Employment in your own business

[helpingperson]

Hi

Are you allowed to work in your own company if you have Tier 1 Entrepreneur Visa as a employee of your company?

Can we register ourselves on PAYE like other full time staff in our company?


Will expense of your salary count towards investment?

I know these kind of employments don't meet the requirement of creating 2 full time jobs under Tier 1 Entrepreneur.

Thank you.

[prajwal87]

good question. I hope some experienced GURUS can help regarding the issue

Cheers !

[RizKCB]

I am not an experienced guru but I think I could contribute to it.

Entrepreneur Visa's basic aim is on 'One could work only for her business'. So YES you are only allowed to work for your business.

If you work for your business, you can get your salary. For this; you will have to register your company on PAYE and get you salary like any other employee on payroll slip.

Your own(Director's) salary DOES NOT count towards investment.

Your HMRC obligations are straight forward with some extras from HO. HO extras are:
1) Assess to funds and their Investment.
2) Director's salary will not count as investment.
3) Investment must be business investment. Nothing should be in domestic or personal capacity.
4) Create employment for settled person(s).

[MTZ510]

I am not an experienced guru but I think I could contribute to it.
Your own(Director's) salary DOES NOT count towards investment.
Your HMRC obligations are straight forward with some extras from HO. HO extras are:
1) Assess to funds and their Investment.
2) Director's salary will not count as investment.
3) Investment must be business investment. Nothing should be in domestic or personal capacity.
4) Create employment for settled person(s).

I have confusion over this and want to initiate a small brainstorming session over here if anyone is interested.
Director’s salaries as well as staff salary are charged to expenditure account of a business and expenses are never counted as investments then why UKBA has differentiated and have only highlighted the Directors salary for not being counted as the investment?
In business one makes investment through share capital or through director’s loan, then this investment is used in the business for buying fixed assets, purchasing inventories, paying running expenses, payroll etc. At the year end there are two possible scenarios, first that the business made profit from its operation and second there was loss from operations. In case of profit all the expenses including payroll, running expenses, cost of inventories and goods sold are set off against revenues and not through the initial investment (i.e Capital or Director’s loan) but in case of loss these are set off against investment only to the extent of loss.
This whole idea of Directors Salary not becoming part of investment seems to be ridicules unless i am missing something over here. The only scenario i can think of for this particular rule by UKBA is that a director invests £200 K in his business and then the company does nothing and he pays to himself 200 K as salary over period of 3 years and then apply for extension that he has made the investment.

I told you i am confused..... Can anyone clear this confusion?

[Olasunkanmi]

@ helpingperson,
Are you allowed to work in your own company if you have Tier 1 Entrepreneur Visa as a employee of your company?
Can we register ourselves on PAYE like other full time staff in our company?

You as a director will need to register yourself as self-employed/self assessment for tax purposes and you don't need to register yourself on PAYEE as an employee since you as a director can still take dividend from the business but such dividend will have to be taken from profit made by the business and not from the 50k/200k investment funds.

According to Paragraph 41 (d) of Appendix A in the immigration rules.

(d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration. The UK Border Agency reserves the right to request further evidence or otherwise verify that the money will remain available, and to refuse the application if this evidence is not provided or it is unable to satisfactorily verify. ‘Available to him’ means that the funds are:

[helpingperson]

Hi Olasunkanmi,

Thank you for your contribution but I am little confused after reading your comment.

Do you agree with RizKCB above comment that as Tier 1 entrepreneur visa holder you can work in your company and you can register on PAYE?

Please comment on original query.

[RizKCB]

HO has NO concern about our profits and how we take out this amount from business. They are focused all about the amount they declared for investment. Also reinvestment from Dividends could be doubtful unless you do not make FRESH investment fully from initially declared amount i.e. 50K or 200K. Now if we again read it:

According to Paragraph 41 (d) of Appendix A in the immigration rules.
(d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration.

@ MTZ510; I fully agree what you wrote as
"The only scenario I can think of for this particular rule by UKBA is that a director invests £200 K in his business and then the company does nothing and he pays to himself 200 K as salary over period of 3 years and then apply for extension that he has made the investment."

