Does the weekly earnings limit include shareholder dividends? Would a tax refund affect ESA?

lighthouse

Hello 

I get ESA contributions based and I'm in the support group. ESA told me there is a weekly earnings limit. Does that include shareholder dividends? 

Would a tax refund affect the ESA claim?

calcotti

Dividends and tax refunds are not earnings.

helentt

Hello, I find myself in a similar situation. I am in the support group on contribution (new style) ESA. I cannot find any documentation regarding LTD company Director dividends and whether they would count as income. Can anybody help? Many thanks. 

lighthouse

I would also like to know how you actually inform ESA about your earnings and how often you should do it. 

helentt

I think it’s initially and then if anything changes. Maybe someone with better knowledge can advise for sure.

calcotti

lighthouse said:

I would also like to know how you actually inform ESA about your earnings and how often you should do it. 

Before doing any work you should inform DWP by completing a PW1 form. If, subsequently, there are changes to the earnings, they should, I think, be updated.
https://www.gov.uk/government/publications/employment-and-support-allowance-permitted-work-form/permitted-work-factsheet

There are now two threads running on the question of dividends for owner-directors. Dividends are generally treated as capital but lighthouse points out that this appears to allow circumvention of the permitted work earnings limit by paying dividends. I don’t have a response to this. Logically that should not be possible but I haven't found what would prevent  it - but I may be missing something. Obviously the 16 hour limit still applies regardless.

UC limits scope for this kind of manipulation by treated directors as self-employed and basing the UC entitlement on business income and expenditure but ESA doesn’t do this. 

May also be worth noting the following in respect of the original question. A tax refund is treated as capital for ESA but for UC is treated as earnings if the refund relates to a tax year in which the claimant was employed or self-employed.

Relevant DWP guidance for new style ESA is here https://www.gov.uk/government/publications/advice-for-decision-making-staff-guide
Chapters V1 to V8

For old contribution based ESA the guidance is here 
https://www.gov.uk/government/publications/decision-makers-guide-vols-8-and-9-employment-and-support-allowance-staff-guide

calcotti

Think I’ve found it (for new style ESA)
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/881138/admv4.pdf

V4063 The income of a director can include
1. payments for services as a director or any other employment with the company
2. share dividend
3. debenture interest.

This is not as clear as I would like in that it doesn’t explicitly say that all of these forms of income are to be treated as employed earnings but I infer that is the intention from the fact it is in the employed earners chapter.

(Subject to the usual qualifier that DWP guidance is not always legally correct.)

helentt

Thank you @calcotti it seems that my instinct was correct that any dividends would be seen as income. Thanks for finding the relevant document!