Becoming Self-Employed from receiving Benefits

[adridude]

Hi CAGgers

 

I've been on benefits for near to a year now after being made redundant. I'm currently on Income Based Job Seekers Allowance, receiving full Housing Benefits and Council tax benefits.

 

I've been thinking about becoming self employed for some time now to get out of this rut. I've spoken to the Job Center about this, and they point blank say "you won't be entitled to anything".

 

I fail to understand this as I thought there was a "minimum income guarantee" in place?

 

My plan to start the company was going to be as follows:

 

1) Start trading for no more than 10 hours a week

2) I won't have an income for several months as it'll be a1 man band

3) Carry on looking for a part time job to compliment the self-employed status and top up income

 

My questions are:

 

1) Will my Income Based JSA fall away even tho I have no income and am still working under 10 hours a week

2) Will I be entitled to Working Tax Credits

3) If I get some revenue through the company, none to me directly but goes back into company running expenses, will these be deducted from anything?

4) If I personally start getting money from the company and I update the Job Center about this, will I have to start a new claim every time?

 

Your help is appreciated in advance.

 

Cheers

 

Adridude

[ptol]

If you have the money to set up a limited company (around £100) then you can be a company director, and still sign onto JSA, and will, subject to your income qualify for housing benefit and council tax benefit. you will be limited to under 16 hours a week work and will still have to maintain a job search for a full time job, and be prepared to take that job.

 

however if you take the view that you are starting part time to prove that you have a viable business, and if the business picks up you have effectively created a full time job for your self, you should be able to get that written into your job seeker agreement. Working under a limited company does give you some significant advantages. The company can earn money and then spend it on company expenses without it affecting your means tested benefits and usually avoids any tax liability. Think mileage allowance at 40p per mile, subsistence when out of the office on business, etc However, hoarding significant cash within the company in excess of its tax and other liabilities will affect your benefit entitlement.

[adridude]

hmm yeah I was debating about that.... but doesnt a LLC _need_ an accountant and a second director?

[ptol]

There is no need for a second director. (there used to be, but not any more...)

 

There are annual accounting requirements, but filed accounts will be 12+ months away, and could be achieved for around £700. If this kind of costs are a problem, then in fairness, you probably do not have a business anyway.

 

By being a director and using dividend payments, you should be saving more than £70 per month in income tax.

[adridude]

I'm going into IT, so £700 is easy to make provided I get enough work in. I'm going to start off doing "housecalls", so the first 2 months will be walking from door to door dropping off flyers, that alone should generate £1000 per 1000 flyers. Hmm, I'll give my mentor at businesslink a call.

 

Thanks for perking my hopes up!

[adridude]

oh yeah, nice to know I can write off my phone line, mobile and internet off against the company Saves me a few quid in VAT ^^

[sillygirl1]

Not to mention the cost of equipment and printer ink......

[adridude]

Indeed. Well I've got a callback from an enterprise mentor from BusinessLink next week to get the ball rolling Definately looking forward to the plunge... It's worse than waiting for Christmas presets lol

[adridude]

Right, I've got a myriad of meetings coming up regarding this and I was wondering how to approach it. My reasoning for this is that I dont want to find out 1/2 way through the process that the DWP drop all benefits because of a glitch..

 

Which comes first? The chicken or the egg?

 

1) Do I open the company first, then change benefits? Or the other way around?

2) What proof can I get from the DWP to show that they stated (whatever they did regarding my benefits)

3) If they default on what they told me I can do i.e. start part time, AND claim benefits variable upon income etc... What can I do about that?

 

Thanks

 

Ade

[ptol]

Steps...

 

1. Register the company, with yourself as the sole director

2. Tell JCP about the change, fill in directorships form.

3. Benefits will now be suspended whilst your case is sent to a decision maker. (This step is mandated by law)

3a.Benefits reinstated about 15 days later, and back paid.

4. You then declare each time you sign on the hours that you have worked. Make sure this is less that 15 hours and 59 minutes.

5. Build a successful business

 

some general advice, you do not need to pay yourself, but keep track of ALL expenses, even when your company has no income to pay them, as you will use these later to reduce your companies corporation tax bill. You cannot use the limited company to hide money, but the limited company does need its working capital, and will need to save money for corporation tax bills etc... If you keep track of your tax liabilities you will have no problems in defending against DWP claiming that you have too much savings.

Edited February 14, 2011 by ptol
typo

[adridude]

Excellent thanks.

 

I've worked out a better way.

 

1) Sign off entirely and work fulltime @ 42 hours

2) Get Back to work grant £100

3) Get self employment credit £50 / week for 16 weeks

4) Get Working Tax Credits as I won't be earning a bean

5) After 12 weeks, if the company is limping, change my contract of employment to 15.59 hours

6) Sign back on and carry on on like that

 

Reason I did this is because I cannot get the initial £400 legal fees and other startup costs as a loan as I'm unemployed etc.. THe JCP told me that I would be awarded ADF (Advisor Discretionary Fund) ONLY IF I agreed to sign off.

 

Seemed like a better deal to me

 

What you think?

[ptol]

you are right, that does sound like a better approach.

 

Just want to check, creating a limited company is not costing you £400 is it? can be done for a lot less than that.

[adridude]

Well the 400 includes:

 

1) Legal address to use for VAT and Registration Purposes

2) 1 year of books (year end returns etc...)

4) 1 year of payroll (up to 10 employees)

5) Companies house registration

6) Company secretary (for y1)

[sillygirl1]

Has this worked - and did you manage to find a company secretary as I understood you don't need one for a one-man band operation I'm looking at going down this route...

[flumps1976]

If you have been signing for less than 52 weeks then you need to ask about the New Enterprise Allowance, http://www.direct.gov.uk/en/employment/jobseekers/programmesandservices/dg_198864

[sillygirl1]

I asked and I do not qualify for it, I am 50+ and the allowance is not applicable to me. I have been unemployed for 54 weeks as well....

[xannado]

Hello.

I am a single parent and on income support plus disability premium, I also get lower rate disability.

I truly want to start my own eCommerce business with the view to opening a shop. This has been something I have wanted to do for a few years. Lack of confidence in my own ability prevented this. I have some time ago seen someone at business link.

Can anyone tell me how this would effect the benefits i get? I have to think of how I will manage until i can generate an income from the business..

[sillygirl1]

This is the website which should belp with benefits, you might also find out about grants there...

 

http://www.turn2us.org.uk/

 

Good luck, I'n trying to do my own business at the moment - lack of funding is an issue but I am working on that.

[xannado]

Hi thank you for your reply and the link you gave me. Unfortunately that wont help me. At the moment I am not sure whether or not to be a sole trader or ltd company. It seems you need more money to register with the ltd, which do you think is best?

[MIKEY DABODEE]

Hello.

I am a single parent and on income support plus disability premium, I also get lower rate disability.

I truly want to start my own eCommerce business with the view to opening a shop. This has been something I have wanted to do for a few years. Lack of confidence in my own ability prevented this. I have some time ago seen someone at business link.

Can anyone tell me how this would effect the benefits i get? I have to think of how I will manage until i can generate an income from the business..

 

You can be Self Employed and keep your Income Support, you can work up to under sixteen hours a week, if you start self employed ring I.S up and tell them,

they will send for your accounts every three months, A DM looks at them and decide how much needs to be taken into account, they allow for expenses etc.

The first twenty pounds a week is disregarded, this may be an option if you feel like a dip before your dive in....

Good Luck

[frank fist]

How's the biz going did you get started?