@ Olasunkanmi; We as Director have to register for self assessment using HMRC SA1 form even if we are getting salary on PAYE basis from own company.

This is what my understanding. Any further comments would be appreciated.

[RizKCB]

I have confusion over this and want to initiate a small brainstorming session over here if anyone is interested.
Director’s salaries as well as staff salary are charged to expenditure account of a business and expenses are never counted as investments then why UKBA has differentiated and have only highlighted the Directors salary for not being counted as the investment?
In business one makes investment through share capital or through director’s loan, then this investment is used in the business for buying fixed assets, purchasing inventories, paying running expenses, payroll etc. At the year end there are two possible scenarios, first that the business made profit from its operation and second there was loss from operations. In case of profit all the expenses including payroll, running expenses, cost of inventories and goods sold are set off against revenues and not through the initial investment (i.e Capital or Director’s loan) but in case of loss these are set off against investment only to the extent of loss.
This whole idea of Directors Salary not becoming part of investment seems to be ridicules unless i am missing something over here. The only scenario i can think of for this particular rule by UKBA is that a director invests £200 K in his business and then the company does nothing and he pays to himself 200 K as salary over period of 3 years and then apply for extension that he has made the investment.
I told you i am confused..... Can anyone clear this confusion?

Your confusions are right on spot. I would add following to it.

1) Why HO used the word SPEND and INVESTMENT at various places? It contains confusion in itself and is controversial as well. Generally speaking SPEND could be EXPENDITURES and it could be said as INVESTMENT. It means you are SPENDING but unsure about any outcomes or profits.

2) Investment is the right word where we pre-plan to utilize money for future prospects and profits.

For example:
I am spending money to run my Software business. (Less appropriate, sounds various things in it)
VS
I am investing money to run my Software business. (More appropriate, suggests something out of shell)

Secondly, previously my views were that any expenditures to run my business will not count towards investments. But I have come to know from some accountants and solicitors that in UK whatever you put in Business/Company Account to run business is said to be Investment. It becomes available to Company now and as Director you can not use this amount in personal capacity unless you dont find some legitimate way to use it in personal capacity. After this, (I assume) SPENDING and INVESTING is same thing in UK. If we follow this approach and quote HO rule as follow:
d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration.

It means that anything SPENT (Expenditures OR Investment including insurances, bills, salaries, hiring office, purchasing furniture etc) must be done fully from applicant's own initial amount (Not from reinvesting from profits until full investment of 50K or 200K). But Director's personal expenditures (applicant’s own remuneration or Director's Salary) WILL NOT be part of SPENDING. Same like you said in your comments that Director getting back 200K over 3 years as salaries to prove his investments is not acceptable.

That is what I understand. Any objection and comments are welcome.

[helpingperson]

You raised good points.

Will transfer of money from personal account to company account in form of loan, be investment?



I am bit unclear after repeatedly seeing spent word being used in your comment.

[RizKCB]

@helpinperson

Yes; when you transfer amount from personal to company account is Investment. (Must be unsecured Loan)

AND

Then you have to spend that full amount from Company's account to qualify for extension.


This is what I understand.

[helpingperson]

I think as long as investment is done, this is what is required.

From your previous comment,
d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration.

This means once you have transferred money to business account, and money is there, you are using it as much you need, you are meeting the requirement. It does not say you have to spend it all, it says it must be available until it is spent. It does not say it have to be spent before extension. HO is concerned about investment which can be done by just transferring money to Business account.

[RizKCB]

That is the reason I have mentioned that HO used two words SPEND and INVEST at different places and scenarios. Now come to guidance policy:

"70. You must show that either the full amount of £200,000, or of £50,000 if appropriate, in cash has been invested in business in the UK."
AND
"74. The amount of money invested should not:
• be in the form of a director’s loan, unless it is unsecured and is subordinated in favor of the third-party creditors."

In above stuff HO could be related to transfer funds from personal to Company's account as you said.

Then what does following means:
"75. If you have bought property for your business which includes residential accommodation, we will not accept the value of this part of the property as investment in the business. The value of this part of the property should be deducted from the amount of your investment."
Here they are referring investment as 'Spending' in business out of the company account.
Similarly, in the following section;
"d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration. "
They are referring 'Spent' out of your company account.

