Proof of Investment - Extension applicants

[MTZ510]

PROOF OF INVESTMENT AT THE TIME OF EXTENSION

I am not clear how to prove that 200K was invested in last 3 years to get the extension. I have read some posts which say that money should not sit in your business account but should be used in the business; i have also read that director’s salary will not be treated as investment. But in accounting term the moment one transfer money into a business either through Share Capital or through Directors Loan the investment is made.

I have an example to discuss the possibility of what will be counted as investment by UKBA.

Year 0:
Transferred 200K into company business account.

Year 1 , 2 & 3

Annual Sales........................................ 200K
Annual Purchases.................................. 100K
Annual Expenses................................... 25K
Annual Salaries including Directors Salary.... 35K
Annual Net profit....................................40K

At the end of year 3 the retained earnings will be (40x3) 120K and assuming that the ending inventories are nil at the end of year 3 the business bank account will have (200+120) 320K.

The question is how to prove that 200K investment was made?

Is UKBA going to hire some chartered accountant to find out actual cash flow activities? And if that’s the case then to make investment of 200K one has to do some big business because if average inventory turnover is 3 months then the purchases plus expenses during one year should be 800K.

The only way i can think of using 200K is to buy fixed assets for the company.

[hnav]

MTZ510

Can you please explain me about this type of investment. How its work in business. Its in tier 1 ent policy guidance initial application pws 50k route. The company have only sole director and no share holder, only sole director is shareholder and investor.

A19. Direct cash investment
In order to ensure that the money is used by the business, you should provide the accounts of that business for assessment. These accounts must be shown the investment in money made directly by you, in your own name.

Much appreciated

[MTZ510]

In accounting terms when a director pays the company expenses from his own account that by default is treated as loan from director. The accounting entry is debit expenses and credit Loan from director. Any credit balance in director loan is considered as investment unless its a current/temporary account, there fore a subordination agreement is often required by third party creditors and financial institutions to safeguard their interest.

The Annual account of your company should reflect directors loan on the credit side or liability side what ever you want to call it. Subordinated Directors loan is generally considered as part of equity if the same is backed by a subordination agreement.

The above information is purely the accounting perspective and i have no idea what UKBA is looking for! I can't understand what they mean by the term "money should be used by the business" if they want us to use entire 200K for business then it will require a huge turnover as mentioned in my last post, or the business should buy some fixed assets to use the directors loan.

I am also looking for the answers over here, i don't want to end up being rejected after 3 years and losing my investment and efforts at the same time.

[hnav]

If investment of director put in liability side in company annual accounts than in this case we need director loan agreement between director and company

[MTZ510]

If investment of director put in liability side in company annual accounts than in this case we need director loan agreement between director and company

yes if you want to prove that its your investment into the business and not just a directors current account.

[hnav]

If company have sole director and who is only shareholder and owner of the company as well and he transfer from personal account to company account and invest in business at same time. In this case company accounts. In this case what we call this type of investment it could be direct investment or director loan investment?

[MTZ510]

If company have sole director and who is only shareholder and owner of the company as well and he transfer from personal account to company account and invest in business at same time. In this case company accounts. In this case what we call this type of investment it could be direct investment or director loan investment?

For direct investment it should be in form of share capital, i have no idea how your accountant treated your investment in the business, so i can't comment. What is your share capital appearing in annual account? for investment through Shares Capital you have to comply with companies house statutory requirements.

[educators]

PROOF OF INVESTMENT AT THE TIME OF EXTENSION

I am not clear how to prove that 200K was invested in last 3 years to get the extension. I have read some posts which say that money should not sit in your business account but should be used in the business; i have also read that director’s salary will not be treated as investment. But in accounting term the moment one transfer money into a business either through Share Capital or through Directors Loan the investment is made......Is UKBA going to hire some chartered accountant to find out actual cash flow activities? And if that’s the case then to make investment of 200K one has to do some big business because if average inventory turnover is 3 months then the purchases plus expenses during one year should be 800K.

I can understand that you are trying to make sure that you do the right things but there is no need to have nil stock. Actually UKBA does not need investment which will be withdrawn after getting the visa. This is the reason why they ask to spend your made investment. But the key thing is that you have to spend what your business genuinely requires. A small part of your investment can remain in your business bank account as working capital.

What you need to do is the following:

Invest £200k in the form of shares capital or director's loan
Purchase assets what you need for your business through this investment
Purchase stock what you need for your business through this investment
Hire 2 settled workers
Start making sales and profit will follow
For yourself try to take dividends rather than salary as it will not be counted - What I think they will do is if you have spent £100k in expenses and these expenses include your salary taken for the amount of £20k, then they will consider only £80k has been invested.
Show your shares certificate/director's loan agreement and financial accounts to UKBA at the end of 3 years in order to demonstrate that you have invested £200k and have been genuinely trading....Thats it really !!!

