My client and her partner have recently formed a company. On the advice of their accountant they issue themselves payslips every week for the same amount with deductions for Income Tax and National Insurance. However they often pay themselves less as the business is struggling the idea being that when business picks up they can pay themselves more to make up for what the business "owes them"

The amount of pay shown on their payslips means they would not qualify for HB, however during many of the weeks they are only paying themselves very small amounts.

They are falling into arrears with their rent and council tax.

can they claim HB on the basis of what is actually going into their bank accounts?

Matthew Finch
Welfare Rights Officer
Leicester City Council

I would doubt it...

Officially, they are paid what is set out on their payslips. Their tax and NI (which are amongst the only allowable deductions), is deducted to arrive at their net pay. This calculation is set down is the regs. For Tax/NI purposes, they are paid what is on their payslip, it is an official and legal document, not just a piece of paper with numbers on it...

In effect what they are doing, is paying themselves a wage, and then loaning money back to their business. HB/CTB can not subside people setting up or seeking to maintain a business.

I think their accountant is not advising them correctly, (obviously, if they pay themselves the same amount every week, the accounts job is much simpler, when calculating employee/employer NI etc). Not that I am suggesting that an accountant would ever ask someone to run their business to make the accountants job easier!!! This raises another point. The amount of employers NI will be higher. They are paying employers NI (11% as I recall) on earnings they are not receiving. How pointless is that for a business that is struggling?

They should write their payslips for what they are actually paid. After all, if you had a client who was an employee, (not an owner of the business) who was getting payslips that were not correct, what would you advise?

Thanks,

I thought that might be the case. You're right they're not helping themselves or their business with the current arrangement!

I think the moral of the story is; if you pay an accountant make sure they earn their money!

Regards

Matthew Finch