spousal settlement: self-employed sponsor

[frustratedbrit]

I am self-employed as company director of my own private limited company. I want to sponsor the settlement visa for my Vietnamese wife and stepson. So, under the new rules as of July 2012, I understand that I need to show annual income of at least 22,400 GBP. My British daughter will also be living with us, but I understand that this does not affect the income requirement. A large chunk of my income is paid out in dividends drawn from the company's post-tax profits. We would like to make the application in about September this year. Help with any of the following questions would be very much appreciated.

1. First of all, can I just check: is it sufficient to supply evidence that my total income over the past 12 months has exceeded 22,400 (i.e. rather than to show evidence that this income will continue into the future)?

2. I'm puzzled by a clause in paragraph 5.4.2 in Annex FM section-FM-1.7 that applies to me: "Where the self-employed person has set up their own registered company and is listed as a director of that company, the income that will be assessed will be any ***salary*** drawn from the post-tax profits of the company.". Income paid to me from dividends from my company is not salary. Is this a mistake in the clause (i.e. shouldn't it say "income")? Otherwise, how do I count this dividend income?

3. Do I have to show my audited accounts covering the period for which the dividends are being drawn? My case relies on company dividends paid in the past 6 months, from company profits earned in the last 6 months, but Paragraph 5.5.4 in Annex FM section-FM-1.7 appears not to require audited accounts to cover the period of the income being used as evidence (it only requires the company's "latest audited accounts"). My company tax year ends in November, and yet it is only in this tax year (December 2011 - November 2012, which has not yet ended, let alone had any accounts audited) in which my company has built up the profits and awarded the dividends. Or, do I have to shift my company tax year to earlier in the year and get audited accounts up to September if I want to you recent dividends as evidence of income?

[Kitty]

The following is my interpretation, arrived at rather painfully and using at least 3 windows open at all times on the desktop to compare and contrast the various bits of Appendix FM and Appendix FM-SE of the Immigration Rules.

frustratedbrit, it looks like you have been referring to the guidance in the IDIs: I have referred to the Immigration Rules themselves as these form the law that should be applied.

I would welcome comments from other posters. How much more straightforward was "adequate maintenance" compared to the alphabetti-spaghetti we now have to wade through...

1. First of all, can I just check: is it sufficient to supply evidence that my total income over the past 12 months has exceeded 22,400 (i.e. rather than to show evidence that this income will continue into the future)?

You need to show a “gross annual income” of #22,400.

Paragraph 13 of the Appendix sets out how “gross annual income” is defined (I have bolded the bits that seems relevant to you):

13(e) Where the person is self-employed, their gross annual income will be the total of their gross income from their self-employment, from any salaried employment they have had, from specified non-employment income received by them or their partner, and from income from a UK or foreign State pension or a private pension received by them or their partner, in the last full financial year or as an average of the last two full financial years.

2. I'm puzzled by a clause in paragraph 5.4.2 in Annex FM section-FM-1.7 that applies to me: "Where the self-employed person has set up their own registered company and is listed as a director of that company, the income that will be assessed will be any ***salary*** drawn from the post-tax profits of the company.". Income paid to me from dividends from my company is not salary. Is this a mistake in the clause (i.e. shouldn't it say "income")? Otherwise, how do I count this dividend income?

Paragraph 19:

19. When calculating income from self-employment under paragraph 13(e), this paragraph applies:
(a) There must be evidence of ongoing self-employment at the date of application...
...
(c) Where the self-employed person has set up their own registered company and is listed as a director of that company, the income that can be counted will be any income drawn from the post-tax profits of the company.

3. Do I have to show my audited accounts covering the period for which the dividends are being drawn?

Your “gross annual income” is defined as being your income “in the last full financial year” (see above) or as an average of the last two financial years.

...My company tax year ends in November, and yet it is only in this tax year (December 2011 - November 2012, which has not yet ended, let alone had any accounts audited) in which my company has built up the profits and awarded the dividends. Or, do I have to shift my company tax year to earlier in the year and get audited accounts up to September if I want to you recent dividends as evidence of income?

Paragraph 9 Appendix FM-SE:

9. In respect of self-employment in a limited company based in the UK all of the following must be provided:

(b) Evidence of registration with the Registrar of Companies at Companies House.
(c) Latest Notice to file a Company Tax Return - CT603 and Company Tax Return - CT600 (both parts must be supplied).
(d) The organisation's latest audited annual accounts with:
(i) the name of the accountant clearly shown; and
(ii) the accountant must be a member of an accredited accounting body.
(e) Monthly corporate/business bank statements covering the same 12-month period as the tax return(s).
(f) Monthly personal bank statements covering the same 12-month period as the tax return(s) showing that the income from self-employment has been paid into an account in the name of the person or in the name of the person and their partner jointly.
...