Now what you stated: "It does not say you have to spend it all, it says it must be available until it is spent." How can we conclude that HO referring Investment only from transferring money from personal to business account.

Therefore I assume on safer side that HO requires us to spend that required money.

[helpingperson]

Hi Riz,

I feel like you are over-stressing on this.

Please see.

HO is only concerned with investment which can be done by just transferring money from personal account to company account. We all have discussed and we all have agreed on this forum. But I am not saying to leave 100% just in business account and don't spend anything, obviously you spend as much and as you need to fuel your business and to expand it.


Now see my comments relevant to policy bits you copied in your last comment.

"70. You must show that either the full amount of £200,000, or of £50,000 if appropriate, in cash has been invested in business in the UK."

Which can be met by just transferring money from person to business account.

"74. The amount of money invested should not:
• be in the form of a director’s loan, unless it is unsecured and is subordinated in favor of the third-party creditors."

Here it clearly say investment is acceptable in form on unsecured loan to company. This is where you need to focus.


"75. If you have bought property for your business which includes residential accommodation, we will not accept the value of this part of the property as investment in the business. The value of this part of the property should be deducted from the amount of your investment."

This is simple common sense. It is completely different thing to what we discussing. We are discussing investment in form of loan to company. This is referring to buying a residential property. If you buy residential property then this is relevant to you. I don't know how you managed to link this to investment by loan.


"d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration.

Again, please read this properly, HO is saying money must be available to until it is spend. So if you have funds in business account, you meet the requirement. You must have it available until it is spent. There is no time frame no condition to spend it, you can spend it whenever you want. As long as it is available you are good.

Let me know what you think now. I tried my best.

[RizKCB]

Absolutely right

Now what I am saying:

1) At one point HO says Investment from personal to business.

2) At other point HO says Investment from business to buy something.
(It is common sense that if it is not residential property then definitely it is commercial property)

3) At another point HO says ‘Spent’ excludes spending on the applicant’s own remuneration.
Its again saying spending out from business.

Now please define for me from above points What is Investment from HO point of view?

How much and when to spend. lets come after clarification of above point.

[helpingperson]

Riz,

You have understood fully now. I suggested you not to over think as even HO will struggle to clarify you otherwise.

HO is only concerned about investment. You have two options to keep money available into business account all the time or spend it on anything for business, both are fine.

1- You have been explained and you understand or read previous comments of mine.

2. Buying is completely different thing, I am talking about investment by loan and HO allows this. If you are going to buy property then HO have separate rules. It is not relevant to what we discussing.

3.It is telling you what kind of spending is not accepted. It is no where telling you to spend all your investment. You can keep the funds in business and this is enough.



You are not really trying to understand.

[RizKCB]

My friend I am not imposing anything to understand. I am presenting my views.

Lets say:

1) I invest amount of 30K into my business through unsecured Loan. We both agree to say it investment.

2) I dont buy commercial property (Leave it). Instead I buy a company car, an insurance policy, office furniture and hire an office from Company's account. After three years I conclude that all it worth £22,000 to run my business. I dont take out anything from Company's account as Salary for myself. (Leave 'Spent on own remuneration' as well)

3) Now to apply for extension I again transfer 20K into my business from personal acc. At this point Spending become £22000 and remaining amount in business account is £28,000. HO raise the point
"70. You must show that either the full amount of £200,000, or of £50,000 if appropriate, in cash has been invested in business in the UK."

You will certainly say NO: HO cannot raise this question because £22K is already spent in running business and remaining £28K is still in account. So £50K is invested fully, no problem if spent £22K, there is still £28K in business account. (I understand it)

The point I am trying to present is; If HO is also calling INVESTMENT :
> to buy commercial building as an office
> to give salary to employees (other than Director)
Both above points only refers to pay from Business Account just like for Insurance, Office and Car and just like to give salary to other staff. Also Here HO is NOT referring INVESTMENT as injecting money from personal to business. Then how reading the point: "70. You must show that either the full amount of £200,000, or of £50,000 if appropriate, in cash has been invested in business in the UK." can only stick us to think INVESTMENT referred here is the transfer of money from personal to business only. It could also be paying from business account for Insurance, Salaries, car and rent.

