Terms & Conditions

[louiseb]

Self employed man. We noticed during an intervention visit in nov 06 that he had given up work and became self employed.
He has taken over his mothers business on july 01 2006. He didnt notify us of the coc’s and he has still not received an income. The business was set up by mother in Jan 06, however mother became ill and that is why he has taken over the business and has given up work to do so.

He still hasnt received any income from the business and a lot of expenses have gone out. However, mother has remorgaged her house and has sent him large credits totaling to about £14,500 in all, this has all been swallowed up by the business accounts overdraft and outgoings.
I have seen lots of info to show that they are doing a great deal to advertise the business, this includes the internet and leaflets to advertise the goods. I am happy to pay based on nil income while they are still setting up the business, however the big question is, how do I treat these credits totalling £14,500? I have asked claimant to confirm in writing that they have come from mother, and also asked for a statement from her to confirm they are from her. But do I treat this income as income received from the business even though it is from the founder of the business? Or do I disregard it as it has been swallowed up from the overdraft of the account anyway and it is the business account in his name?

He has also had a number of changes such he has got married in nov 06, they are both claiming child benefit for a child each as single people, and are waiting for child benefit to be sorted as a couple. I think I could just input the figures 2 x £17.45 for this until child benefit sorted out anyway – does anyone agree?

[Kevin D]

Child Benefit: strictly speaking, CB shouldn’t be taken into account until it has been awarded. However, most LAs take it into account to avoid an o/p. Your decision….. :).

The self-employed / income bit….

[quote:eba54ddbc7]I have seen lots of info to show that they are doing a great deal to advertise the business, this includes the internet and leaflets to advertise the goods. I am happy to pay based on nil income while they are still setting up the business[/quote:eba54ddbc7]
Monies used to set up the business and/or expand the business are not allowable expenses for self-employed cases in HB/CTB cases [[b:eba54ddbc7]HBR 38(5)(c)[/b:eba54ddbc7]].

[quote:eba54ddbc7]how do I treat these credits totalling £14,500[/quote:eba54ddbc7]

Very difficult to answer this – more info is needed:

1) Are the credits a loan (or a series of loans) – do they have to paid back?

2) What has the money been used for? Personal living expenses? For capital, or stock, purchases for the business (need to distinguish)?

3) By “business”, is the company a “limited” company?

4) Are the credits [u:eba54ddbc7]from[/u:eba54ddbc7] the company account, or [u:eba54ddbc7]from[/u:eba54ddbc7] a personal account?

5) Are the credits made [u:eba54ddbc7]to[/u:eba54ddbc7] the son personally, or [u:eba54ddbc7]to[/u:eba54ddbc7] the business?

Depending on the answers to the above, there are any number of possiblities, including:

a) Counts as “earnings” from the business (subject to expenses in the normal way);

b) Counts as unearned income, but not a voluntary payment;

c) Counts as unearned income, but completely disregarded as a voluntary payment;

d) Not income at all; possibly capital to the clmt, or the business. Or both….

Regards

[louiseb]

Kevin, Thanks for the info. In answers to your questions, i’ve gathered as much info as I have but I am still waiting for further info.

The credits are for the business, I do not believe this is a loan. His mother who formed the business re-morgaged the house to fund the business. The credits are paid into the business bank account. I think the credits were used to bring the account back into the black as it was £9000 overdrawn at one point. I have however written to him to ask what the credits are for. Expenses that have taken the account overdrawn are for internet advertising, leaflets, products etc. (They write poetry and put them on ornaments etc). The mother is the poet, and the son sells her stuff now that she is too ill to manage the business.

They are not set up as a Limited Company. This is something that they are planning in the near future.

The credits come from his mothers account straight into the business account.

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