Investment by director loan

[Sound]

Hello

A quick question, I have to buy raw materials from abroad for my company to manufacture the products here in UK. The cost will be 15k every quarter. I m confused whether buying raw materials from abroad will count as an investment according to HO. My common sense says yes stock is an investment but am worried what theHO rules say! Please help

[Mrchaany]

Sorry
You are the first one refused in t1 extension
But
Confused by other questions raised by other members

[Sound]

Hello businesstobusiness,

Your reply is incomplete and irrelevant, am not asking whether I will be rejected but am asking will that be considered as investment.

You have not explained y do you say so

Also it's 15k for stock every two quarters not every quarter, sorry it was typo error.

Senior members please help!

[shanybaba1974]

Hello

A quick question, I have to buy raw materials from abroad for my company to manufacture the products here in UK. The cost will be 15k every quarter. I m confused whether buying raw materials from abroad will count as an investment according to HO. My common sense says yes stock is an investment but am worried what theHO rules say! Please help

Yes, it will be considered investment, every money spent for business purpose may it be for imports fm abroad will be definitely an investment. U would just need to show yr bank statements, personal & business both showing investment has been made & is onwards spent for business assets or expenditures , minus property development & management. It can be trading ie imports / exports . There is no where in the application, they ask for nature of the business. Just need to add certificate fm certified accountant for investment confirmation or directors loan certificates or share certificates as main evidences

[Mrchaany]

Mr Sound
whats wrong with you.

i am asking you these questions. i am asking this from MTZ510 who posted earlier.

are we clear, or you need further clarification

[luqmanzaheer]

hi friends i am very confuse my accountant says director loan only shows in liability section in annual account not equity please help me out is he right ?

i have transferred 50000 pound from personal to company account and i want to show as director loan as i seen in this website some people says we need to show director loan in liability and equity section in balance sheet in annual accounts. help please if you have any knowledge?

[krishan2014]

hi friends i am very confuse my accountant says director loan only shows in liability section in annual account not equity please help me out is he right ?

i have transferred 50000 pound from personal to company account and i want to show as director loan as i seen in this website some people says we need to show director loan in liability and equity section in balance sheet in annual accounts. help please if you have any knowledge?

Your accountant is right by saying that Director's loan shows in the liability section of the balance sheet as every loan by definition is a liability to the debtor. In this case you are creditor giving loan to the debtor i.e. Your company. Under company law, you can ask your company to give you the money back any time if you have it available in the bank account unless you have drafted a loan agreement between you and the company explaining the terms.
This liability section of a company only matters when you have to get a loan from banks or deal with suppliers but with Home Office; I don't think liability section of balance sheet matters that much.

To let you know, I am not an accountant; I got this information by posting to the UKbusiness Forum and it seems correct to me by common sense. To get more information, you should either speak to Home Office or to your accountant.

Thanks

[Irfanmz]

Dear Members,
To show investment at extension time every one encourages producing Director’s loan agreement but I have not seen many people talk about share certificate? Could anyone please explain what are the complications about producing Share Certificate for business owners as compare to Director Loan Agreement? According to my knowledge share certificate is more authentic way of showing your investment, please please please do share you valuable comments Thanks

[krishan2014]

I also believe that investing by shares is more authentic way to invest in LTD company as it seems more straightforward than proving director's loan is unsecured and subordinated in the favor of third party [which I could not understand anyway]. I found out that accountant can draw a share certificate when you invest money and you can keep any number of shares and give any value to shares and invest any amount of money in one go. I asked this question during live hmrc webinar but I could not find out if you invest e.g. £50,000 in one go by share capital method and want some money back for any reason whatsoever [after all its your money]; then what is the procedure to be followed and if there are any legal or tax implications.
Another thing; I am confused about is if money paid to subcontractors/employees working for your company can be accepted as an investment by UKBA for extension purposes. It does not say in the policy guidance about it. I called UKBA to explain it to me and they sent me the Policy Guidance by email and wrote that we don't give specialist advice.

