money deposited into business – is it capital or income?

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    I have a claim that i am dealing with just now with regards to a self employed claim.

    on the clmts books,it shows deposits of £500, £200, £250 etc into the business for relevant months. The deposits have the clmts name or the name of his partner beside them.

    The decision maker has treated this as income for the month and calculated profit accordingly.

    my question is – is this correct? does the money being placed into the account count as capital being placed into the business or as income?

    if the business is in trouble and the clmt is placing capital into the account, how should this be treated when assessing the accounts??

    thanks in advance 🙂


    A complex one. The capital of a business is generally disregarded. However, for pure self-employment I think it depends on other factors. For instance, some self-employed use business bank accounts as personal accounts (technically, the monies should be kept seperate but in the real world). Has the claimant “borrowed” money from the business and is merely paying it back, is it a company, is the claimant a director of that company and so on are other questions.

    Having said that, I am not sure how the claimants capital can become income in this way? So I agree with your basic concern.

    If a claimant gets rid of any capital then the decision maker needs to consider whether they have deprived themselves in the normal way. Trying to support a failing company would be reasonable in most instances I can think of. It might be that the claimant has a personal liability for the debts of the business.


    thanks Peter, the clmt has never borrowed money from the account and he is not a director of the company.

    his ‘books’ (excel worksheets) show his name against a deposit of, say £500. He is saying that this is capital that he put into the business. (no proof of the origins of this money has been supplied). This capital is placed into the account, sometimes in months that are showing a good profit.

    he has now been asked for receipts etc to show the origin of the capital that was placed into the account. if it is proved to be actual capital, then I assume a revision will be required on the net profit?

    are there any regs that i could rely on to support the authority’s case either way


    You haven’t said what the business is, but could these deposits just be cash takings? If this is a taxi driver or store owner they will probably deal in cash a lot and these payments could be part of the business income that is already declared on the accounts.


    hi, the business is self employed handy man … so it could very well be cash takings, but the clmt has come back to say that it is his captial that he was putting into the business – so does this now change the issue – should the capital payments be disregarded??? or just treated as capital of the business??


    Generally no …but you do need to know the source of them. If you do not, then the claim may have to be refused.

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