Tier 1G as Director of a limited company

[Hassan Butt]

Hi
Can somebody tell me the difference between director of a company and self employed through a limited company.What documents are needed for the director of a company for ILR?

[AccountantMatthew]

Good question Hassan! It's been a common one recently.


For the purposes of HMRC and everyone else except the UKBA, sole traders are self employed. Legally sole traders and their business are one and the same person.

For a limited company set up, legally the company is one person and the individual is another person. Now, whilst in law just being a director does not necessarily automatically make you an employee, full time (or executive directors) of limited companies are classed as office holders for the purposes of tax and National Insurance contributions (NICs) - so are basically employees in substance.

Therefore if you have incorporated a company where you are the sole director and worker, you are classified as an employee. You can't be self employed as a director of a company.


Where the confusion come in is with UKBA rules as they state in http://www.ukba.homeoffice.gov.uk/polic ... roduction/ that:

Under Part 6A of these Rules, "Self-Employed" means an applicant is registered as self-employed with HM Revenue & Customs, or is employed by a company of which the applicant is a controlling shareholder.

So you will be seen in the eyes of UKBA as being self employed.

Do remember that the only difference in what you ask is the interpretation of what self employment is (so UKBA v everyone else).

The documents you need can be found on guidance on the UKBA website.

[karthik_nk]

Good question Hassan! It's been a common one recently.


For the purposes of HMRC and everyone else except the UKBA, sole traders are self employed. Legally sole traders and their business are one and the same person.

For a limited company set up, legally the company is one person and the individual is another person. Now, whilst in law just being a director does not necessarily automatically make you an employee, full time (or executive directors) of limited companies are classed as office holders for the purposes of tax and National Insurance contributions (NICs) - so are basically employees in substance.

Therefore if you have incorporated a company where you are the sole director and worker, you are classified as an employee. You can't be self employed as a director of a company.


Where the confusion come in is with UKBA rules as they state in http://www.ukba.homeoffice.gov.uk/polic ... roduction/ that:

Under Part 6A of these Rules, "Self-Employed" means an applicant is registered as self-employed with HM Revenue & Customs, or is employed by a company of which the applicant is a controlling shareholder.

So you will be seen in the eyes of UKBA as being self employed.

Do remember that the only difference in what you ask is the interpretation of what self employment is (so UKBA v everyone else).

The documents you need can be found on guidance on the UKBA website.

I tend to disagree with "So you will be seen in the eyes of UKBA as being self employed."

You should mention that you are an employee of your limited company and show payslips and dividend vouchers for previous earnings. You are not self-employed and that's the reason you pay PAYE and Class 1 NIC.

[AccountantMatthew]

As I mentioned, in both legal form and substance you are not self employed Hassan. However UKBA may disagree due to their own terminology as pasted into my earlier post.

Rather than get into any debate and go around in circles here, I think if you are in any way unsure then you should call UKBA for guidance. After all it's their game and their rules so it ultimately doesn't matter what any of us say on here.

[geriatrix]

Simple answer to a seemingly "complex" issue:

When making an immigration application, follow immigration rules .... which clearly state:

Under Part 6A of these Rules, "Self-Employed" means an applicant is registered as self-employed with HM Revenue & Customs, or is employed by a company of which the applicant is a controlling shareholder.

When dealing with HMRC, follow what HMRC says about such individuals.

Simple!!

[Hassan Butt]

Thanks Accountant Mathew and sushmitha for guidance .As UKBA does not respond to direct enquiries of people ,it is very difficult to get answer from them.As they are charging a lot of fee but unfortunately due to lack of guidance in specific circumstances their genuine cases are refused and people get into stress for nothing.This forum is doing a good job to help people and gude them in their own scenarios.Please keep on doing this noble work .I would be grateful if you can send me a link for the template of accountants letter for sole trader of a limited company,format of dividend voucher and invoices.Bundle of thanks.

[AccountantMatthew]

I'd leave the accountant letter to your accountant Hassan - and if s/he asks for a template then leave them to do the work - you're paying them after all!

Dividend voucher and invoice templates are widely available on the internet. Just Google each term.

[vin123]

Therefore if you have incorporated a company where you are the sole director and worker, you are classified as an employee. You can't be self employed as a director of a company.

I just go linked to this thread from another post.
This above statement from AccountantMatthew is utterly misleading and confusing in my view.

One important thing he has missed is ownership. Sole-traders are self-owned, registered independent traders doing a 'single' job for the purpose of tax and self-assesment.
Limited companyentitiles you to trade on behalf of entity with limited liability. As an individual, you can be four status associated at any one time for an incorporated Ltd company

a) legal owner
b) Director
c) Shareholder
d) Employee - salaried

One individual can be all 4 of the above at the same time. Perfectly valid.

If you are holding shares in your own ltd company where you are a director, then you are classified as self-employed by HMRC, UKBA pretty much follows the same.