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dividend income from limited company UC !!!!!!!!!!!!!!!!!
my client set up a limited company and takes a dividend , she pays corporation tax , UC are takin into account all th eincome from the business and the dividend she receives as income, she was told if she took a salary that would b etaken into account as income
surely some mistake, she is having a double whammy from UC, don’t ask why she set up a company for a one woman cleaning business, suspect her accountants had something to do with it
but what can she do to stop UC hitting her for her profits and her dividend , she is just below the MIT but has taken on anothe rjob to just reach the MIT
Help please
Are you sure they are including the dividends? They shouldn’t be doing so!
Are they including the divis as earned income or unearned income.
Salary they would be correct to include, but on the other hand the salary would reduce the profit of the business, so no double-counting would happen.
hi yes that’s the problem, dividends are being included, do you have the regs to show they should not i
The Regs don’t specifically exclude them, they are just not included in the list of income which is included. (Dividends are income from capital.)
CPAG mentioned HMRC v PA holdings, could that b erelevant to my case ???
I haven’t looked it up in CPAG, but that shouldn’t be relevant for the director/shareholder of their own limited company.
PA was a case where the Court of Appeal suggested that, looking at the substance rather than the form, dividends could be taxable as general earnings from employment. But in the particular case an artificial structure had been set up to allow bonuses to come in the form of dividends from a company separate from the employing personal service company, which makes it rather different. And if the dividends were being treated as employed earnings in the claimant’s hands, surely the expense of paying them should then, as Charles says, be deducted in the calculation of the company’s income.
indeed, we just dont know yet why DWP are taking the dividends into account sa income, we will ask for an MR o fteh decision to try and get to the bottom of it
Just to clarify, are you saying that DWP are doing something like the following example:
Income: £2000
Expenses: £750
Therefore profit: £1250
Dividends taken: £500
Profits left in company: £750
Earned income used by UC: £1250 + £500 = £1750
that’s about it, a double whammy
How do they make them report the dividends?
As self-reported earnings? Or something else?
Charles, I dont know how she reports them but the more I look at this case teh more I suspect my instructions are not sound, I understand that dividends should be disregarded as income for UC, correct ???
if she si a Ltd Co, is it right that th eonly income taken into account for UC is wages or salary paid
I am going back to try and see an actuall UC award as I have been workign on what has been reported to me so far
They should have actual wages automatically through the payroll, and she should be self-reporting her profits each month as well (after deducting her salary). The profit would not be affected by any dividends she chooses to take, or not take.
Charles, I dont know how she reports them but the more I look at this case teh more I suspect my instructions are not sound, I understand that dividends should be disregarded as income for UC, correct ???
if she si a Ltd Co, is it right that th eonly income taken into account for UC is wages or salary paid
I am going back to try and see an actuall UC award as I have been workign on what has been reported to me so far
There are other sources of income/receipts. For instance the sale of a business asset such as a van. There is a list here.
https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/calculating-income-from-self-employment/