secsmed wrote: My problem is that I can not get a concrete answer for my situation.
Because this is an immigration forum, not a forum that deals with employment issues or income tax issues (or similar stuff). So not exactly the right place to look for answers to such queries. What has been suggested to you is "how you can avoid the hassle at the time of extension", without the intention of guiding you in the right direction.
The problem is that if you follow what has been suggested, you may end up in big trouble one day and then will have to pay price that you'll surely regret. So, why not sort out the matter right at the beginning so that you can live in the UK in peace!
The issue you have is not an immigration issue, but rather an employment one - as to which working model you should adapt in the UK, and how you must pay your taxes in the UK - given your immigration status and terms of your employment.
I am not an expert in these matter, so the following is based on my limited personal understanding:
1. The root cause of the problem here seems to be the fact that your employer is not registered in the UK and therefore (perhaps) can get away by offering you a tax-free income (from his point of view not yours, as you'll end up paying whatever is due as per UK laws).
2. For the company to employ you in UK and pay you salary in the UK, the company must be registered in UK so that they can comply with the income tax laws of the country. e.g.- deduct income tax and NI contribution at source from your salary and deposit the same with HMRC along with their contribution of the NI.
3. As an employee of your employer, you cannot pay income tax and NI contributions to the HMRC - not something that you can do or ought to be doing when it is the responsibility of the employer.
4. For you to pay income tax and NI, on your own, on income you make in this country, you need to be registered as self-employed.
In your case, I believe the best route for you to take is the self-employment route. Discuss with your employer if he is okay that you do the same work as a vendor / supplier and not as an employee. If there's an agreement on the matter, register yourself as self-employed and invoice your employer/client as per terms mutually agreed.
If you follow this route, then perhaps you may need a bit of professional help in arranging your documentary evidences to support your Tier 1 extension, but let me assure that you'll spend your life here in peace and focus on your career rather than looking over your shoulder all the time wondering if HMRC or UKBA are out there wanting to arrest you.
Like I said, this is an immigration forum ... perhaps not the best place to look for answers to non-immigration issues!
regards