[frustratedbrit]

Thanks Kitty, I had not seen the webpages you mention, only the IDIs, which appear to be contradictory in some details with the actual Immigration Rules. I wonder where this leaves the poor applicants. ECOs may feel at will to give the strongest possible interpretation from combining both. Anyway....

It's reassuring that, according to the Immigration Rules, it seems that I can use dividend payments as part of my income (although this does not appear to be explicitly stated).

As you say, it seems I must show gross annual income according to the last full financial year or an average or the last two. So given that it is a "full financial year" (i.e. presumably this means 12 months), and that my company only started earning money in the last 6 months, and that my company's last accounts were submitted for the year ending in November 2011, then I cannot apply for my family's settlement until my company's accounts for the year ending in November 2012 have been submitted. This is a great annoyance. The company will already have earned sufficient profit well before then, and I was hoping to bring forward the end of my company tax year so that the submission of the company accounts could also be brought forward.

Another very important detail is that, I notice that paragraph 13(f) states that the self-employed, unlike others, cannot use savings to bolster their income level. This seems an arbitrary restriction to me.

[frustratedbrit]

Hmm. Now I'm confused for another reason. Reading paragraph 19(c), it seems to suggest that the *only* income that can be counted is income drawn from the post-tax profits of the company (e.g. dividends). I award myself both salary and dividends, as I'm sure do 99% of private limited company owners. Salary is very much an expense of a company, and not at all "profit". And yet, salary is very obviously personal income.

[harv]

Do not confuse yourself.

Your salary will be considered as = PAY Salary + Dividends

You will need to show your payslips and dividend vouchers issued by your accountant on company headed paper.

Other company documents as stated in the requirements are also needs to be submitted, to show that your business is performing well.

[frustratedbrit]

But where does it say this? Can you point to the relevant paragraphs of the Immigration
Rules?

[Kitty]

Hmm. Now I'm confused for another reason. Reading paragraph 19(c), it seems to suggest that the *only* income that can be counted is income drawn from the post-tax profits of the company (e.g. dividends). I award myself both salary and dividends, as I'm sure do 99% of private limited company owners. Salary is very much an expense of a company, and not at all "profit". And yet, salary is very obviously personal income.

I think that you should count the dividends as "self employment income" and your salary as "income from salaried employment". It's not completely clear, but it would seem absurd if you could not.

What is confusing (to me, anyway!) is the distinciton between the calculation of income and the documents required to support it. In your case, I think you have:

1. Income from salaried employment and
2. Income from self-employment

You will have to submit all the company documents that are required for individuals self-employed through a limited company. You will also have to submit wage slips and personal bank accounts, and an employer's letter, in support of your salary income.

You can then add together you dividend income and salary to calculate your "gross annual income" for the relevant period.

I don't think salary is anywhere precluded for people in your position, but my eyes are starting to cross now (does anyone else find you need at least 3 windows open in order to be able to x-refer all these requirements properly?)...

[frustratedbrit]

What worries me is that the two concepts of private limited company income and personal income (from salary, interest from bank accounts, etc) don't necessary neatly fit together in terms of timespan. The rules say that company income must be from the last full year of company accounts, which could of course be up to 12 months prior to the application. Any mention of personal salary income in the rules refers to the last 6 months, or the last 12 months.

Are we to assume that, in the case of individuals who own a private limited company, that any personal income used as evidence must overlap precisely with the same months as the company accounting year? So for example, personal income from 23 to 11 months ago, and my company accounts from 23 to 11 months ago. Or must the personal income come from the last 6 months or last 12 months, and thus, when taken together with the company accounts, could represent a period of more than 12 months? Or perhaps no personal income other that derived from the company is allowed to be included.

And can we assume that it is fine to submit accounts that are 11 months old (surely this satisfies the rule that it must be the last full year of company accounts)? This goes against what is done for the other cases, where individuals must present evidence about the last 6 months.

[frustratedbrit]

In Appendix FM-SE of immigration rules, in relation to the financial requirement for a settlement visa for a self-employed sponsor, there is reference to "financial year":
http://www.ukba.homeoffice.gov.uk/polic ... ndix-fmse/
In particular, in paragraph 13(e):

"Where the person is self-employed, their gross annual income will be the total of their gross income from their self-employment, from any salaried employment they have had, from specified non-employment income received by them or their partner, and from income from a UK or foreign State pension or a private pension received by them or their partner, in the last full financial year or as an average of the last two full financial years."