Hope it is clear to you.

[hnav]

If you see policy guidance page 41. They have no objection
There is no objection, however, to you investing in companies that are mainly involved in construction.
Money should be fully used in the business and not held in the business bank account in order to qualify for the award of points
Money deposited in a bank account, even if it is in a United Kingdom business bank account, is not counted as investment in business. The money should be used in the business to encourage growth or expansion, to improve services or products and to ensure the business is profitable.

[kayani2012]

hello guys,
i just need an advise. i am running my company, its going ok but i am having problem to manage other expensive so if i do taxi as a self employed to manage my extra expensive to run business smoothly. will it effort on extension???? i have to register self employed as well

[samaygrg]

I second what you said 'educators'. Yes that's the case.

PROOF OF INVESTMENT AT THE TIME OF EXTENSION

I am not clear how to prove that 200K was invested in last 3 years to get the extension. I have read some posts which say that money should not sit in your business account but should be used in the business; i have also read that director’s salary will not be treated as investment. But in accounting term the moment one transfer money into a business either through Share Capital or through Directors Loan the investment is made......Is UKBA going to hire some chartered accountant to find out actual cash flow activities? And if that’s the case then to make investment of 200K one has to do some big business because if average inventory turnover is 3 months then the purchases plus expenses during one year should be 800K.

I can understand that you are trying to make sure that you do the right things but there is no need to have nil stock. Actually UKBA does not need investment which will be withdrawn after getting the visa. This is the reason why they ask to spend your made investment. But the key thing is that you have to spend what your business genuinely requires. A small part of your investment can remain in your business bank account as working capital.

What you need to do is the following:

Invest £200k in the form of shares capital or director's loan
Purchase assets what you need for your business through this investment
Purchase stock what you need for your business through this investment
Hire 2 settled workers
Start making sales and profit will follow
For yourself try to take dividends rather than salary as it will not be counted - What I think they will do is if you have spent £100k in expenses and these expenses include your salary taken for the amount of £20k, then they will consider only £80k has been invested.
Show your shares certificate/director's loan agreement and financial accounts to UKBA at the end of 3 years in order to demonstrate that you have invested £200k and have been genuinely trading....Thats it really !!!

Hope it is clear to you.

[bubbly123]

Hello

For my business I buy raw materials from India and design and manufacture the final product in uk so my question is the money used to buy raw materials in India will be considered as investment or the home office wants us to do the purchase in uk or eu which works out really expensive for my business.

Also please tell me what are the acceptable and unacceptable investments by ukba

Thank you very much

[JohnOhn]

Hello,

I've spent £170,000 using funds I deposited into my business bank account, so I know that counts as an investment of £170k.

I also spent another £40k on business expenses for the same company, but I paid for those expenses directly from my personal bank account. However, again, it was for valid business expenses relating to my company--I just paid from my personal account instead of my business account.

My question is, will the money I used to pay for my business expenses (the company expenses) from my personal bank account be counted as "investment in the company" even though I never moved that money into my business bank account? Or am I f*cked?

[GLL]

Hello

For my business I buy raw materials from India and design and manufacture the final product in uk so my question is the money used to buy raw materials in India will be considered as investment or the home office wants us to do the purchase in uk or eu which works out really expensive for my business.

Also please tell me what are the acceptable and unacceptable investments by ukba

Thank you very much

There is no requirement to purchase materials in the UK or EU, so you can purchase materials from India or anywhere else in the world. You need to make sure that when you do that you make an order on behalf of your company/business (ie invoices are addressed to your company/business) and you pay for the goods from company/business account to avoid complications.

[GLL]

Hello,

I've spent £170,000 using funds I deposited into my business bank account, so I know that counts as an investment of £170k.

I also spent another £40k on business expenses for the same company, but I paid for those expenses directly from my personal bank account. However, again, it was for valid business expenses relating to my company--I just paid from my personal account instead of my business account.

My question is, will the money I used to pay for my business expenses (the company expenses) from my personal bank account be counted as "investment in the company" even though I never moved that money into my business bank account? Or am I f*cked?

Hi John,

In principal the money you spent from your personal account which were spent for the legitimate business purposes will be something considered as spent for the purpose of the business. However here you should check how the £40k that you spent from your personal account is reflected in your company accounts. If the accounts show £200k as company expenses and the accountant will clearly state in the letter that this is the amount which was spent for business purposes and if needed clarify that £40k was spent by you personally for the purpose of the business I suppose that would help.