As you wrote:
"It is telling you what kind of spending is not accepted." It also means what is acceptable.

[helpingperson]

You have explained whole thing perfectly but still you raised a question, makes me smile.

Anyway, let's try again.

Firstly you agreed that what HO considers investment and that is simple transfer of funds from personal account to business account. Then you raised a question on this.

I kind of understand what is confusing you.

The point I am trying to present is; If HO is also calling INVESTMENT :
> to buy commercial building as an office ( Where does it say to buy commercial property and this will be only way of investing?



> to give salary to employees (other than Director) This is to tell what is included and what is not included in spending. Where it is says that you must spend all money on buying things or etc..?




Look, if you transfer funds from person account to business account, this is investment. Then you need to spend money for the running of business as much you need. Simple is that. Don't you agree with this? If not, then what is your question?

You keep twisting UKBA words to get understanding of that spending is investment, while you keep agreeing that transfer of funds to business account is investment.


I will again say don't over-cook things.

If you still have doubts, then I need your points and questions and HO policy part which support your argument?

But don't bring commercial property in or anything irrelevant to what we discussing here. Let me remind you we are discussing that transfer of funds from personal account to business is investment and you can spend as much you need. While I know this is not only type of investment, you can make investment in million ways.

[RizKCB]

You are still missing the point:

http://www.ukba.homeoffice.gov.uk/sitec ... dance1.pdf

Page 40 of 53

Your focus is on A19

While I am on A20 (Especially last two paragraphs)


Also we take 50K or 200K as maximum amount for this visa but infact these are minimum amounts we must have access to.

[helpingperson]

it clearly says in A20 that unsecured loan is acceptable for investment.


You keep getting answer to your questions but you still mixing things up.

I again say director loan is investment, there is no requirement for spending, you spend as much business needs.

[Olasunkanmi]

Hi Olasunkanmi,

Thank you for your contribution but I am little confused after reading your comment.

Do you agree with RizKCB above comment that as Tier 1 entrepreneur visa holder you can work in your company and you can register on PAYE?

Please comment on original query.

I don't see any reason why anyone on Tier 1 entrepreneur visa will want to register as PAYEE in their own business when they can easily take dividend from the company profit and thereby manage their tax themselves by claiming what is legally allowed. If you register yourself as PAYEE, you will need to pay your tax and NI directly each time payment is done and this payment is still not part of investment.

On the issue of investment in business, money in business account must be spent on the business to qualify for extension according to HO, its actually controversial as some think that cash in business account is also classed as investment, but I haven't seen any evidence to support this interpretation.

[RizKCB]

@helpingperson ; I have not negated you at any point that Unsecured Loan is not investment. I fully agree with you.
I have doubts of A20's last two paragraphs where HO is clearly saying that they will no award points if funds are not fully used. They are also clearly saying it under this section that merely keeping funds in business account will not award points.

My concern is that:
At one side HO says, transferring funds from personal account to Business through Unsecured Loan is investment.
At other side HO says, 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.

My focus is only on this contradiction and NOT to twist the facts in my own way.
Actually you are agreeing on A19 but want to keep your eyes close on A20. Think over contradiction between A19 and A20 and keep smiling on HO not on me.

@Olasunkanmi ; Your concern is absolutely right. It all depends on one's business model and way to save taxation. We could only take Dividend after making profits but Salary could be started since first day but obviously as a director that will not be counted as investment. On PAYE, we could also save taxation keeping it at lower rates and at the same time could take out dividends. The point is that PAYE is not restricted for director itself if she wishes to take salary.

[kayani2012]

hello guys,
This debate is getting heat but still its very informative.
i just need to know one thing if you guys could reply on it please. i am running my company, its going ok but i am having problem to manage expensive which are quite high in beginning of business, so if i do taxi as a self employed to manage my extra expensive to run business smoothly. will it effort on extension???? i will fulfill all requirements of extension but i want to do taxi at night to run my extra expensive such home rent, eating which business is not filling as suppose to so i m struggling...

[Princess of Ammi]

Copy from rizKCB post!!
‘’My concern is that:
At one side HO says, transferring funds from personal account to Business through Unsecured Loan is investment.
At other side HO says, 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.’’

