Employed or Self-Employed (Limited Company)

Ideal · Post by **Ideal** » Wed Feb 15, 2006 7:23 pm

Dear Friends, I'm studying this board for a long time and this is my first post. My FLR is due in next few months. I have a query and an answer would be much appreciated.
I have set up my own limited company...
Could you please advise which section applies to me Employed or self-employed?
If I'm employed who is going to issue the reference letter me? or company secretary?
Infact I'm applying through a solicitor and he says I'm self employed but I'm sure I'm an employee of my own company. Your advice will be much appreciated. Thank you all.

Post by **John** » Wed Feb 15, 2006 7:49 pm

Your advice will be much appreciated.

In a nutshell ..... don't use that solicitor! Indeed why do you think you need to use any solicitor at all? Are there any difficult circumstances that make your application a bit doubtful?

Ideal · Post by **Ideal** » Wed Feb 15, 2006 7:59 pm

Thank you John for the quick reply. I'm using them as I got my HSMP through them and I have had a very good experience working with them and as I can afford so I thought it's better to go through them. But this situation is really strange. So what do you think I'm employed or self-employed? Very many thanks for your precious time.

Post by **John** » Wed Feb 15, 2006 8:26 pm

You sound to be employed ... well you certainly are for tax purposes. That is, if you were needing to submit a Self Assessment tax return form you would attach Employment Pages (SA101) and not Self-Employed Pages (SA103).

A solicitor of all people really should understand that a Limited Company is a legal person, distinct from its directors and shareholders .... and you are employed by that legal person.

Having said all that, I think a mortgage broker would argue you are self-employed! But you are not applying for a mortgage, are you!

Ideal · Post by **Ideal** » Thu Feb 16, 2006 9:23 am

Dear John,

My profuse thanks for your timely and crucial help. You are really doing a great work. I just have contacted HSMP people and interestingly first the advisor was a little hesitant to accept me as an employee but later he confirmed that if with Inland Revenue my NI & tax staus is of an employee so I'm definitly an employee. So here we are. Now I'm thinking to inform my solicitor to not going further also keeping in mind he'll charge me some amount as I already signed the mandate form and gave an initial deposit. But I think it'll be best even if I have to pay rather than making another mess of my application.

Very many thanks.

Ideal · Post by **Ideal** » Thu Feb 16, 2006 4:35 pm

Dear John, Things are getting more puzzled. I talked to my solicitor and he insisted I'm under self employment. So I decided to talk to HSMP people again. And to my surprise this time I was told I can apply under self employment not as an employee. Later I also got an email reply from HSMP desk having contents as below....

As you have your own company, you should enter that you are self
employed.

I hope this is of help to you,

Regards
XYZ

Post by **John** » Thu Feb 16, 2006 6:09 pm

The Solicitor, how does he propose to calulcate the earnings from that "self-employment" ..... given that two (legal) persons are involved .... the company and yourself?

jillsjack · Post by **jillsjack** » Thu Feb 16, 2006 6:39 pm

Ideal,
If the company which has been formed has you as one of the Nominated Directors and/or you shall receove dividends if the Company does business resulting in Profit then you must declare your self as Sel-Employed and you should calculate the earning on the Basis of the Salary you receive from your company + the dividends from the profits. All dividends which are received from an operation where you are actively involved can be counted as income towards qualifying as a Highly Skilled Migrant.
Also please keep in mind that you should state what is true to the home office and make to sufficiently clear. Contractors have their own companies in UK and that is how contractors work.
Also remeber that if you say that you are an employee of a company then it may also mean that you are saying that you have guaranteed income which will not be a true statement.

Ideal · Post by **Ideal** » Thu Feb 16, 2006 6:47 pm

Thank you John. I'll raise the question to my solicitor. And thank you JillsJack. I'm the only nominated Director of the company and I don't receive any dividends but I'm paying myself a salary on Pay as you earn system. But what about if there are two directors of a single company? still self employed?
Now shall I persume I'll have to provide documents as self employment rather than as an employee?
Many thanks.

busa · Post by **busa** » Thu Feb 16, 2006 7:10 pm

One of the umbrella companies I was working with used to pay me dividend. I am not sure but I think I was made one of the directors. However at the end of my contract they provided me with p45.

Is there anything wrong in this ? As per discussion in this thread I as person is employed but as director is self employed. Who am I

Do I declare the income from dividend as part of my earning for my HSMP extension? And should my pay slip part include the invoice reconcilation indicating the income earned through dividend.

jillsjack · Post by **jillsjack** » Thu Feb 16, 2006 10:08 pm

For Busa:
I would again empahsize the point that if you receive dvidends from a company where you have worked then that is part of the income you can show for HSMP. Also remeber that dividends are taxed differently than the Salary and you should see to it that what ever you have earned has been accounted for with Tax dept.

