Director of Ltd company related questions

[rizmir]

Hi MP8H0
paragraph in guidance clealrly differentiates the to types of company. Very critical analysis shows the difference
*
First part of paragraph depicts the characters of a company that could be counted towards employment or non employment category which involves only one person as a share holder

*2nd part of paragraph shows the characters that could be counted as category F, which involves the share holders( partner or other family family member OR other persons)
*the point you mentioned any remaining means apart from family members i.e., other person not family members
* the lines of paragraph ''This is because in a company in sole or limited family ownership there is scope for doubt as to the effective control of the company, as the person is a director and shareholder or the other shareholders are family members of that person''

''A limited company is owned by its shareholders. Where such a shareholder is also a director employed by the company, they may be paid a salary and receive dividends, which can generally be counted, as appropriate, as employment or non-employment income under Category A, Category B or Category C. However, if the company is of the type specified in paragraph 9(a) of Appendix FM-SE, the person’s income will be considered under Category F or Category G. This is because in a company in sole or limited family ownership there is scope for doubt as to the effective control of the company, as the person is a director and shareholder or the other shareholders are family members of that person. In that case, instead of the employment evidence in Category A or Category B or the dividend evidence in Category C, we need evidence about the operation of the company''.

thats why they used the word in that case we need evidence about the operation of the company because there are different peeople involved
regards

[rizmir]

This critical analysis is just to remove ambiguity including myself

In simple words what factors will show that company could be counted as employment category(Aor B) or category F

there are two options
i) share is held by one persson
ii) shares are held by more than one person (including family members or other people)

so to count company employment as category A or B which option will prevail, if not first option then definitely would be second option which iss not the case

so the first option only would be counted as compaany employment as category A or category B

the second option (type of company as in paragraph 9a would be counted as category F

[MPH80]

Except you have it twisted around - your company IS subject to section 9.

A normal limited company may have 10 or 1000 shareholders. If the director of a company is a shareholder at this point - he cannot 'simply' issue himself a dividend or salary because of the number of people with a say involved. This company would be excluded from 9.

Section 9 is there to highlight that when a limited company is owned by a low number of people - the ability to do that and manipulate the finances is high.

As such - you have to submit evidence under category F, not category A or B.

I will repeat - you trip 9a(i) - for certain, 9a(ii) - for certain as you are the only shareholder and then also 9a(iii) because there are no more remaining shares.

[rizmir]

Thanks for the post

Could you pls mention then what paragraph meant about income from company director could be counted as under employment caategory A or category B.

how company director income could be counted under category A

regards

[rizmir]

the ii) point of paragraph 9(a) clearly shows that '' shares are held by the persson , their partner or family members

which clearly involves more than one person

regards

[MPH80]

I could become a company director tomorrow and not be a shareholder.

As such I would just draw a salary from the company. Thus - I would count my income under category A or B.

OR I could become a company director of a limited company with hundreds of shareholders. Because I would have (almost) no say in a) my salary and b) the dividend - then my income could be counted under category A or B.

[MPH80]

the ii) point of paragraph 9(a) clearly shows that '' shares are held by the persson , their partner or family members

which clearly involves more than one person

regards

The key is the OR in the sentence.

To have that statement apply to you - the shares have to be held by a) you OR b) your partner OR c) your family members or d) A combination.

M.

[rizmir]

Thanks for ur quick response, highly appreciated

but the line shows share holder as director

'A limited company is owned by its shareholders. Where such a shareholder is also a director employed by the company'',

Also as u mentioned the word OR but the word OR is used after the partner not before the partner which clearly shows the more tha one

ii) shares are held by the person, their partner or their family members

[MPH80]

When an 'or' is used to end a list of comma separated items - the 'or' applies to all items in the list.

Otherwise it would be phrased as 'the shares are held by the person and his partner or their family members'.

A company director may be a shareholder or they may not. The sentence you've quoted shows that where you are a company director and shareholder the following applies to you ... As such - the paragraph you quoted shows that where someone is both a company director and a shareholder they may receive both a salary and a dividend.

If they were just a company director - it'd just be the salary. If they were just a shareholder - it'd just be the dividend.

So - let's break down the paragraph:

A limited company is owned by its shareholders. Where such a shareholder is also a director employed by the company, they may be paid a salary and receive dividends, which can generally be counted, as appropriate, as employment or non-employment income under Category A, Category B or Category C.

Ok - so a company director who is also a shareholder can normally count the dividends and salary under category A, B or C. Great.

However, if the company is of the type specified in paragraph 9(a) of Appendix FM-SE, the person’s income will be considered under Category F or Category G.

