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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience:  Solicitor with 5+ years experience
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If I am running a property lettings business that has a low

Customer Question

If I am running a property lettings business that has a low income can i still apply for housing benefits. The department is getting it wrong I believe as they are going on about £16000 or more in capital and you don't qualify. All my properties are on interest only. I rent my accommodation. I am a lone parent
Submitted: 2 years ago.
Category: Law
Expert:  Ash replied 2 years ago.

Alex Watts :

Hello my name is XXXXX XXXXX I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return. There is no need to wait here, you will get an email when I reply.

Alex Watts :

Is it a Limited Company or sole trader please?

JACUSTOMER-vh8pg198- :

I am a sole trader, all the properties were purchased in my name as buy to lets. I've had repossessions take place with huge outstanding debts.

Alex Watts :

Do you own the properties then yes?

Alex Watts :

Have you had a years accounts prepared?

JACUSTOMER-vh8pg198- :

yes

Alex Watts :

How were you able to purchase the properties?

JACUSTOMER-vh8pg198- :

I purchased over 8 years ago, my circumstances have changed

Alex Watts :

Ok. So what is the equity of all the properties?

JACUSTOMER-vh8pg198- :

i am a little unsure as to the exact amounts. I have repossession debts. Taking everything into account, the sale value and equity losses probably 80K in negative equity. My concerns are do they treat the debts as non contributing overall equity, or will they just look at the gains and not losses. the properties have a flux of the two.

Alex Watts :

When you say repossession debts what do you mean?

Alex Watts :

What have you declared in your tax return?

JACUSTOMER-vh8pg198- :

three properties were repossessed by the banks

JACUSTOMER-vh8pg198- :

I have shortfalls

JACUSTOMER-vh8pg198- :

outstanding debts to repay

Alex Watts :

Did you own them before repossessed?

JACUSTOMER-vh8pg198- :

yes

Alex Watts :

So if they are repossessed by the bank, you no longer own them?

JACUSTOMER-vh8pg198- :

thats right, only the solicitor has sent me the bill for the short fall to repay back the difference

Alex Watts :

OK - so they are taken back by the bank and you are paying back the mortgage which was outstanding?

JACUSTOMER-vh8pg198- :

the properties got sold and I owe the difference.. do you understand reposessions?

Alex Watts :

Yes I understand that but it was not clear from your question.

Alex Watts :

So you have a number of properties, these have been repossessed and you owe outstanding sums

Alex Watts :

Do you complete tax returns?

JACUSTOMER-vh8pg198- :

yes naturally

JACUSTOMER-vh8pg198- :

overall i need to understand, if you are running a business. is the overall net worth of the business classed as capital? so if i was a plumber with a van worth 15k and tools worth 10k and my business was turning over at a loss and was not giving me enough income does that then mean i have to sell the business and become unemployed before benefits are available

Alex Watts :

Ah there is a difference between vans and tools and properties.

Alex Watts :

Vans, tools etc depreciate over time and they are deducted at say 20% a year

Alex Watts :

Property is different.

Alex Watts :

The gain/loss does not count until it is sold.

Alex Watts :

But then if you make a loss then you can only deduct this from future gains

Alex Watts :

You can not get a refund

Alex Watts :

So if you purchased a property for £100,000 and sold it later for £20,000

JACUSTOMER-vh8pg198- :

so do properties

Alex Watts :

You can't offset the £20,000 against income.

Alex Watts :

You can only offset the £20,000 against future capital gains.

JACUSTOMER-vh8pg198- :

not all of them appreciate that is how i lost my properties

Alex Watts :

Does that make sense?

JACUSTOMER-vh8pg198- :

the market went down by 40-50%

JACUSTOMER-vh8pg198- :

no sorry

Alex Watts :

But the fact you are paying the debts is not relavent.

Alex Watts :

That only matters on a tax return and future capital gains where offsetting losses.

Alex Watts :

Not for the calculation of benefits

JACUSTOMER-vh8pg198- :

Im not talking about income that's a separate issue

Alex Watts :

Yes

JACUSTOMER-vh8pg198- :

I understand how income is seperate to capital gains/losses

JACUSTOMER-vh8pg198- :

i have over 500k in capital losses

Alex Watts :

ok

Alex Watts :

Then that is not counted as an asset

JACUSTOMER-vh8pg198- :

OK look it doesn't matter, thank you for your help got to go

Alex Watts :

Ok - is there anything else I can help with? Have I answered your question?

Alex Watts :

I work for a local authority and deal with benefits

JACUSTOMER-vh8pg198- :

no you havent really answered my question.

Alex Watts :

OK - you want to know if losses can be offset against the £16k allowance, right?

Alex Watts :

Because they are saying that you can not

JACUSTOMER-vh8pg198- :

yes and not only that these properties form the business. it gives me an income.I asked if i am running a business which i am and my assets form the business how does it differ from any other business.

Alex Watts :

It does not.

Alex Watts :

The fact you complete tax returns should be evidence enough of your entilement

Alex Watts :

It may be worth having interim management accounts prepared if you have done so already

Alex Watts :

If they refuse then you can appeal the decision

Alex Watts :

That means it would go before an independent Tribunal

JACUSTOMER-vh8pg198- :

Yes that's what i thought and according to my accountant i definitely have a claim.

Alex Watts :

Yes I would agree.

