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Forum Home  →  Discussion  →  Income support, JSA and tax credits  →  Thread

s/e business in the name of the appointee/carer/mother

Tara CAC
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Client is in receipt of CA with IS top up

Daughter gets enhanced rate for PIP (DL & Mob) and due to make a claim for UC (client will be appointee)

——

Daughter does not have the capacity to manage her own affairs
Daughter’s support network have proposed the idea of starting a s/e dog walking business, to give her purpose.
Daughter would need assistance from Mum and support network to provide these services and manage the business/finances.

Mum was thinking of setting up the business in her name, on her daughters behalf but wondered how it would impact their individual benefit claims.

——

My first thought is an LPA so the business can be set up in the daughters name

Would Mum’s benefits be unaffected as she’s not deriving profit/income from the business and any work done for the business is in support of her daughter as her appointee and/or LPA?

UC would work as normal? Likely to be found not GSE and be awarded LCW/RA at a later date, with Mum reporting income and expenses each month - would there be any impact if the business was set up in Mums name instead?

Tim Saint
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Mum is on IS, so would be transferring to UC in 2024 I guess, so if she owned a business, she may have the risk of being classed as gainfully self employed and then subject to the minimum income floor herself even if she is not drawing a wage. If she paid her daughter from the business, the daughter would be an employee, so may get the work allowance and 55% taper.

If the business is in the daughter’s name, then it would be her subject to the MIF.

Anyone else had any experience on people working only one or two hours per week being classed as gainfully self employed?

Paul_Treloar_AgeUK
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You cannot set up a Lasting Power of Attorney if you don’t have mental capacity.

Mother can apply to become Deputy for her daughter but that’s likely to take quite a few months at least and has costs attached. See section 6 of our factsheet Arranging for someone to make decisions on your behalf for more information.

Ianb
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Tim Saint - 20 July 2022 02:38 PM

Mum is on IS, so would be transferring to UC in 2024 I guess, so if she owned a business, she may have the risk of being classed as gainfully self employed and then subject to the minimum income floor herself even if she is not drawing a wage.

Just picking up on that one point - if mum gets CA she is a carer and not subject to MIF.

I have no opinion about the merit or otherwise of the proposition as a whole (but it does seem complicated).

Tara CAC
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Paul_Treloar_AgeUK - 20 July 2022 04:13 PM

You cannot set up a Lasting Power of Attorney if you don’t have mental capacity.

Mother can apply to become Deputy for her daughter but that’s likely to take quite a few months at least and has costs attached. See section 6 of our factsheet Arranging for someone to make decisions on your behalf for more information.

Thanks - I’ll need to check the level of capacity (I’m going from referral notes atm)

Tara CAC
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Tim Saint - 20 July 2022 02:38 PM

Mum is on IS, so would be transferring to UC in 2024 I guess, so if she owned a business, she may have the risk of being classed as gainfully self employed and then subject to the minimum income floor herself even if she is not drawing a wage. If she paid her daughter from the business, the daughter would be an employee, so may get the work allowance and 55% taper.

If the business is in the daughter’s name, then it would be her subject to the MIF.

Anyone else had any experience on people working only one or two hours per week being classed as gainfully self employed?

It’s likely the daughter will have lcw/ra so the MIF wouldn’t apply but with regards to low hours and low income s/e:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1079323/admh4.pdf

H4032 The S/E activity is unlikely to be the claimant’s main employment where the claimant
1. undertakes only S/E activity and that activity occupies signifcantly less than half the expected hours
or
2. undertakes S/E and employed earners activity and the S/E activity takes up more time than time spent
on employed activity but still only represents a small proportion of the expected hours of work (but also
have regard to H4034 1.)
Example
Ziggy plays guitar and every fortnight performs at his local pub. He plays for about two hours and
receives £20 for each performance. The pub where Ziggy plays advertise the nights that Ziggy performs.
Ziggy does not play anywhere else and regards the fortnightly performances as a bit of fun.
Ziggy only spends a few hours on the S/E activity and receives a low wage. The DM determines that the
self-employment is not Ziggy’s main form of employment.

HB Anorak
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What exactly do we mean by setting up a business in the mother’s name?  If someone is self-employed, they just do work for people and get paid: the “business” doesn’t exist as an entity in its own right, it is just a description of someone going to work but not as an employee.  It’s what I do.

What I have “in my name” are a business bank account, emails, tax assessments, some stuff that I use (computers etc), insurance policies, subscriptions and any contract I enter into to do jobs for people is in my name.