For Ideal:
Even if you do not receive dividends but since your are one of the owners/ stakeholders of the company and the Company resolution would say so too I would suggest that you show your self as self employed. Citing your income from Salary should not be a problem. And even if you dont show dividends then even if the company is posting a profit then that becomes your invested capital/ retained profit and should be shown as part of your assets.
Remember that this whole excercise is to show you that you are economically a viable prospect for the UK Govt. If you have integrated here in the society, have earned, payed taxes and contributed to the economy then employed or self-employed is of inconsequence. You should show yourself as what is closest to the truth and is at the same time easiest to you.

Ideal · Post by **Ideal** » Fri Feb 17, 2006 10:14 am

Thank you JillsJack. It's really useful. Thanks for the clarification. I have no problem at all whether I show myself self- employed or as an employee. I was most concerned to present my application according to the rules and regulations. I didn't want to mess up my application by showing myself employee if I'm self- employed and vice versa. Thanks to you and thank you John for all the help.

umeshsethi · Post by **umeshsethi** » Sat Feb 18, 2006 5:41 am

Hi,
I don't know if this helps much but i actually set up a Ltd company when i was in UK (not on HSMP). I researched regarding this. A director of a Ltd company especially an active director is an employee as well and would be treated on NI and tax laws governing directors. However in your case the limited company seems to be expressly formed for the sake of taking contractual work from what i believe is a single or maybe 1-2 clients, hence in that respect you are self employed as well.

As Ideal said, the whole exercise is to show your are economically active and contributing and i think you are more self-employed than employed because in the true sense of the word you are like a consultant who even if he is working for a single client is working as a consultant.

The retained earnings and such treatment which come as profit and are finally repatraited to you as your income can i believe defn. be treated as income and letters from solicitors or companies (or website articles) which form umbrella companies for this reason can be added as explanatory notes as to why you are justified in treating this as an income. I think as long as you attach sufficient objective documentary evidence to justify your assessment of yourself , and if it is beneficial for you, you should not have trouble.

regards
Umesh Sethi

sunny158 · Post by **sunny158** » Mon Mar 20, 2006 12:25 pm

Ideal,

Have you applied your hsmp extension? I am in the same situation as you. If you applied, what documents are your submistted? do you need to show that you are the only shareholder and direct in your company?

Ideal · Post by **Ideal** » Mon Mar 20, 2006 2:49 pm

Hi sunny, I haven't applied yet as my solicitors have advised me to apply one month before th expiry of my current hsmp visa. I'm definitly going to apply under self-employed and that'll be in April.

sunny158 · Post by **sunny158** » Mon Mar 20, 2006 3:48 pm

Ideal,

I think you should apply 2 months before your current visa exprires, you dont need to do everything your solicitors advise, just have a look, many people apply 2 months in advance, they dont have problem at all, home office says you should apply 5 weeks in advance, but they dont say you cannot apply 2 monthes before your visa expire date. If you have evidences to show that work permit uk said you can apply as employed, I think you can apply as employed as well, cus home office does not make it very clear.

Ideal · Post by **Ideal** » Mon Mar 20, 2006 4:34 pm

thank you sunny. but at the same time I want to file my annual tax return ending year 2005-2006 in first week of April. I feel more comfortable while applying as self employed.

sunny158 · Post by **sunny158** » Mon Mar 20, 2006 5:16 pm

HO does not ask annual tax return for HSMP extension, I intend to apply in May, I am not gonna submit my annual tax return, business and personal bank statements are enough. It does not mattter whether you make profit or not. For self-employed, the required docuemnts are bank statements, and a business plan. However, if you apply after 3rd april for 4 years stamp, it makes much more sense.

Ideal · Post by **Ideal** » Mon Mar 20, 2006 6:10 pm

But doesn't it make sense to convince that tax matters are in order?

sunny158 · Post by **sunny158** » Mon Mar 20, 2006 7:52 pm

Ideal, you can submit your tax return, but you dont have to, cus it is not required by HSMP extension. HO wanna know you economic activity only, they are not inland revenue, maybe you think it makes sence to do so, but in my opinion, i only wanna provide the required documents, cus if you like, you can provide many documents, but I think HO will look at the documents they need, they will ignore many of them.

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Employed or Self-Employed (Limited Company)

Employed or Self-Employed (Limited Company)

Employed or Self-Employed (Limited Company)

what i researched when i set up a ltd company