Move from Tax Credits To Universal Credit Problem

Any Experts in Migration from Tax Credits to Universal Credit - Some Very Tight Disclosure Deadlines

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This has caught me completely by surprise.

Mother and daughter trade in partnership earning a pittance. Mother is very old and showing signs of age. Daughter has some learning problems so suffers from a mental deficiency,

Daughter received a letter recently from HMRC saying Tax Credits were being stopped and replaced by Universal Credit. Daughter had to attend a recent meeting to see if she qualified for Universal Credit, so mother went along to "hold her hand" and provided proof of negligible savings and that partnership was a long-standing matter.

Daughter has been told in the last few days that she may qualify for Universal Credit but that she needs to submit a months income and expenditure details to HMRC including details of any income tax or NI paid to HMRC. Daughter has a profit share of around 95%.

If partnership accounts have always been prepared on an accruals basis well after the 31 March year end, how on earth can the daughter be expected to work out by herself a months income and expenses and allocating 95% profit share to herself. My only conclusion is that she could do a simple monthly cash basis calculation along the following lines:

Month Ending xx/10/23

95% x [Cash receipts + Bank receipts - Running costs - Capital Expenses (i.e. p&m costs)]

The problem with the above is that it is cash basis, so in the month accountancy is paid or plant and machinery is purchased there may be a loss if running costs are high. Unsure what to do about any monthly losses as far as UC is concerned.

Are there any Universal Credit experts out there. If so, what should be done under the circumstances. Is there an easy solution to this.

And is all of this expected of my client every month.

Replies (2)

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By K81
18th Oct 2023 16:06

hmmm, tricky. I know that if you are self-employed you should be using cash basis accounting & reporting monthly but I do not know if the rules are different for a partnership, especially if the person claiming is not the nominated partner.
Also Universal Credit will use a basic income of (I think) 35 hours at minimum wage regardless of actual income.

I also believe that HMRC have said that if they move you from tax credit to universal credit that you will not be worse off - maybe citizens advice can offer more assistance.

Thanks (1)
By paul.benny
19th Oct 2023 08:59

UC does not accommodate self-employment well. Cash basis probably is the best way for your client to prepare her submissions.

That said, you say the business makes very little. It might be worth exploring whether running the business makes any sense - both mother and daughter will be entitled to a range of benefits that they may not be claiming. Worth looking at benefits calculator (eg turn2us) on a range of scenarios and engaging with Citizens Advice to help with claims.

Thanks (1)