More and More Director Claims!!

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  • #43584
    Angelao
    Participant

    Over the last year we seem to have received an increasing number of director claims.  Two of our staff have been on hbinfo's excellent course for valuing companies but where we are getting stuck is deciding whether the company is analagous to a sole trader/partnership!

    I know I have posted before regarding a hairdresser who works in her business and the responses agreed with our view that she was analagous to a sole trader and disregarded the capital value of the company.  However we now have another case (hair dressing/beauty again). In this case the claimant has a shop in our area which she works in and employs staff and also has another shop in another part of the country (same business name).  It is unlikely she works in this shop but may do from time to time if they require specialist treatment(hair extensions). She is also trying to expand the business by offerring a franchise under the business name but has not had any takers as yet.

    The net profit is £15,000 and directors earnings £3000.  I believe that due to her having another shop in another part of the country then she should not be treated as analagous but I would be interested to know what other authorities are doing? If we value her company she won't qualify but if we treat her as analagous to a sole trader she will!

    Any help / views  mush appreciated 

      

    #123753
    Anonymous
    Guest

    I think employing staff is a significant indicator that she is not analogous to a sole trader: taking on an employer’s responsibilities is quite a personal risk and not many sole traders would do it, at least not in a proper official way. I am sure there are lots of tradesmen’s “mates” helping out for cash, but if you register as an employer with HMRC and pay employer’s NI contributions, SSP etc I think you would probably prefer to do that through the limited company model and not as a private individual.

    I also agree that having a second branch indicates she is operating on a scale that is not analogous to being a sole trader.

    #123756
    Angelao
    Participant

    Thanks again Peter I am hopefully starting to get to grips with these cases now! This will be the first case to proceed to Tribunal -I’ll post the outcome for any others who are coming across these cases.

    #123760
    peterdelamothe
    Keymaster

    Plus with a net profit of £15K it is difficult to value the company at below the capital max. How much is the business worth? Perhaps 50 to 60K minimum…maybe significantly more.

    The unfortunate reality is that there are many places where the owner of this type of business is getting full HB/CTB (based on the 3K) whilst her staff are told they do not qualify.

    Thanks for the plug Angela..we are offering this course as a full one day course early next year rather than as a half day because of the complexity. Dont forget to request a financial person to sit on the Tribunal to assist the Judge.

    https://hbinfo.org/training/courses/company-directors-and-housing-benefit

    Something like 3 million new businesses have been set up over the last year. Excellent news for the economy and worth supporting. The difficulty is that many have been set up specifically to avoid tax and claim benefits. Perfectly legal to do so…but paying benefits to someone who is in fact earning 50K per year plus but has pushed the funds via a company is not really the idea (many very senoir public sector staff fall into this category as the media is pointing out)

    #123762
    Angelao
    Participant

    Thanks Peter
    Two of the team leaders attended your course a few months ago and found it very informative-we are now actually able to make an informed decision on the value of a company! The tricky bit is I now have to take them to Tribunal!
    The part we were struggling with (most of us having worked in the public sector for 25 years!) was the comparison with sole/trader-but with the help of you and Peter(Barker) I think we are getting there!

    #124146
    mika
    Participant

    Hope you don’t mind me hijacking your Directors thread but haven’t received any replies to my posting and thought maybe someone out there could give some advice?? :((

    I have a very confusing case concerning Directors of a Limited Company and the income they receive. Can anyone give the definitive answer as to what income should be used as their employed earnings? Claimant has variously told us that she and partner (both directors of their limited company) are getting a wage of £50 per week, £240 4 weekly and £200 per month. She has also provided business accounts for year ending 30.11.10 showing Directors’ salaries of £12068.
    Their accountant has provided a letter detailing figures for financial year ending as follows:
    Date Salary Voted Salary Actually Drawn Unpaid Salary
    Claimant Partner Claimant Partner Claimant Partner
    05.04.10 £5760 £5760 £100 £3385 £5660 £2375
    05.04.11 £5720 £5720 £1600 £2400 £4120 £3320
    05.04.12 £7086 £7086 £2600 £2600 £4486 £4486

    The unpaid salaries have been included in Creditors in the company balance sheet under the heading of Directors’ Loan Account. The arrears are available to be drawn as and when trading conditions allow. The accountant states that directors of small companies need to be flexible in how they draw remuneration from the business and this should be taken into account when looking at accounts and directors remuneration???

    Additionally, do I need to be concerned about the value of the company?

    Any help or guidance gratefully received :~

    #124177
    peterdelamothe
    Keymaster

    I have answered your query now Barbara.

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