Client on tax credits, in full time work - offer of second job as director of limited company

Hi all

Client in full time work, receives tax credits for children (no childcare costs - just CTC).

Client considering partnership offer in a new limited company but no ‘income’ anticipated in first year as they try to get business established. Would HMRC be likely however to deem client as notionally earning at least minimum wage for hours put into new business even if no earnings taken?

Client very worried about losing existing tax credit entitlement if business fails or even during set up of same.

Thanks in advance for all advice.

Not for CTC nor for the first year of business under Universal Credit.

If your client’s in FT work, he’ll be earning at least minimum wage anyway, I should think. So, even if HMRC did deem him to be earning min wage, his entitlement would be no lower than it is now, which is how I read your question.

However, concur re: Gareth’s comment above.

Lots of activity in the startup phase of a business will not generate income.  I’m assuming that he gives up FT job to go self-employed.

No intention of giving up full time PAYE job, role of director accepted to see if additional income possible from business but realistically that will not be likely until at least the second year.

The main concern was that HMRC may presume additional hours should be paid accordingly at minimum wage when in fact the plan if for a small dividend to be taken after 6 months (assuming such a profit exists).

I can’t see why you are concerned.  If he is in FT work now then his income & hours will continue & I don’t see how HMRC could stop or reduce his CTC as his income won’t have increased.

There is also the question of whether he has to notify them of the new job at this stage - I’m not sure of the regs. on that but it is worth checking as he may not have to because it can’t affect anything.