Alex Watts :

But get interim accounts if you have not updated ones

JACUSTOMER-vh8pg198- :

i took everything, all my accounts, spreadsheets, letters from solicitors re the mortgage debts, the current valuations, and they didnt understnad a thing

JACUSTOMER-vh8pg198- :

they asked me for bank accounts

Alex Watts :

Ok - but they probably dont quite understand the business and they are not accountants remember

Alex Watts :

So if you have previous tax returns (or interim) showing low income etc

Alex Watts :

Then when they refuse you can appeal

JACUSTOMER-vh8pg198- :

so let me ask you again... is it based on having equity on the business assets

Alex Watts :

In terms of capital assets yes

JACUSTOMER-vh8pg198- :

16k or more in business asets and you dont qualify

Alex Watts :

Thats right

Alex Watts :

(but your own home does not count for this figure)

JACUSTOMER-vh8pg198- :

so they expect you to become unemployed is that the legal requirement according to law and the government policies?

JACUSTOMER-vh8pg198- :

never know anything so ridiculous in my entire life

Alex Watts :

Well not really but if you are working or have a business, this does complicate things.

Alex Watts :

Remember they are not lawyers, they are civil servants who have no legal or tax qualifications

JACUSTOMER-vh8pg198- :

how,

Alex Watts :

When you appeal you go before a Solicitor or Barrister

Alex Watts :

Your accountant can also attend to confirm the position when you appeal

JACUSTOMER-vh8pg198- :

I have children and my working day and commitments are limited, my income is not enough. if i take a letter of summary explaining what they need to know could that help them

Alex Watts :

Yes indeed I understand that it is frustrating.

Alex Watts :

Can I clarify anything else for you about this today?

JACUSTOMER-vh8pg198- :

what do you mean by your home does not qualify for this figure?

JACUSTOMER-vh8pg198- :

if i was to look at getting my accountant to look at the overall equity he would need to look at taking 15% off as they are tenanted propeties. Some of them have negative equity in them by 50% some are evening out and one has equity

JACUSTOMER-vh8pg198- :

so just to recap benefits are based on 16K or more in assets, capital, property, tools,

Alex Watts :

Ok - if you had your own single home and you needed benefit, generally that is excluded from the £16k

Alex Watts :

But in terms of benefits and over £16k then yes they include assets, capital, property etc.

Alex Watts :

But not your own home!

JACUSTOMER-vh8pg198- :

makes no sense what so ever

JACUSTOMER-vh8pg198- :

why do they need bank accounts, they are not a true account of my income and expenses as i use the bank account for personal use aswell

Alex Watts :

Ok - they count assets yes, excluding your primary home

JACUSTOMER-vh8pg198- :

can i refuse them bank accounts and take last years hmrc accounts prepared by official accountant

Alex Watts :

As a matter of course they need bank accounts

Alex Watts :

I agree, it does not reflect what your true income is

JACUSTOMER-vh8pg198- :

to determine what exactly

Alex Watts :

But they ask for it usually.

Alex Watts :

Because whenever anyone claims for benefit they ask for copy bank statements

Alex Watts :

They want to see evidence of money going in

Alex Watts :

Usually if someone is on JSA then they will see £65 a week (paid 2 weekly) going in

Alex Watts :

That is what they want to see, so when someone says they are on a low income, they can see it going in

Alex Watts :

This is why self employed is always more complicated

Alex Watts :

But you have an accountant, so that helps

JACUSTOMER-vh8pg198- :

well i have two bank accounts, tax credits goes in one and the other is for the general running of my properties

Alex Watts :

Yes which is good. But they will always want evidence of all accounts

JACUSTOMER-vh8pg198- :

I've borrowed money off my mum and sister to help out, so how is this going to determine income

Alex Watts :

Well as long as there is evidence of that, it will not affect benefit

Alex Watts :

So either lump sums or direct bank transfer

JACUSTOMER-vh8pg198- :

besides i have deposits for tenants that needs to be returned, money sat in the account is not savings, as if i have 3 months of shortfall in any one period, i need to pay the mortgage payments from the working capital

JACUSTOMER-vh8pg198- :

stuppid and pointless they should just go with my prepared accounts

JACUSTOMER-vh8pg198- :

lump sums and transfers

Alex Watts :

Yes I understand.

Alex Watts :

But they will ALWAYS ask for bank accounts and this is why you need to take your tax return/interim accounts

JACUSTOMER-vh8pg198- :

Basically i need to refer myself back to my accountant for the capital versus the losses.

JACUSTOMER-vh8pg198- :

Do they look at net income or gross, as my net income gets carried over with the losses and leaves me with a zero income in terms of net income according to tax law

Alex Watts :

They should look at net income after expenses etc as a normal business

Alex Watts :

But again, this is why they need accounts.

Alex Watts :

If it is the case you have zero income to declare then you should be entitled to full benefit

Alex Watts :

But it may be the decision is refused and you have to appeal

Alex Watts :

Just make sure your accountant provides up to date accounts for you

Alex Watts :

Does that help?

JACUSTOMER-vh8pg198- :

re disregarded when ein the manual for housing benefits is states that capital etc including assets are disregarded when self employed

JACUSTOMER-vh8pg198- :

guide 2012-2013

JACUSTOMER-vh8pg198- :

assets of a business wholly or partyly owned by a claimant are disregarded as capital when he or she

JACUSTOMER-vh8pg198- :

is self employed in that business- so long as the assets are held in the course of self employemnt

JACUSTOMER-vh8pg198- :

everything you have said contradicts what i have read in the guide manual 2013 to date

Alex Watts :

If you look at the book it states:

Alex Watts :

"If the person is the claimant or the claimant’s partner, the decision maker should decide if the person remains the beneficial owner of any business assets"

Alex Watts :

Therefore this is indeed considered.

Alex Watts :

But as I have indicated you need to have your accountant prepare interim accounts to show what you are getting (if anything) from the business.

Alex Watts :

That will be counted. So if you are getting £NIL income, then NIL will be assessed.

Alex Watts :

In terms of assets again if you have made losses the 'value' of your business will be NIL

Alex Watts :

Can I clarify anything?

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