Capital – business asset

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  • #22505
    Kevin D
    Participant

    Ok, it’s hot, my mind has ceased to function and I have a mental block…. Any assistance welcomed….

    [b:065c272240][u:065c272240]The Facts:[/u:065c272240][/b:065c272240]

    Clmt is listed as a Director of a company.
    Clmt is the sole shareholder of the company.
    Clmt is/was on JSA(IB).
    The company has no other employees and is not (apparently) trading.
    The company has an asset (property) worth well in excess of £16,000 (even after 10% & all liabilities have been allowed).
    There is evidence to show the Company has taken steps to dispose of the asset (but the LA will be arguing that such steps were not reasonable).

    [b:065c272240]Note:[/b:065c272240] Just for clarity, the LA will be arguing that Hamilton applies (i.e. JSA(IB) has not been lawfully paid).

    [u:065c272240][b:065c272240]The Issue:[/b:065c272240][/u:065c272240]

    [b:065c272240]Can the asset be disregarded under Sch 6?[/b:065c272240] The following has been considered:

    1) any value in the Company (including assets) is properly attributable to the clmt as he is the sole shareholder in the Company. Anyone suggest differently?

    2) [b:065c272240]para 8 of Sch 6[/b:065c272240] appears to rely on the clmt being self-employed. As the clmt is a Director, he is/was an employee, NOT self-employed. Therefore, the asset cannot be disregarded under this provision. Anyone suggest differently?

    3) can [b:065c272240]para 26[/b:065c272240] apply? The aspect causing difficulty is the definition of premises. There appears to be no distinction between residential and business premises. Any offers (either way)?

    Any comment / observation / other Sch 6 provisions / CD & case law references would be much appreciated.

    Regards

    #8326
    petedavies
    Participant

    I think the first stage is to establish for certain whether the company has ceased trading, if no 49(5) applies.

    If so, I can see no way of disregarding it – the capital value is the value of the company rather than the property (even though they are probably pretty much identical).

    Your claimant cannot dispose of the property in his own right, he is acting for the company.

    It may be possible to argue that he is the owner in substance if not form but methinks not. What does the land reg say?

    I do not think there was meant to be a distinction otherwise the word “dwelling” would have been used.

    Maybe the heats getting to me as well but innit para 26?

    #8327
    Kevin D
    Participant

    Thanks Pete. Just to confirm:

    1) Yep – para 26 (I’ve edited the original) 😀

    2) the clmt has stated the company is not trading. The LA is happy to rely on his word. And, thinking about it, he should also be happy – if the company is trading, and he is the only employee, it may just raise issues about his JSA……(in a different respect) 🙂

    3) the LA is satisfied that the Company has freehold ownership of the asset.

    Regards

    #8328
    petedavies
    Participant

    Pretty much the way I read it, I can see no way it can be disregarded.

    #8329
    Kevin D
    Participant

    [b:98afb158ad]EDITED[/b:98afb158ad]

    Thanks for your help. Your observations did have the effect of making me look closer at [b:98afb158ad]HBR 49(5)[/b:98afb158ad] and at the commentary in Findlay.

    Having done so, it seems that cap falling under HBR 49(5) can in fact be disregarded. Findlay points out, correctly, that HBR 49(5) is discretionary ❗ “…he [u:98afb158ad][b:98afb158ad]may[/b:98afb158ad][/u:98afb158ad] be treated as if he were such sole owner….”.

    I completely overlooked that. So, now to make a “reasonable” call on that discretion…

    {Edit} Just noted, JSAR 113(4) states “…he [u:98afb158ad][b:98afb158ad]shall[/b:98afb158ad][/u:98afb158ad] be treated as if he were such sole owner….”.

    Does anyone have any idea if either the HBRs or the JSARs are misprinted?

    Regards

    #8330
    Anonymous
    Guest

    I see Reg 49(5) as being designed for the situation where legally the claimant owns shares in a company but for all practical purposes the business is like self-employment:

    – it’s a one man band, or a one couple band
    – the shares probably have a notional face value that bears no relation to the capital value of the company
    – the shares have probably never been traded, so there is no market value you can refer to
    – there is very little to stop the claimant from treating the company’s assets as if they were his own personal assets, just like they would be if he were self-employed

    The effect of Reg 49(6) is that the value of the assets can be disregarded in much the same way that personally owned business assets used for self-employment are disregarded under Schedule 6.8 for as long as you are in business. From what has been said about this case, it seems he is no longer active so para (6) would not apply.

    What is not completely obvious from the wording of Reg 49 is the following:

    – are we talking about the claimant being treated as owning an amount of money calculated by reference to the company’s assets, rather than treating him as if he owns those assets directly? (yes, I think so)
    – does that mean that disregards applicable to “premises” do not apply to the claimant’s capital for Reg 49(5) purposes (not sure, but I don’t think so)?
    – in arriving at the value of money the claimant is treated as possessing under Reg 49(5), should the premises disregards be applied to the company’s assets first before the value of money attributed to the claimant is fixed? In other words, should the company’s assets be valued in the same way a claimant’s assets are valued, including any disregards that may apply? (Arguable)

    If the premises disregards are engaged directly or indirectly, this means that the Council needs to consider whether sufficient steps are being taken to dispose of the premises; if not, it doesn’t matter how hard the company is trying to sell the premises, the value still counts in full.

    #8331
    petedavies
    Participant

    Like Peter, I cannot see how 49(5) can apply if the company is not trading. If it is not trading then it is difficult to see how somebody can be engaged in the course of its business.

    I would go slightly further on the assessment of its purpose – analagous is used, I think to cover situations where there is another share holder (often the company secretary) with a nominal holding e.g. <=1%.

    I agree that it is an amount of money but think it has to be referenced to the company’s value rather than the value of its assets, i.e you have to factor in “good will” and all those fiddly bits but don’t ask me how!

    I can see no way that the disregards can be applied. It is the company, not the claimant, that owns the premesis it is the premesis which gives the company its value.

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