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

capital invested in a business

SocSec
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welfare benefits/citizens advice//ashfield

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Help please my client claims income support. he will be creating a business partnership and investing £20.000 into a business not due to start taradig until November but the money will be used for set up costs. he will not be doing any work until November but will be a formal partner in June this year. Question, is he self employed now, will the £20.000affect his income support entitlement now, He will only have child tax cr and CB to live on if his income support stops now, so what is his benefit position between June and November

Gareth Morgan
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Has he got the £20,000 now.  If not, where is it coming from?

SocSec
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not yet, its coming from a friend

Brian Fletcher
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So, is it a loan provided to your client on the proviso that he invests it in the business?
Or, is it going to be a gift.

I need a friend like that if it’s a gift :-)

SocSec
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is a loan

Brian Fletcher
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If it’s a loan, then (s)he can argue that the £20k remains the property of the friend unless it is used for the purpose for which it was provided (see p.357 CPAG WB&TC; handbook; Barclays Bank v Quistclose).

If (s)he is going self-employed and starting a business though, surely there is an intention to make a profit and a business plan? Why not WTC/UC ?

SocSec
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Thanks Brian, that’s helpful, no income expected for some months so wtc possible but problematic

ClairemHodgson
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SocSec - 22 June 2017 02:06 PM

is a loan

in that case, ensure that this is evidenced in writing and signed by both parties, thus protecting the client’s position for the future if e.g. the business fails, particulalry if it fails rapidly and DWP then say he still has this money…... which of course he wouldn’t have but if not all in writing, hard to prove.

SocSec
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Thanks Clairem, will do, part of problem is cl is from a culture where all deals are in cash and nothing in writing, I know it sounds scary but they work in that way habitually I have warned of risk of DWP asking many questions

ClairemHodgson
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SocSec - 22 June 2017 03:03 PM

Thanks Clairem, will do, part of problem is cl is from a culture where all deals are in cash and nothing in writing, I know it sounds scary but they work in that way habitually I have warned of risk of DWP asking many questions

i can imagine.  lots of people do .  but “my word is my bond” until it isn’t butters no parsnips and runs up huge amounts of litigation costs, from which only the lawyers benefit…

even in your client’s home state/culture, “he said she said” doesn’t get anyone anywhere if there’s a dispute…..

ClairemHodgson
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and in any event, would the person lending the money be prepared to give evidence as and when the DWP query the money and its ownership?  which is more to the point in this context that whether a loan can be evidenced as between the parties….