Income from self employment or loan

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    I have a self employed claimant who is addition to his income from self employment, approx.£7000.00 a year receives loans from someone else.

    The amount of the loans is approx. £1800.00 per month and have been going on for over 18 months.

    The claimant has provided a letter from the person lending him the money which states the purpose of the “loans” is to help him set up the business and support the business in it’s development and also to supplement the claimant’s personal expenditure. It also states the claimant has to repay the money when he can, if possible.

    There is no relationship declared between claimant and the other person who happens to live in a completely different part of the country to the claimant.

    At the moment we have assessed the “loans” as unearned income and he had appealed the decision.

    He has provided some further information, the “loans” are paid on an adhoc basis as and when he needs money and are always paid into his personal bank account rather than his business account and claims he is unable to provide any breakdown between his personal expenditure and his business expenditure.

    Anyone any idea how we should treat this?

    Just seems highly unusual due to the large amounts involved currently the claimant has received well over £30k, this appears to be ongoing and he appears to be repaying nothing.


    If you regard the loans as a payment derived from the business – in the sense that the person making the loans is only doing so because the claimant is running a business – the definitive case law now is R[H] 6/09 which says that you only take into account the profit.

    But if you take the view that the loans are not coming from the business (and the fact that they are paid into the personal account tends to support the proposition that these are personal rather than business payments) cases such as CH/3393/2003 and, especially, an Income Support case Stephanie Morrell v Sec of State for W&P [2003] EWCA Civ 526 provide authority for treating the payments as income for as long as they carry on without any immediate obligation to pay anything back. The facts of your case are quite similar to Morrell and I think I would agree with what you have done.

    The counter-argument would be that the loans are not paid in enough of a regular pattern to amount to “income” at all and instead they are just occasional payments of capital that will not effect HB/CTB unless the amount held ever exceeds £6,000.

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