Where a person or persons carry on a trade or property business through the medium of a company, they are treated as the sole owner of or a partner in the trade or business for UC purposes. For tax purposes, companies are subject to specific rules and pay corporation tax which is a different system to the HMRC cash basis outlined above for the self-employed. The following consequences apply, except where the person is working for an IR35 type intermediary company or managed service company (ITEPA 2003, Part 2, Chapters 8 and 9):
- The person is treated as possessing capital equal to the value, or their share of the value, of the capital of the company (the actual value of their holding in the company is irrelevant), but any assets of the company that are used wholly and exclusively for the purposes of the trade are disregarded while they are being so used.
- The income of the company, or that person’s share of the income, is treated as the person’s own self-employed earnings, and liable to the MIF where their business is their main employment.
- Any employed earnings the person receives as a director or employee of the company are added to their deemed share of the company’s income.
Updated 26 February 2015