Money invested as Loan

"Director’s loans however are permitted to remain in a bank account, provided the loan is not called in. "
So I don't have to spend all the money provided it is a loan, but I must spend any other form of investment before I can extend my visa? What is the logic behind this?

Here is the link:
https://www.gov.uk/government/uploads/s ... reneur.pdf

I am not sure but this implies that if you are doing business as a self employed person then you have to spend the money in business as the money left in self employed business account is legally speaking his own money and therefore cannot be counted as investment. Where as the money in business account of a limited company belongs to business and is therefore counted as investment.

That's how things really are in accounting and finance terms.

Thank you for your reply.

I understand that; however, what I don't get is why money deposited in the account is acceptable as investment if it is a Director's loan, but not if it is deposited as share capital. Why do we have to spend the share capital funds to show investment, but don't have to meet this requirement for a Director's loan at the time of extension?

Same applies for Share capital too but they have further clarified the directors loan by mentioning over here because share capital cannot be withdrawn unless you go into liquidation or winding up where as Directors loan can be withdrawn when ever required. I believe they have mentioned that a subordinated director's loan which cannot be withdrawn for specific time can stay in business bank account and will be accepted as money invested.

It my interpretation as in accounting practices subordinated loan is considered as equity.

whiteroses wrote:Thank you for your reply.

I understand that; however, what I don't get is why money deposited in the account is acceptable as investment if it is a Director's loan, but not if it is deposited as share capital. Why do we have to spend the share capital funds to show investment, but don't have to meet this requirement for a Director's loan at the time of extension?

HI MTZ510,

just a quick question ..... I have got Tier 1 visa after a long battle .... regarding investment I need bit of help as since I got visa which was (april 2014) I have transferred all the funds into business account and my business account balance is £50K plus at the moment and I am going to invest into business and will use all the funds from business account as needed .... eg (office deposit, furniture, equipment's etc) my question is I didn't do any directors loan agreement or anything I just simply transferred funds from personal account into business and will invest into business directly from business account ..... is that the right way of doing it ? or do I need to invest in form of director's loan or shares?


please advice, you help will be highly appreciated as I am not a account person and don't have much knowledge about this .... I been to one accountant and he is ACCA certified and I had discuss this with him and he said if funds in your personal account just transfer into business account and start investing from there.

regards

regards

MTZ510 wrote:Same applies for Share capital too but they have further clarified the directors loan by mentioning over here because share capital cannot be withdrawn unless you go into liquidation or winding up where as Directors loan can be withdrawn when ever required. I believe they have mentioned that a subordinated director's loan which cannot be withdrawn for specific time can stay in business bank account and will be accepted as money invested.

It my interpretation as in accounting practices subordinated loan is considered as equity.

whiteroses wrote:Thank you for your reply.

I understand that; however, what I don't get is why money deposited in the account is acceptable as investment if it is a Director's loan, but not if it is deposited as share capital. Why do we have to spend the share capital funds to show investment, but don't have to meet this requirement for a Director's loan at the time of extension?

What is the structure of your business? is it self employed or limited company?

If its a limited company then the moment you transferred funds from your personal account to company's business account it automatically is assumed as a loan by the director to the company. In the annual accounts your accountant will show the funds transferred/invested by you into the company's bank account as Director's Loan.

For extension purpose you will be required to submit a subordination agreement between you and your company stating that the director loan is subordinated in favor of third parties creditors and is repayable after certain period of time ( in my opinion 5 years).

rehan01 wrote:HI MTZ510,

just a quick question ..... I have got Tier 1 visa after a long battle .... regarding investment I need bit of help as since I got visa which was (april 2014) I have transferred all the funds into business account and my business account balance is £50K plus at the moment and I am going to invest into business and will use all the funds from business account as needed .... eg (office deposit, furniture, equipment's etc) my question is I didn't do any directors loan agreement or anything I just simply transferred funds from personal account into business and will invest into business directly from business account ..... is that the right way of doing it ? or do I need to invest in form of director's loan or shares?


please advice, you help will be highly appreciated as I am not a account person and don't have much knowledge about this .... I been to one accountant and he is ACCA certified and I had discuss this with him and he said if funds in your personal account just transfer into business account and start investing from there.

regards

regards

MTZ510 wrote:Same applies for Share capital too but they have further clarified the directors loan by mentioning over here because share capital cannot be withdrawn unless you go into liquidation or winding up where as Directors loan can be withdrawn when ever required. I believe they have mentioned that a subordinated director's loan which cannot be withdrawn for specific time can stay in business bank account and will be accepted as money invested.