I am trying to find out by reading whatever I can and by asking question on number of forums. I will really appreciate if someone who has run LTD company for some time or who knows how to prepare for extension can shed some light on these matters.

Remember knowledge increases by sharing. If you help us here; we may be able to help you somewhere else.

Thanks

[MTZ510]

The company has a limited liability to the extent of its share capital. A company with 200K share capital can run into trouble if it gets in to any form of litigation hence people avoid financing their companies in form of share capital.

If you have share capital of say £ 100/- and if you get in to legal problems you can walk away with your money without much trouble. Speak to an Accountant he will explain you.

The other reason is that you cannot withdraw share capital whenever you want ,for this you have to wind up your company and its a long legal process which may have tax implications.

Dear Members,
To show investment at extension time every one encourages producing Director’s loan agreement but I have not seen many people talk about share certificate? Could anyone please explain what are the complications about producing Share Certificate for business owners as compare to Director Loan Agreement? According to my knowledge share certificate is more authentic way of showing your investment, please please please do share you valuable comments Thanks

[Atif786]

hi,
as far as your refusal points are concern, they are quite obvious that you din't not submit any loan agreement, and if i assess your
investment carefull as you have mentioned that you buy and export goods, this kind of business doesn't qualify for entrepreneur visa extension as UKBA clearly stated that your nature of business has to be equivalent to NQF level 4 or above other than your job title, and if you purchase goods and resale them then it's not an investment, as the goods purchased are meant to be resold to make profit and UKBA's requirement is to make an investment for the expansion of your business, second point, there is a big difference between investment and spending , for Eg:
your company is make a gross profit of £3000 in a month and your company expenses are £2000 which includes salaries,bills and other stuff, it's called running cost of the business not the investment as your company spending the money from it's profit , so the money held for investment which is eithet £50 k or 200K remain as it is,.

[Atif786]

Thanks for you valuable advice, however i still have a lot of confusion regarding the same,would really appreciate if throw some more light on the same to disperse confusion.
1) Points related to Nature of Business: UKBA has clearly mentioned that nature of business has to be equivalent to NQF 4 or above other than your JOB title or designation , but the gentleman who got refusal below mentioned that he is into buying goods from the uk and exporting it , which according to UKBA is not NQF 4 or above then how come UKBA has not mentioned about it in refusal or is it only applicable at the extension, i mean can we get into any business activity after getting tier 1 entrepreneur visa regardless it's nature? plz reply
2) As far as investment is concern , if i make an agreement of directors unsecured loan to company and transfer the funds from my personal account to business account and after that money is lying there in business account without being invested as it's a small it company and got 2 projects through which company is making upt0 £3000 gross profit and after paying bills , rent and other stuff, it's making a profit of £1000 each month, so the money which is spent from the company's profit will be considered as investment or it's just a running cost?( according to my understand it's just a running cost not the investment)
3) if suppose after giving director's loan to the company which is 50k in my case, my company is making a gross profit of £2000 per month however the running cost or expenses of the company are £3000 , it means company is loosing £1000 each month, and that £1000 is going from the director's loan amount, then will that £1000 be considered as investment , if yes than there is another confusion on annual accounts, company's accounts will show in loss of £12000 if follow the above example however UKBA clearly states that Business has to be Profitable , how is it possible to meet both the requirements.
4) if suppose company is not at loss and making profit of £1000 each month after expenses and company has also bought a property for expansion of it's business using director's loan account, at the end of the year accounts will show company made a profit of £12000 and invested £50k in property taking loan from director, it means company is in credit of £50k, how it works please help, hell lot of confusion.
Thanks

[nbhatt]

Hello,

My accountant has prepared my company's account and is nearly ready for submission.When I checked the balance sheet of my LTD company ; my accountant has put Cash in hand 40,000 K instead of directors loan. I had transferred 40 K from my personal account to business bank ac as soon as I got my visa.
Is cash in hand title acceptable or does it specifically need to be specified as directors loan?