Ah - ok - so now we know that if the company falls under paragraph 9(a) then the income should count under categories F or G! So - let's go look at paragraph 9(a) (which I won't do because I've done it twice already). Since we know your company falls under paragraph 9(a) - you have to use category F or G as appropriate.

This is really getting into pretty basic english comprehension now.

[Zorrouk]

Riz did you get the Visa for your wife?

[Zorrouk]

Riz did you get the Visa for your wife?

[Zorrouk]

Riz did you get the Visa for your wife?

[rizmir]

I havnt applied yet but preparing to launch the application.

[rizmir]

Hi MPH80
Thanks for prompt and continuous reply

As u mentioned in previous thread that a director who cannt be a share holder can count company income as employment. But thats thing is cleared from the paragraph as i posted previously that '' a director who is also a share holder ''

2nd thing a share holder who receives dividends can count his/her income under category C

and more and clarifying of importance is from GOV.uk website is:
You must usually pay dividends to all shareholders.

''To pay a dividend, you must:

hold a directors’ meeting to ‘declare’ the dividend
keep minutes of the meeting, even if you’re the only director''

u mentioned previously that if only one person is director of company he cannot give dividend to himself but its clearly mentioned in above paragraph in bold only director

so i think i am still standing on the points that we should trace which factors could make the difference to count company income under category A, B, C or category F

[rizmir]

and more important of points in paragraph 9(a) should be considered as u mentioned :

point i and ii and iii of paragraph 9(a) are all combined with the word and not by or which clearly shows the complimentary terms that all ought to be present to include the company in category F

otherwise it would have mentioned the word or among all the three points

and also last sentence of the paragraph clearly shows that ''we need evidence about the operation of the company vecause company is in family ownership''

If there is one person they dont need to be in doubt about the operation of the company

regards

[MPH80]

I think you're trying to wind me up now.

u mentioned previously that if only one person is director of company he cannot give dividend to himself

I've never said any such thing.

I've said that a single director company has complete control over what the dividend is which is why UKBA want the person to apply under Category F and G so they can make sure the person hasn't paid an artificially high dividend to supplement their personal income.

so i think i am still standing on the points that we should trace which factors could make the difference to count company income under category A, B, C or category F

The only factors you need to take into account are the ones laid out in paragraph 9.

and more important of points in paragraph 9(a) should be considered as u mentioned :

point i and ii and iii of paragraph 9(a) are all combined with the word and not by or which clearly shows the complimentary terms that all ought to be present to include the company in category F

The individual clauses of paragraph 9 are indeed combined by 'and'. The clauses of 9a(ii) are combined with an 'or' which is what you were disputing before. This is into algebra now - 9a(i) AND (9a(ii) point 1 OR 9a(ii) point 2 OR 9a(ii) point 3) AND 9a(iii). In your case - it all still comes out 'true'.

and also last sentence of the paragraph clearly shows that ''we need evidence about the operation of the company vecause company is in family ownership''

If there is one person they dont need to be in doubt about the operation of the company

This is where you're falling down ... it's precisely because the company is in exclusive family ownership - e.g. it's owned by you alone (and if you aren't your own family who is?) - that they need evidence of you running the company.

One last time - and I mean that - this is my last post in this thread:

A company director of a company who has hundreds of shareholders and/or a large company directorship cannot easily manipulate the running of the company so as to influence their own personal income (either shares or salary). As such UKBA can trust that the income he reports under categories A and B is legitimate.

A company director of a company which has a low number of shareholders and it's primarily in the hands of himself and/or his family CAN manipulate the company finances to affect his own personal finances. He could choose, for example, to pay an extraordinarily high dividend such as to supplement his own income even to the detriment of his company's finances. They could also choose to pay an unusually high salary for a short period of time (6 months) to meet the financial requirements of category A - which would then return back to normal once the visa was granted.

UKBA are wise to these tricks and as such need someone in that situation (which includes you) to provide full company details under categories F and G which means they want to see the previous financial years trading and tax details.

Now - this is the situation. That's it. There's no more dancing on the head of a pin to try and find a way it's not true.

You can now either 1) accept my explanation and prepare to apply under categories F and G
or 2) not accept it and apply under category A and C and watch the application fail.

Good luck - I'm now out.

M.

[rizmir]

Hi MPH80

Sorry u got angry, coz things were not clearly understood thats y thread continues longer.
Because in other thread there was a case when there are many directors and share holders involved British embassy refused the case as guy counted his income under employment category (see the thread titled, ''visa refused as hmrc'') that prompted me to think and analyse this scenarios.
and the point u highlighted is applied in both cases whether in category F or category A, they check ur continued employment

regards

[rizmir]

Hi MPH80

after a long critical analysis i come to the conclusion that ur understanding is right mine company falls under category F as i am the only director.