If it is proposed that the daughter carries out the work, but with admin support from her mother, would the mother be the one entering into contracts (written or oral), or the daughter?  Who would hold any PI/PL insurance?  Would there be a business bank account and who would be the account holder?  What exactly is it going to be that is “in the mother’s name”?

Tara CAC
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I’ll double check (I’m going from the referral atm) but I presume ‘in the mum’s name’ would be similar things you listed - but for the purposes of dog walking, so the contracts would be with the mum

Though I think it may be so small scale it would be small amounts of cash changing hands - however they mentioned applying for grants/funding to set up (I’m thinking business cards, advertising and potentially insurance) which may need a bank account

Elliot Kent
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I’m not at all keen on that plan from a legal point of view. It sounds a lot like an arrangement where the mother runs a business and then either sub-contracts or employs the daughter to do the work. It is perhaps all on such a small scale that it might not really matter, but I would rather a tidier arrangement.

Possible alternatives:

(1) Mum and daughter form a partnership. They call it “Mum and daughter dog walking”. Mum, as partner, is able to sign contracts etc. on behalf of the partnership and the daughter carries out the work on behalf of the partnership. Anything purchased for the business forms partnership property. No special formalities are required but a partnership agreement would need to be drawn up dealing with profit sharing etc between the partners (and perhaps giving the daughter the lion’s share of the profits). Each partner is taxed on their share of the profits as self-employed income and likewise that is how it is treated for benefit purposes.

(2) A limited company is set up as a vehicle for the business. They call it “Mum and daughter dog walking Ltd”. The dog-owners contract with the company as a separate entity, so the daughter’s lack of capacity is a non-issue. The internal workings of the business can be set up in whatever way works best with reference to directorship and shareholdings (perhaps the mother would be sole director but the daughter would be the majority shareholder). The daughter is remunerated through wages or drawings from the company. There would be some additional admin costs and reporting obligations associated with setting up a company but it may give the most flexibility in how they wish to deal with ownership and remuneration.

There are plenty of other implications to these things and specialist advice would of course be encouraged.

Tara CAC
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Elliot Kent - 21 July 2022 03:04 PM

I’m not at all keen on that plan from a legal point of view. It sounds a lot like an arrangement where the mother runs a business and then either sub-contracts or employs the daughter to do the work. It is perhaps all on such a small scale that it might not really matter, but I would rather a tidier arrangement.

Possible alternatives:

(1) Mum and daughter form a partnership. They call it “Mum and daughter dog walking”. Mum, as partner, is able to sign contracts etc. on behalf of the partnership and the daughter carries out the work on behalf of the partnership. Anything purchased for the business forms partnership property. No special formalities are required but a partnership agreement would need to be drawn up dealing with profit sharing etc between the partners (and perhaps giving the daughter the lion’s share of the profits). Each partner is taxed on their share of the profits as self-employed income and likewise that is how it is treated for benefit purposes.

(2) A limited company is set up as a vehicle for the business. They call it “Mum and daughter dog walking Ltd”. The dog-owners contract with the company as a separate entity, so the daughter’s lack of capacity is a non-issue. The internal workings of the business can be set up in whatever way works best with reference to directorship and shareholdings (perhaps the mother would be sole director but the daughter would be the majority shareholder). The daughter is remunerated through wages or drawings from the company. There would be some additional admin costs and reporting obligations associated with setting up a company but it may give the most flexibility in how they wish to deal with ownership and remuneration.

There are plenty of other implications to these things and specialist advice would of course be encouraged.

Thanks Elliot, appreciate the suggestions

Paul_Treloar_AgeUK
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All the discussion about doing things for the daughter is ignoring the fact that you have said she doesn’t have mental capacity and therefore other people should be very cautious about making decisions on her behalf, especially financial decisions. I would suggest sorting out a Deputy to act for her when she becomes an adult should be the first thing to sort out - once that’s done, the Deputy can begin to consider lots of the other issues raised and act in the daughter’s best interests as required by law.

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Yes. Sorry Paul I thought you had already made that point above. We are told that “I’ll need to check the level of capacity (I’m going from referral notes atm)”.

Tara CAC
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Paul_Treloar_AgeUK - 21 July 2022 04:44 PM

All the discussion about doing things for the daughter is ignoring the fact that you have said she doesn’t have mental capacity and therefore other people should be very cautious about making decisions on her behalf, especially financial decisions. I would suggest sorting out a Deputy to act for her when she becomes an adult should be the first thing to sort out - once that’s done, the Deputy can begin to consider lots of the other issues raised and act in the daughter’s best interests as required by law.

Thanks Paul, yes an LPA was my first thought from the referral, corrected by you to be Deputyship. Once I manage to get hold of the client I’ll double check capacity before considering other options :)