Kindly advise.
Nisha

After seeing huge interest in this topic, I am going to start this thread to help all those who are looking for information on this topic. Please contribute here on this topic. Please remember my only intention is to help and clear doubts and confusions. Please only input HO and not your own version of UKBA rules.

Below are the points which all support investment by unsecured director loan.

A19. Direct cash investment In order to ensure that the money is used by the business, you
should provide the accounts of that business for assessment. These accounts must show the
investment in money made directly by you, in your own name.
Share capital This only applies to migrants with a company structure that can raise money
through shares.

Director’s loan This only applies to migrants who become directors of a company. A director’s
loan to the company will be considered for the award of points as long as it is unsecured and
subordinated in favour of third-party creditors. (For the purposes of this guidance an unsecured
loan is where you have loaned money to the business that is not secured by property or assets
that become subject to seizure on default. Third-party creditors are those individuals or companies
that the business owes money to, not including you.)

As per above full director unsecured loan will be considered for award of points.


74. The amount of money invested should not:
• include the value of any residential accommodation or property development, or
property management; or
• be in the form of a director’s loan, unless it is unsecured and is subordinated in favour
of the third-party creditors.

As per above investment is acceptable in form of unsecured director loan.


According to Paragraph 41 (d) of Appendix A in the immigration rules.

(d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration. The UK Border Agency reserves the right to request further evidence or otherwise verify that the money will remain available, and to refuse the application if this evidence is not provided or it is unable to satisfactorily verify. ‘Available to him’ means that the funds are:

This (d) is saying that money must be available until it is spent. As long as money is available in business account, you are covered. Later part of it tells us that what is included and what is not included in spending. It does not give directions to how much to spend or you must spend.

A20. A loan to the business will not be accepted The investment should not be in the form of
a Director’s loan, unless it is unsecured and subordinated in favour of third-party creditors. We
will use any legal agreement between you and the company to assess this. If no legal agreement
is provided or if the investment appears to be in the form of a loan which does not meet these
conditions, no points will be awarded for this investment.

Again and again even in above A20, HO is saying director unsecured loan is accepted for investment.


Now finally go to attributes section for extension,point no.67 in policy guidance.

A. You have invested, or had invested on your behalf, not less than £200,000 (or
£50,000 if, in your last grant of leave, you were awarded points for funds of £50,000)
directly into one or more businesses in the UK.
20 Points


It is clearly saying investment not spending. Spending and investment are separate things. All above points from policy guidance clearly to me accept investment in form of unsecured director loan.


As long as you give unsecured loan to your company and then spend as much as you need from your business account to keep your business alive and for its expansion, you are done. There is no limit/requirement on how much to spend. So investing by way unsecured director loan, running a business, creating jobs and meeting UKBA rules, I am sure you will get extension.


One final thing for now is that see what HO is awarding points for in attributes for extension applications, is it investment or spending? It is investment.


Link for Tier 1 Entrepreneur policy:


http://www.ukba.homeoffice.gov.uk/sitec ... dance1.pdf

[NabilElsayed]

Dear helpingperson,
I've read your valuable post but I got confused when I found in the "Tier 1 (Entrepreneur) Policy Guidance" the following statement Under Annex A - Glossary of Terms and Further Information A20:
Money should be fully used in the business and not held in the business bank account in order to qualify for the award of points
Money deposited in a bank account, even if it is in a United Kingdom business bank account, is not counted as investment in business. The money should be used in the business to encourage
growth or expansion, to improve services or products and to ensure the business is profitable.

What I understtod is the money should be spent not only kept in the business account!

Please clarify if I am wrong
Thanks

[rajesh0505]

can anyone please provide me a format of directors loan agreement accepted by ukba. thanks in advance.