Tier 1 extension Query - Director of Limited company.

[sanjeev.x.kumar]

Hi Guys,

My Tier 1 extension is due in April 2013, so I have already started planning for it now. I have to show £50000 as my earnings.I am working as a contractor and currently drawing salary as a director of my own Limited company. Every month I am drawing a salary of £4000 from my business account to personal account. This salary comprises actual salary plus dividend. Now my question is about the calculation to earn the required points for my earnings. If I keep drawing a salary of £4000 per month from April 2012 to Mar 2013, will this suffice the earning requirement of £50000. Is there a different calculation to when we draw a salary including dividends? Sorry if I am sounding too dumb, but I have no idea about the way salary is calculated for ltd company director. Just for your information, my company’s monthly turnover at the moment is £5250. Out of this I am taking £4000 per month as salary (plus dividends). Please advise.

[O_Relly]

4k per month amounts to only 48k for 12 months.

Earnings is calculated based on your income, which is salary + dividends + ..., read the policy guideline document for understanding what other income can be shown as earnings.

Yes, salary + dividends is perfectly fine.

[safeery2k]

it is fine, you can continue withdrawing your salary and dividend like this..the income which they require is Gross not the Net one. so if you are drawing 4k per month (which is Net) it means that your gross would be around 70K...so you don't need to be worry...

I have recently got extension while working as a contractor and director of limited company...

[QuickSam]

1) Do you have an accountant managing your company accounts? If yes, talk to him / her about this

2) The amount of £4000 is paid as salary + dividend PM but what are the actual salary and dividend amounts out of the £4000.

3) You need to show £50,000 so £4000 * 12 = £48000 + Tax, which would amount to a sum greater than £5000 so you should be okay.

[Jayaprakash28]

Hi,

I am going for extension in a month. I am also have similar query. As per my accountant advise I have transfered the amount whicu includes Divend + salary as single figure to my personal account. Does this causes any issue.

Please adivse me.

[safeery2k]

No, its not a problem. I had the similar situation, what you need to do is to explain the case worker how payments are divided.

For example, you transferred 2000 to your personal account from business.
You need to explain that 2000, in a cover letter how much out of this 2000 is your salary of which month and how much is your dividend...something like that...

Hi,

I am going for extension in a month. I am also have similar query. As per my accountant advise I have transfered the amount whicu includes Divend + salary as single figure to my personal account. Does this causes any issue.

Please adivse me.