I recently got a job in sales marketing in another company since 1 month from which i am getting 1200 to 1300/month salary.
and i been getting salary of 14K from my company since 7 months.

so could u highlight that whether i can combine two categories and if then whether i have to wait for 6 months or whole financial year.

will be highly appreciated.

regards

[MPH80]

According to the guidance (https://www.gov.uk/government/uploads/s ... 140324.pdf) - category F/G can only be combined with A/B for the relevant financial years.

So that means you have to wait until your company's financial year ends and you've filed your taxes (so you can show all the required documents) to allow for the income from category A. Note you'll also have to show ongoing trading - which means some business will have to be transacted by your company, so providing it's not dormant you'll be fine.

To be honest - it might be a hell of a lot easier to find a higher paying job and wait 6 months than file all that stuff and try to combine the incomes. ECOs are under a lot of pressure to hit targets and a complex income structure might make it even harder for them to make a good decision.

[rizmir]

Hi MPH80
I totally agree with u one good job removes all these hectics. But i almost getting jobs near threshold like 17K or 18. Recently i got job 0f roughly 16K. so i still nedd 2-3K, thats y i was looking for combination.

i filed tax of company in may 2014 so nest tax or financial year of company is on feb 2015. mean while i got another job of 16K since two months.
As u know my previous thread i been getting salary from my company of 14K(1150/month) since 7 months

Whats ur suggestion.

option 1) i should reduce my salary from my company to some extent(ur suggestions plz to what extent?) and combine my other job of 16K and wait until company financial year till february

option 2) i should keep my new job of 16K and look another part time job of 3K to combine, and close the company.
and some ppl suggest that in category A there is only one job so u cannt combine two jobs within category A

highly appreciated

regards

[MPH80]

If your financial year is Feb-Feb - then it'll be April (at least) next year before you're ready to apply because they want all the HMRC docs.

If, tomorrow - you found a second job for another 5k a year - you could apply under category B at (roughly) the same point and ignore any income from the company during your application. Or if you can find a job which would qualify under cat A - you could apply in Feb next year with far more certainty.

But keep in mind you're going to have to meet these requirements again in 2.5 years after the first visa is granted. So I'd suggest finding yourself a long term plan that works.

I don't see why you'd reduce your salary from your company income though. If it's sustainable for your company's finances to be paying you that salary - why reduce it? The only real reason would be tax - paying corporation tax and dividends rather than income tax.

But then that's a calculation of balance - if you want to reduce your tax payments that's how you have to structure it.

The other thing to consider is that you might lose your 16k job tomorrow. So reducing your salary on your company, only to increase it again for the application, would be tough.

[rizmir]

Hi MPH80

Thnx very nice exploration of points, i got it.
Actually i opened company in august 2012 and for new companies first taxation period starts after 21 months of incorporation so that was in May 2014 and i filed taxation to Hmrc in May 2014. Then the next taxation would be after 9 months of previous taxation period, so due to this it would be in february 2015.
The job i got one and half month ago is non-salaried employment and due to monthly income it wud constitute 16-17K approximately, and that falls in category A.
The point of concern is that at this point if i combine company income and this non salaried income they shoul be within same financial year.
This non salaried income is i think in 2014-2015 financial year as i started just one and half month before(correct me if ism wrong) but whats the actual financial year for company? Because what i submitted to hmrc is taxation period from august 2012 to august 2013 and submitted in may 2014 as for new companies requirement so in february2015 of next submission of taxation files what financial year wud be that whether it wud be august 2013- august 2014 or invlusive of 2015
Because category A income shud be within same financial year as company,s year
Regards

[zaidamjad]

Hi,
I have some questions about my case. Can any one repay please.
I am planning to apply my wife visa soon. I need an income of 24800 ( two children). I am self employed and I have 1£18200 ( Oct 14 - Oct 13) income from this. Remaining I am a shareholder of the company and withdraw a salary of £11,400 ( Oct 14 - Oct 13) it and having wages slip ready for it. But problems is I don't have CT600 for this period as my financial years ends in may 2015. And 12- 13 I submitted a dormant accounts as the company did not trade during this period. Is there Any alternate to CT600 as I have all other documents.

I want to apply in mid December 14.

Wiring for kind reply from any forum member

[MPH80]

The important thing - as far as UKBA are concerned - is the last full financial year. Since your financial year ends in May - the only information you can supply is May 2013 to May 2014.

If you meet the financial qualification criteria for that period - great - if not - you have to wait to apply until after May 2015 when you have gathered all the relevant financial data.

[zaidamjad]

Hi MPH80,
Thanks for your kind reply. I am still confused about CT600. Do I need to provide this or any alternative document is available? As my last year 12-13 dormate accounts were submitted.

I am fine with my sole trader income of £18,200 and have all the documents to prove this income.