RizKCB I like the way you ask and explain,
Money to be in business account and spending through it, is how you comply with taxation and subsequent matters which includes the UKBA requirement in terms of an extension. Where as a director loan agreement is source of funding to company it is required to have been designed in favour of creditors to company before the investor, a company appoints another board member, emerges or taken over by another company is all relevant. Using business account for all transactions and investments, before the UKBA are the HMRC watchdogs regardless of spending using business account they scrutinise a company and director personal accounts as part of assessments, UKBA would only like to see when and where money is spent, specially at the time of extension.
In addition to above let me tell you guys it does not mean money in business account are counted as invested those who are thinking or thought this way are misled. All amounts to have been invested of which a visa is relevant at the time of extension is unquestionable.
No offence but I recommend you guys to talk on as to where and how to invest money that could eventually be shown as invested, honestly I do not see anything confusing within policy in terms of investment apart from where to invest when there is not no room to invest within business or company one has.

Dear Kayani,
being very respectful and considering your everyday expenses it is hard living but visa conditions do not permit you to to be working as a cabi, by doing so you will be in breach of visa conditions which would mean a leave to have curtained.
while I have seen this happening in my area when I asked why you doing it when it is not permitted they replied we will see that at the time of extension, some of them qualifying for ILR (long residency based)before the extension. well I can not make a comment on why they doing something they aint permiited for...

[MTZ510]

Thank you guys for carrying on with the discussion.

So now we can say that by transferring money in to business bank account we made the INVESTMENT but then we have to use this investment in the business to get the extension.

This brings us to the basic question how to prove that 200K was spent in business?

I have planned to set up a trading business; goods will be imported in to UK and then sold mostly to retailers. No shop, no fixed assets, just a ware house on rent.

If average inventory turnover is 3 months and the cost of inventory is 50K, annual expenses will be 50K and annual turnover will 300K the annual projected accounts will be

Annual Sales........... 300K
Cost..................... 200K
Expenses............... 50K
Profit................... 50K

For projected 300K turnover the investment used will be 50K in inventory and 50K for expenses. This in total is 100K investment used in business. What about rest of investment?

The only way to use entire 200K is to buy some fixed assets for the business.

I don't know whether the people at UKBA are qualified enough to assess the actual investment used in the business.

On a separate note what if we take dividends at year end and then invest in the business?

[helpingperson]

@Olasunkanmi
Riz has given you very good reasons why one wants to work in his/her own company. I can expand it but in short it is tax efficient way.


@RizKCB

74. The amount of money invested should not:
• include the value of any residential accommodation or property development, or
property management; or
• be in the form of a director’s loan, unless it is unsecured and is subordinated in favour
of the third-party creditors.

As per above investment is acceptable in form of unsecured director loan. If not tell me why not?


According to Paragraph 41 (d) of Appendix A in the immigration rules.

(d) The money will remain available to the applicant until such time as it is spent in the establishment or running of the applicant’s business or businesses. ‘Spent’ excludes spending on the applicant’s own remuneration. The UK Border Agency reserves the right to request further evidence or otherwise verify that the money will remain available, and to refuse the application if this evidence is not provided or it is unable to satisfactorily verify. ‘Available to him’ means that the funds are:

This (d) money must be available until it is spent. Where it says it must be all spent? Later part of it tells us that what is included and what is not included in spending. It does not give directions to how much to spend or you must spend.

A20. A loan to the business will not be accepted The investment should not be in the form of
a Director’s loan, unless it is unsecured and subordinated in favour of third-party creditors. We
will use any legal agreement between you and the company to assess this. If no legal agreement
is provided or if the investment appears to be in the form of a loan which does not meet these
conditions, no points will be awarded for this investment.

It is very clear to me from A20 that if investment is made in form of unsecured director loan it is acceptable by UKBA.


Now finally go to attributes section for extension,point no.67 in policy guidance.

A. You have invested, or had invested on your behalf, not less than £200,000 (or
£50,000 if, in your last grant of leave, you were awarded points for funds of £50,000)
directly into one or more businesses in the UK.
20 Points


It is clearly saying investment not spending. Spending and investment are separate things. All above points from policy guidance clearly to me accept investment in form of unsecured director loan.