Presumably this paragraph applies both to sole traders/partnerships/etc and to private limited companies.

For a sole trader/etc, I can imagine "financial year" means the personal tax year (which ends in April). But what about for a private limited company? Is it the tax year of the company or of the individual? My company tax year ends in November. So for me is it the year ending in November or the year ending in April or both?

[geriatrix]

How do you derive your income from the company that you are a controlling shareholder of? Through salary and/or dividends?

[frustratedbrit]

Salary and dividends.

[harv]

When salary and dividends are concerned, you will need to report these to HMRC through the self assessment route. So in terms of evidence you will need to shoe both Company returns as well as your self assessment details. So, I would include the following:

- Company Returns:
* CT600 and CT603 - Corporation Tax docs
* Company Accounts - ACCA Accountant or firm of accountants

- Self Assessment:
* SA302 - Once you have submitted your self assessment to HMRC, you can just call them and request SA302 and they would usually send them to you in a couple of weeks. Banks use this for Mortgage puposes as well.
* Payslips and Dividend Vouchers

Any other stuff I may have missed for further evidence.

Hope this helps.

[olawest]

In Appendix FM-SE of immigration rules, in relation to the financial requirement for a settlement visa for a self-employed sponsor, there is reference to "financial year":
http://www.ukba.homeoffice.gov.uk/polic ... ndix-fmse/
In particular, in paragraph 13(e):

"Where the person is self-employed, their gross annual income will be the total of their gross income from their self-employment, from any salaried employment they have had, from specified non-employment income received by them or their partner, and from income from a UK or foreign State pension or a private pension received by them or their partner, in the last full financial year or as an average of the last two full financial years."

Presumably this paragraph applies both to sole traders/partnerships/etc and to private limited companies.

For a sole trader/etc, I can imagine "financial year" means the personal tax year (which ends in April). But what about for a private limited company? Is it the tax year of the company or of the individual? My company tax year ends in November. So for me is it the year ending in November or the year ending in April or both?

Hello. I assume you are local, hence your voice will carry some weight,
what I will advise, is you write a letter pointing out these inconsistencies
on how the financial requirements for spouse visa does not cover limited liability directors that are in their first trading year, but have salaries/dividends in excess of the £18,600 income threshold. You can point out that HMRC does not require companies with less than £6.5m annual turnover to have 'audited' accounts. (see links below)

http://www.hmrc.gov.uk/manuals/emmanual/EM2781.htm

http://www.hmrc.gov.uk/manuals/emmanual/EM2782.htm

You can also point out that current financial year salaries/dividend earnings are currently been accepted by UKBA for limited liability contractors to renew their Tier 1 General visa and apply for Indefinite Leave under the Point Based system.

You can also point out that HMRC treats limited liability directors as been in 'employment' for tax purpose and not as 'self employed', hence limited
liability directors should be allowed to combine savings with their salaries/dividends.

See 'What makes up your tax return' page in the SA100 tax returns frorm below.

http://www.hmrc.gov.uk/forms/sa100.pdf

Write to the Policy Directorate of UKBA, copy the following:
- UKBA Chief Executive (Rob Whiteman)
- your MP,
- Chairman Home Affairs Select Committee (Keith Vaz),
- Shadow Home Secretary ( Yvette Cooper),
- Home Secretary (Theresa May),.

The summary is the way limited liabilty directors trading in their 1st year are treated under the financial requirements for spouse visa are against
the intent of the income requirement.

[geriatrix]

Salary and dividends.

Follow clause 9.

Clause 2 also applies but with a slight difference - The "employer letter" is to be replaced with a letter from certified accountant (see paragraph 19 (g)(ii) of Appendix A) certifying the same content as prescribed in 2d. Ignore 2e if you don't have any between you (individual) and your company (your employer).

[olawest]

Salary and dividends.

Follow clause 9.

Clause 2 also applies but with a slight difference - The "employer letter" is to be replaced with a letter from certified accountant (see paragraph 19 (g)(ii) of Appendix A) certifying the same content as prescribed in 2d. Ignore 2e if you don't have any between you (individual) and your company (your employer).

Hello Sushdmeta the guru:

Please kindly have a look at the Spouse visa Financial Application form, it does not allow allow the use of Clause 2 for self employed limited liability directors. The form only allows you to show earning for the previous financial year earnings.

[geriatrix]

In such case, ignore clause 2 and only follow clause 9.

