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.
Is it a Limited Company or sole trader please?
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.
Do you own the properties then yes?
Have you had a years accounts prepared?
How were you able to purchase the properties?
I purchased over 8 years ago, my circumstances have changed
Ok. So what is the equity of all the properties?
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.
When you say repossession debts what do you mean?
What have you declared in your tax return?
three properties were repossessed by the banks
I have shortfalls
outstanding debts to repay
Did you own them before repossessed?
So if they are repossessed by the bank, you no longer own them?
thats right, only the solicitor has sent me the bill for the short fall to repay back the difference
OK - so they are taken back by the bank and you are paying back the mortgage which was outstanding?
the properties got sold and I owe the difference.. do you understand reposessions?
Yes I understand that but it was not clear from your question.
So you have a number of properties, these have been repossessed and you owe outstanding sums
Do you complete tax returns?
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
Ah there is a difference between vans and tools and properties.
Vans, tools etc depreciate over time and they are deducted at say 20% a year
Property is different.
The gain/loss does not count until it is sold.
But then if you make a loss then you can only deduct this from future gains
You can not get a refund
So if you purchased a property for £100,000 and sold it later for £20,000
so do properties
You can't offset the £20,000 against income.
You can only offset the £20,000 against future capital gains.
not all of them appreciate that is how i lost my properties
Does that make sense?
the market went down by 40-50%
But the fact you are paying the debts is not relavent.
That only matters on a tax return and future capital gains where offsetting losses.
Not for the calculation of benefits
Im not talking about income that's a separate issue
I understand how income is seperate to capital gains/losses
i have over 500k in capital losses
Then that is not counted as an asset
OK look it doesn't matter, thank you for your help got to go
Ok - is there anything else I can help with? Have I answered your question?
I work for a local authority and deal with benefits
no you havent really answered my question.
OK - you want to know if losses can be offset against the £16k allowance, right?
Because they are saying that you can not
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.
It does not.
The fact you complete tax returns should be evidence enough of your entilement
It may be worth having interim management accounts prepared if you have done so already
If they refuse then you can appeal the decision
That means it would go before an independent Tribunal
Yes that's what i thought and according to my accountant i definitely have a claim.
Yes I would agree.
But get interim accounts if you have not updated ones
i took everything, all my accounts, spreadsheets, letters from solicitors re the mortgage debts, the current valuations, and they didnt understnad a thing
they asked me for bank accounts
Ok - but they probably dont quite understand the business and they are not accountants remember
So if you have previous tax returns (or interim) showing low income etc
Then when they refuse you can appeal
so let me ask you again... is it based on having equity on the business assets
In terms of capital assets yes
16k or more in business asets and you dont qualify
(but your own home does not count for this figure)
so they expect you to become unemployed is that the legal requirement according to law and the government policies?
never know anything so ridiculous in my entire life
Well not really but if you are working or have a business, this does complicate things.
Remember they are not lawyers, they are civil servants who have no legal or tax qualifications
When you appeal you go before a Solicitor or Barrister
Your accountant can also attend to confirm the position when you appeal
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
Yes indeed I understand that it is frustrating.
Can I clarify anything else for you about this today?
what do you mean by your home does not qualify for this figure?
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
so just to recap benefits are based on 16K or more in assets, capital, property, tools,
Ok - if you had your own single home and you needed benefit, generally that is excluded from the £16k
But in terms of benefits and over £16k then yes they include assets, capital, property etc.
But not your own home!
makes no sense what so ever
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
Ok - they count assets yes, excluding your primary home
can i refuse them bank accounts and take last years hmrc accounts prepared by official accountant
As a matter of course they need bank accounts
I agree, it does not reflect what your true income is
to determine what exactly
But they ask for it usually.
Because whenever anyone claims for benefit they ask for copy bank statements
They want to see evidence of money going in
Usually if someone is on JSA then they will see £65 a week (paid 2 weekly) going in
That is what they want to see, so when someone says they are on a low income, they can see it going in
This is why self employed is always more complicated
But you have an accountant, so that helps
well i have two bank accounts, tax credits goes in one and the other is for the general running of my properties
Yes which is good. But they will always want evidence of all accounts
I've borrowed money off my mum and sister to help out, so how is this going to determine income
Well as long as there is evidence of that, it will not affect benefit
So either lump sums or direct bank transfer
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
stuppid and pointless they should just go with my prepared accounts
lump sums and transfers
Yes I understand.
But they will ALWAYS ask for bank accounts and this is why you need to take your tax return/interim accounts
Basically i need to refer myself back to my accountant for the capital versus the losses.
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
They should look at net income after expenses etc as a normal business
But again, this is why they need accounts.
If it is the case you have zero income to declare then you should be entitled to full benefit
But it may be the decision is refused and you have to appeal
Just make sure your accountant provides up to date accounts for you
Does that help?
re disregarded when ein the manual for housing benefits is states that capital etc including assets are disregarded when self employed
assets of a business wholly or partyly owned by a claimant are disregarded as capital when he or she
is self employed in that business- so long as the assets are held in the course of self employemnt
everything you have said contradicts what i have read in the guide manual 2013 to date
If you look at the book it states:
"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"
Therefore this is indeed considered.
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.
That will be counted. So if you are getting £NIL income, then NIL will be assessed.
In terms of assets again if you have made losses the 'value' of your business will be NIL
Can I clarify anything?