will this affect her benefits in the meantime?

Thanks

Hi, before I gave consideration to your client’s future entitlement to means tested benefits, I would be exploring whether there is anything in her proposed full time work which would be in any way inconsistent with her current DLA award as well as her CA.

LizM - 19 April 2018 03:22 PM

She would like to start her own business and has been successfully building some momentum for a while now. An accountant has advised her to setup a Limited company. She has been told that this will allow her to build the company until there is enough money in the kitty to take a wage. In the meantime she will be working full time hours but either unable or choosing not to take a wage.

If you mean she’s been working on her business for 16 hours or more a week, then she isn’t usually entitled to claim Income Support and could well have been overpaid, regardless of whether she’s been earning any money.

Remunerative work must be work done in expectation of payment, not merely hope. Worth looking at R9IS) 5/95 - http://administrativeappeals.decisions.tribunals.gov.uk/Aspx/view.aspx?id=649

Thanks everyone for your comments.

The DLA is for the claimant’s son. She will be running her business from home so I am not concerned that she will not be able to fulfill the 35 hour caring requirement.

With regards to hours worked, this is where I felt stuck. She will be working full time hours but without expectation of payment. At least not until there are enough funds in the LTD company to take a wage. So there is an expectation of payment eventually but this would be dependent on the success of the business which is not guaranteed.

Whilst it is true that remunerative work must be done in the expectation of profit, it’s worth noting that R(IS) 5/95 also references reg. 42(6) of the Income Support Regs - i.e. the effect of this is, in essence, that where a person is not precluded from entitlement by the ‘remunerative work’ provisions, it may nevertheless be permissible for a decision maker or tribunal to treat that person as receiving earnings at a level that would be paid in comparable employment. An example would be, I imagine, a mobile hairdresser charging only £10 a cut in order to build up custom where the ‘going rate’ would be £25.

It might also be the case that reg. 42 (1) and (2) could come into play - i.e. deprivation of income/failure to apply for income. If the limited company is in fact paid for the work, but its director (i.e. the claimant) chooses to use that income to build up the company’s reserves/capital/stock when it would be possible to draw down an income, then they could be caught by the notional income rules…..

Thanks past caring. That’s a great help.