[frustratedbrit]

In order to construct a visa application, I need to precisely understand the period of time over which I am supposed to be supplying evidence of my income for. Maybe I'm being a bit slow here, but I still don't know!! Please people, don't be afraid to explicitly spell out the answer to me! I won't be offended!

So, I intend to make the case that my income is sufficient by combining my company's salary and dividends paid to me. But I don't know over which time period this applies, and I don't know exactly which paragraphs of Appendix FM-SE apply to me.

Paragraph 13(e) certainly appears to apply to me - paragraph 19 mentions it at the start and then 19(c) goes into detail about private limited companies. So, what is the "financial year" that is referred to in 13(e)? Is it my company tax year that ends in November or my personal tax year that ends in April?

Or is it simply that the rules are contradictory and none of us actually know the answer?

Sushdmehta: you refer to and link to Appendix A, but this appears to refer purely to points-based applicants - Tier 1, etc? I am a British national, and want to apply for a settlement visa to bring my non-EU family over to the UK, so surely this link is not relevant?

[geriatrix]

I stand to be corrected but having read through paragraph 9 of FM-SE I believe the following two sub-paragraphs provide the answer to "what is the financial year that is being referred to":

(c) Latest Notice to file a Company Tax Return - CT603 and Company Tax Return - CT600 (both parts must be supplied).

(f) Monthly personal bank statements covering the same 12-month period as the tax return(s) showing that the income from self-employment has been paid into an account in the name of the person or in the name of the person and their partner jointly.

As for paragraph 19(g)(ii) of Appendix A, it merely tells you the kind of accountants one may use to certify any documentary evidences that UKBA requires to be certified by an accountant. e.g. - 9(d)(ii) points to the same paragraph.

[MPH80]

I think you're over thinking it.

If they were interested in individual financial years - they'd have used the wording tax year.

They haven't - so they mean company financial years - and full financial year at that. So you need to look at your last full financial year - which in your case is November to November. So you can either wait until you've gathered the required evidence from this November (11-12) ... or submit last year (10-11) now.

M.

[frustratedbrit]

Excellent, thanks. So it's my company's year.

Ok, so there's one last thing (for now at least, I'm sure there'll be more). Paragraph 19(a) of Appendix FM-SE worries me. We've surely already established that Paragraph 19 does apply to me. Paragraph 19(a) says:
"There must be evidence of ongoing self-employment at the date of application."

I'm not sure what this means in my case as a director of my company. It could quite conceivably mean any of the following:
a) evidence that my company still continues to be a company with me as a director;
b) evidence that my company is still paying me a salary and/or dividends;
c) evidence that my company still has turnover (i.e. still has customers earning the company revenue).

Does anyone know which one(s) it is?

My plan is to continue with the company earning revenue until January. Then my company will terminate its contract with its (only) customer whilst I go to live with my family in Vietnam. At some point later in the year (some several months after November), I will make the settlement visa application. Does this go against 19(a) or not? Will this make my application fail?

[frustratedbrit]

So does anyone know what Paragraph 19(a) of Appendix FM-SE means for the case of limited company directors (as opposed to sole traders)? It says:
"There must be evidence of ongoing self-employment at the date of application."

It could quite conceivably mean any of the following:
a) evidence that my company still continues to be a company with me as a director;
b) evidence that my company is still paying me a salary and/or dividends;
c) evidence that my company still has turnover (i.e. still has customers paying the company money).

But which of a), b) or c) is it?

[harv]

Well to be honest you should enclose some evidence that your company still runs as it was running during the last financial year fo the company. So add further evidence up to the date of the application with the bundle.

- Include your personal bank statements up to the last month of submitting the application
- Go to 'Online Filing' and select the option to send you the company information. This usually includes the Director details directly from the Companies House website. Add this report with your application as well to show your ownership/directorship
- For the turnover part, I would say you also attach the company bank statements to the recent month of submitting the application.

I would say you bundle them in a seperate section just after the full bundled section of your financial year evidence.

It does not hurt to add extra evidence...

Hope this helps.

[frustratedbrit]

Hi harv, I know that it's a good idea to submit as much positive evidence as I can, of course, but I am trying to plan what to do over the next 6 months, and trying to minimise the very painful time that I am apart from my family. So my company may or may not still be in the same position that it's in now when we make the visa application. I am asking the question in order to understand what my options are.

So, explicitly please, does anyone know which of a), b) and c) is it?

[frustratedbrit]

Does anyone know? This is a crucial detail that could easily sink the visa application if I get it wrong..

[MPH80]

Section 9g holds your answer.

In fact - section 9 holds all the answers.

M.