Director's Salaries

[skg2017]

Hello All,
Thanks in advance for the valuable suggestion, specially Zimba.

We are the 2 directors have been taking salaries from the last one year from the company and now someone told that Director's salaries are not countable towards the investment count. We have transferred around 58K to the business account in the last 3 years.

We 2 directors started taking salary from company for the last 14 months and so far taken around 24k altogether through submitting RTI and paying tax.

Please advise me where is my situation and what should I do?

[Bruce_Ho]

58-24=34. So u are 16k short in investment funds.

[noajthan]

Welcome.

Noone should have had to tell you - it should have been clear from T1 guidance.
Probably worth checking up on it as there are many gotchas for the uninitiated.

Have you had any sort of revenue coming in?

[skg2017]

Thank you for the reply.

I have never found anywhere written that Director Salaries will be deducted from the Investment amount. Can anyone please give an exact link or point where it clearly says?

I am going to apply for the extension in mid Feb 2017. In the last accounting year (Nov 2015--Oct 2016) my company's sales/turnover was 80K but company was 5K loss in accounts at the end and I had covered around 5000 hours of employment with staffs.

If I would have not taken salary, the question might come up in interview that how we 2 directors survived???

I am seeking Zimba's attention please. And please Bruce_Ho reply with reference.

Thank you all

[zamaha]

Can't we pay the expenses and staff's salaries from investment and get director salary from revenue?

Does director salary have to pay only from profit or revenue?

[noajthan]

The guidance is your friend...

invested’ or ‘spent’ by your business’ excludes spending on all of the following:

• 1) your own remuneration,

https://www.gov.uk/government/uploads/s ... 1_2016.pdf
= para 45

[sm12]

In the OP's case, he has 80K revenue. If the investment is being used for paying for expenses, can this 80K revenue not be used for paying his own salary of 24K?
In total the business has 80K plus 58K coming into the bank account, and he has spent 85K, so technically one could say that he has spent 58K on expenses excluding his salary?

[skg2017]

Thanks for the link.

However, it is in the initial application section. There is nothing in the extension guidance.

Is there anyone who have seen any refusal case for this reason (Director's Salary)?

zimba88, could you please shed light in here?

[zimba]

You revenue can be used to pay your salary. As long as the salary did not come directly form your investments, you should be fine.

[sm12]

Zimba

Do you think that applies even if the company makes a loss? Since it is possible that your investment goes towards other expenses and the revenue is used to pay your salary.

[zimba]

Zimba

Do you think that applies even if the company makes a loss? Since it is possible that your investment goes towards other expenses and the revenue is used to pay your salary.

A company can have a huge turn over and be in loss. You are in trouble if you had no revenue or spent money from your investments on your own salary.
Be aware that there NO official guide on how this works.

[seasky]

Zimba

Do you think that applies even if the company makes a loss? Since it is possible that your investment goes towards other expenses and the revenue is used to pay your salary.

A company can have a huge turn over and be in loss. You are in trouble if you had no revenue or spent money from your investments on your own salary.
Be aware that there NO official guide on how this works.

A (possible) litmus test. If there was no investment, would it be possible to pay the salaries? in this case no.

[skg2017]

Thank you Zimba88 for your views. One more thing I need to know.

We have transferred the 58K to the business account from the 3 different sources (1. My personal account, 2. my partner's personal account and, 3. our joint account) over the last 3 years period in small small transaction i.e. 2k/2.5k/ 3k/5k etc.

Question is: What will be the date of Director's Loan agreement??? Is it before transferring the money? or after?

My partner already got ILR through 10 years route and he is still in my business, so extension will go for me only.

Question is: Which bank statements should I provide to show the director's loan? Is it only business account or all three???

[zimba]

We have transferred the 58K to the business account from the 3 different sources (1. My personal account, 2. my partner's personal account and, 3. our joint account) over the last 3 years period in small small transaction i.e. 2k/2.5k/ 3k/5k etc.
Question is: What will be the date of Director's Loan agreement??? Is it before transferring the money? or after?

Preferably before the first transaction

My partner already got ILR through 10 years route and he is still in my business, so extension will go for me only.
Question is: Which bank statements should I provide to show the director's loan? Is it only business account or all three???

Only business account but the money must be traceable to you or your partner.

[skg2017]

Dear Zimba88,

Thank for your reply. What do you wanted to mean by money must be traceable? My Business bank statement shows our personal full name for directors' loan amount transfer. But Some money were transferred from our joint account and in the business bank statement it shows only our surnames (Mr. surname and surname).

As I said before, the money were transferred from 3 different sources (my personal account, my partner's personal account and our joint account). The reference of the transfers were also different and mix. i.e. Director/Business/Investment etc.

Please suggest me do I need to provide only the business bank statement or I need to submit all other statment to link the transfer?

[samaygrg]

I think it is better to supply respective counter-statements of the bank from where the money was injected into if there is not clear name of Director shown.

Regarding the reference words, I think it should go fine.