Earnings of company director.

So, I’m a bit confused.

In relation to self employment and company directors and UC

CPAG says “Earnings you receive as a director or employee are taken into account as employed earnings”

Entitledto says “Any salary or dividend that you pay yourself is ignored”.

What am I missing?

Not actually contradictory, just a bit short on details and explanation. 

Directors, analogous to sole owners, are treated as sole traders so it’s the business earnings that matters.  How much you pay yourself in dividends or salary doesn’t matter.

Thanks Gareth

So when CPAG say“ Earnings you receive as a director or employee are taken into account as employed earnings”
What are they referring to?

CPAG is more accurate.

Entitledto’s wording isn’t great, although as Gareth says, what you pay yourself as a salary often won’t be relevant, which I suppose is what they’re trying to say.

Basically, when you take a salary through payroll, that will count as employed earnings (and will feed through to UC via the RTI feed). To counteract that, the salary must be deducted as an expense when calculating the profit of the company.

There are a number of cases where the above system leads to different results as compared to simply ignoring the salary (as Entitledto suggest).

For example, if the salary is paid out to the director late, then the cash accounting rules of UC could mean that the salary is an expense in a different AP to the one in which the salary is brought in as employed earnings.
Another example where there could be a difference is where there are partners and they don’t take equal salaries.
Also, the salary will still count in full as earned income for UC even if it takes the company into a loss (but the loss would be carried forward).

Thanks Charles

So, on a practical level, doing a benefit check, what happens in this scenario

SE person’s income from SE for month is £1000.

Expenses including wage to self of £400, totals £600

Balance is £400

SE income is the balance £400.

But if the wage is reported through RTI, would the total income not be £400 SE income plus £400 wage?

Yes, that is correct, a total of £800 income for the month, £400 self-employed earnings and £400 employed earnings.

If you think about it, that’s what it should be!

Yes I completely agree, that’s why I was so confused!
The added complication is that the online benefit calculators don’t appear to allow you to input self employed income and wages.

I would just put it all in as self-employed income, no harm in that.

Maybe that is why Entitledto say what you quoted them as saying?

This is what they say

https://www.entitledto.co.uk/help/company-directors-and-self-employment