It my interpretation as in accounting practices subordinated loan is considered as equity.

whiteroses wrote:Thank you for your reply.

I understand that; however, what I don't get is why money deposited in the account is acceptable as investment if it is a Director's loan, but not if it is deposited as share capital. Why do we have to spend the share capital funds to show investment, but don't have to meet this requirement for a Director's loan at the time of extension?

Thx mtz510,

Yes its ltd company and thanks for the advice will ask accountant for more clarification on this.

Regards

[quote="MTZ510"]What is the structure of your business? is it self employed or limited company?

If its a limited company then the moment you transferred funds from your personal account to company's business account it automatically is assumed as a loan by the director to the company. In the annual accounts your accountant will show the funds transferred/invested by you into the company's bank account as Director's Loan.

For extension purpose you will be required to submit a subordination agreement between you and your company stating that the director loan is subordinated in favor of third parties creditors and is repayable after certain period of time ( in my opinion 5 years).




[quote="rehan01"]HI MTZ510,

just a quick question ..... I have got Tier 1 visa after a long battle .... regarding investment I need bit of help as since I got visa which was (april 2014) I have transferred all the funds into business account and my business account balance is £50K plus at the moment and I am going to invest into business and will use all the funds from business account as needed .... eg (office deposit, furniture, equipment's etc) my question is I didn't do any directors loan agreement or anything I just simply transferred funds from personal account into business and will invest into business directly from business account ..... is that the right way of doing it ? or do I need to invest in form of director's loan or shares?


please advice, you help will be highly appreciated as I am not a account person and don't have much knowledge about this .... I been to one accountant and he is ACCA certified and I had discuss this with him and he said if funds in your personal account just transfer into business account and start investing from there.

regards

Is this is a change in policy guidance regarding Director's loan(if it is)or amount to be in business account will be counted as investment even if it is not fully spent for growth.

Can someone please explain ? as previously discussed money must be spent and money simply hanging in business account was not considered as "Investment "
If for example I have given 50,000 as Directors loan to company and before extension I have invested 30,000 in different expenditures(excluding own remuneration) and 20,000 is in company's account .will it be OK

Any new info about this??

this is very good topic to dicuss, can anyone please explain what activities are considered as investment coz
i heard paying salaries to employee and office rent etc is will not be counted as investment so please tell me what activities are counted as investment to show that 50k has been ivvested..

your reply will be appreciated

Yes Accountant is saying right, it's accountant job at year end to do all paper work. For you, you need to transfer money in business account and start spending it.

rehan01 wrote:HI MTZ510,

just a quick question ..... I have got Tier 1 visa after a long battle .... regarding investment I need bit of help as since I got visa which was (april 2014) I have transferred all the funds into business account and my business account balance is £50K plus at the moment and I am going to invest into business and will use all the funds from business account as needed .... eg (office deposit, furniture, equipment's etc) my question is I didn't do any directors loan agreement or anything I just simply transferred funds from personal account into business and will invest into business directly from business account ..... is that the right way of doing it ? or do I need to invest in form of director's loan or shares?


please advice, you help will be highly appreciated as I am not a account person and don't have much knowledge about this .... I been to one accountant and he is ACCA certified and I had discuss this with him and he said if funds in your personal account just transfer into business account and start investing from there.

regards

regards

MTZ510 wrote:Same applies for Share capital too but they have further clarified the directors loan by mentioning over here because share capital cannot be withdrawn unless you go into liquidation or winding up where as Directors loan can be withdrawn when ever required. I believe they have mentioned that a subordinated director's loan which cannot be withdrawn for specific time can stay in business bank account and will be accepted as money invested.

It my interpretation as in accounting practices subordinated loan is considered as equity.

whiteroses wrote:Thank you for your reply.

I understand that; however, what I don't get is why money deposited in the account is acceptable as investment if it is a Director's loan, but not if it is deposited as share capital. Why do we have to spend the share capital funds to show investment, but don't have to meet this requirement for a Director's loan at the time of extension?

Hello

Can some one please send me a link on guidance to investment please?

I am not a account person but want to understand about the policy guidance so that there is no issue during the extension!

Please do reply

Sound wrote:Hello

Can some one please send me a link on guidance to investment please?

I am not a account person but want to understand about the policy guidance so that there is no issue during the extension!

