Disability Benefits and 'Other Income'

Hi Everyone

I have been on Incapacity Benefit for about 3 years now and have been on DLA high rate care and high rate mobility for about 2 years, after being rejected the first two times before finding this website. I don't and have never received any other benefits.

In June 2009 I was told by my Consultants that I could expect to recover completely within 6 months and that I absolutely categorically did not have a hereditary thyroid condition that the rest of my family have and has made them sick for life.

I was offered the chance to buy a fully automated website with an existing small income in August 2009 and thinking I was shortly to recover I decided to buy it thinking it would give me some hope of getting back into earning my own income when I was better.

My health then got progressively worse and after seeing various other specialists I was diagnosed in March 2010 with the hereditary lifelong thyroid condition that I 'definately did not have'. (This was on top of the ME, Fybromyalgia, Endometriosis etc that my original claim was based on) I have since been on various treatment regimes all of which have failed to improve my health and I've been told this is basically my last option and it may take several years for me to get back to anything near normal health even if it is eventually successful.

Anyway I bought the automated website in August 2009 as I say and made a large loss for 2009-2010. However this year I would have started to make a small monthly income from it. I am in the process of doing a tax return for this income but am slightly scared about this as my accountant is declaring me as 'self employed' when I am obviously not working but the website brings me a residual income if you like.

I will obviously be paying the correct tax and NI on this small income as I'm completing a tax return (or should I say an accountant is) but I'm concerned about the implications of this for my Incapacity Benefit claim as I am worried they will see it as me working when I literally haven't touched the website since I bought it.

I'm not sure what to do - I know DLA is not classed as taxable benefit and IB is, and I will be paying the tax on the income I am getting, and I know neither DLA or IB are income related (at least they weren't when I last claimed them) so presumably I would still be entitled to them even with the small extra income. But I don't know whether I should be worried about the 'self employed' element of it and whether it is the correct way to go about things - my accountant doesn't appear to be able to answer my concerns regarding this as he sees it as a benefit issue and entirely separate to my paying taxes etc whereas to me they are connected. I want to do the right thing and pay the correct tax and NI etc but I guess I'm worried about the DWP jumping to incorrect conclusions.

I'm also unsure as to what the implications for this would be if I am moved at some point to ESA?

Any advice much appreciated.

Many thanks

Bunny

This is complex.

If you have an income that doesn't come from earnings and doesn't come from a pension, then you do not need to declare it to the DWP if you are only claiming IB and DLA. You would, however, have to declare any income if you are on any means-tested benefits such as IS, HB or CTB.

If you set up in business as a self-employed person, as opposed to simply buying an asset that pays you an income, this will usually affect your IB, but there are rules that allow you to do a little work for a fixed period of time whilst still claiming IB. This is called permitted work and is explained in our guide - go to the Help for Claimants area and follow the link to work.

from what you have posted regardless of amount of hours worked you have been working as self employed from 2009

did you have permission to work ?

had the tax man given you a self employed ref number ?

Just to clarify I do not have permission to work and have never requested it because I am not working in any shape or form whatsoever. If I am working ZERO hours then I am not working and should not need permission to not work.

I simply purchased an existing automated website with the intention of setting up an actual business and group of websites in the future when I thought I would be recovered from my ill health.

However this never happened as I have been far too ill to do anything related to the website or setting up a business and the site has just been left and because of this and the initial money paid for the site in the tax year 2009-2010 I made a large loss.

Because I have been essentially bed bound for the past year or so I have not done anything whatsoever and have only just realised that I will make a small profit this year so have hired an accountant to sort this situation out as it has been on my mind and I am in no fit state to deal with it. At present he is in the process of declaring me self employed and doing my tax return for 2009-2010 and will be informing HMRC of the situation as explained.

At the time when I first got considerably iller and had just bought the site I did look up info on this and found as Survivor says that if my income doesn't come from working or a pension I did not need to declare it to the DWP, so I didn't (and as stated I have only started actually getting an income from the site this year in any case). I had also previously been receiving mortgage insurance payments and had been told the same by the DWP themselves, so presumed it was okay since this is also neither income from working or a pension.

My problem is that my income does not come from work related earnings and in essence I have bought an asset that pays me an income as you say, but my accountant seems to be filing me as self employed and I don't know what other option I have in order to ensure I pay the correct tax etc.

I'm concerned that just filing as being self employed is going to make me look like I am 'employed' when I have never worked on this site at all but I don't know what else to do. Not doing anything would mean I was getting an income and not paying the correct tax, NI etc and filing as self employed leaves me feeling like I am going to be viewed as working when I am claiming as sick.

I just thought there may be some correct way of going about this that would mean I could pay the necessary tax/NI etc and it would be above board but without risking more hassle and possibly losing my benefits because I am incorrectly presumed to be working - I have already had to pay out thousands to a solicitor fighting my previous employer and really do not have the energy or money to go through it all again.

I also have hypoadrenia and really cannot handle the stress of not knowing the right thing to do. Essentially I am not doing anything wrong and would rather it did not look as though I am so I don't want to make a mistake of thinking I am doing the right thing and then regretting it because I then find out I should have done it differently. I really cannot afford any more solicitors so need to get it right the first time.

The thing is if I am earning an income from anywhere other than an employer or via a pension then how am I meant to pay tax/NI on it without completing a self assessment tax return and therefore declaring myself as 'self employed'?

It has to be a question of fact as to whether you were in fact self-employed. If you were, then you should have told the DWP, but if you were not doing any work that would not be covered by the permitted work rules, then you will not have been benefitting financially by not telling them. You could be in trouble for not keeping them informed, but since you appear not to have been sure whether your situation amounted to being self-employed, I can't see them getting excited about it. (Though I can't guarantee that, it's just a surmise.)

However, I can't advise you as to whether what you did amounted to being self-employed. As to paying tax, why not have a word with someone at HMRC to see whether what you are doing is the correct way of declaring the income or whether it counts as an investment or whatever? You really do need to clear this up and we can't advise you on here as to whether earning money from the website amounts to being self-employed.

Have you thought of contacting Business Link?

www.businesslink.gov.uk/bdotg/action/home