Please do reply

Hope this will help. Go to page 47 of the latest guidance:

Tier 1 (Entrepreneur) Visa Policy Guidance

Regards,
Krishna.

Well, the conundrum most people are banging their heads over is that in the policy guidance page 47 it says that the money "has to be spent fully", whereas in other places it says that the money has to be kept in a UK business account until it is spent on the business, without explaining what timeframe the "until" implies.

I don't know if they are being deliberately vague or are just erroneously using the terms "spend" and "invest" interchangeably.

Anyone wanna take a shot at this?

MTZ510 wrote:Same applies for Share capital too but they have further clarified the directors loan by mentioning over here because share capital cannot be withdrawn unless you go into liquidation or winding up where as Directors loan can be withdrawn when ever required. I believe they have mentioned that a subordinated director's loan which cannot be withdrawn for specific time can stay in business bank account and will be accepted as money invested.

It my interpretation as in accounting practices subordinated loan is considered as equity.

whiteroses wrote:Thank you for your reply.

I understand that; however, what I don't get is why money deposited in the account is acceptable as investment if it is a Director's loan, but not if it is deposited as share capital. Why do we have to spend the share capital funds to show investment, but don't have to meet this requirement for a Director's loan at the time of extension?

.........................................................................
Dear brother can any body assist me my visa extension is due and i want to do investment as director loan. but my confusion is how shall i show this unsecured and subordinated director loan in annual account whether the director loan will be shown in liability side or where

Unsecured and Subordinated Directors loan will appear on Equity & Liability side of balance sheet and is considered as part of Equity.

My advice , hire the services of an accountant because you have to submit a letter from your accountant along with your un audited accounts for extension application.

If you don't mind sharing when is your extension due and what sort of business you are doing?

luqmanzaheer wrote: Dear brother can any body assist me my visa extension is due and i want to do investment as director loan. but my confusion is how shall i show this unsecured and subordinated director loan in annual account whether the director loan will be shown in liability side or where

i am running MONEY REMITTANCE COMPANY AND I HAVE TRANSFERRED 50000 POUND IN MY COMPANY ACCOUNT FROM PERSONAL ACCOUNT AND I WANT TO SHOW THIS AS DIRECTOR LOAN AND MY EXTENSION IS DUE IN MARCH 2015. I AM VERY CONFUSE REGARDING LIKE I TRANSFERRED FUNDS FROM PERSONAL TO COMPANY ACCOUNT IS THIS WAY IS RIGHT, WHAT YOU SAY WHAT I NEED TO DO

Is it a Limited Company ? What is the Share Capital of the company?

Assuming that it is, as you said you are the Director of Company and the share capital is not 50K which i hope isn't, the transfer of funds from personal account to Company account is considered as Directors Loan . And should appear in your balance sheet as Director loan.

luqmanzaheer wrote:i am running MONEY REMITTANCE COMPANY AND I HAVE TRANSFERRED 50000 POUND IN MY COMPANY ACCOUNT FROM PERSONAL ACCOUNT AND I WANT TO SHOW THIS AS DIRECTOR LOAN AND MY EXTENSION IS DUE IN MARCH 2015. I AM VERY CONFUSE REGARDING LIKE I TRANSFERRED FUNDS FROM PERSONAL TO COMPANY ACCOUNT IS THIS WAY IS RIGHT, WHAT YOU SAY WHAT I NEED TO DO

ya private limited company

MTZ510 wrote:Unsecured and Subordinated Directors loan will appear on Equity & Liability side of balance sheet and is considered as part of Equity.

My advice , hire the services of an accountant because you have to submit a letter from your accountant along with your un audited accounts for extension application.

If you don't mind sharing when is your extension due and what sort of business you are doing?

luqmanzaheer wrote: Dear brother can any body assist me my visa extension is due and i want to do investment as director loan. but my confusion is how shall i show this unsecured and subordinated director loan in annual account whether the director loan will be shown in liability side or where

hi friends i am very confuse my accountant says director loan only shows in liability section in annual account not equity please help me out is he right ?

i have transferred 50000 pound from personal to company account and i want to show as director loan as i seen in this website some people says we need to show director loan in liability and equity section in balance sheet in annual accounts. help please if you have any knowledge?

Its a non current liability and should appear in balance sheet as Liability. In the notes to accounts it should be mentioned that the directors loan is subordinated and unsecured.

The link that I have provided in my second post has been updated and still includes the following text:

"The money must be used in the business to encourage growth or expansion, to improve
services or products and to make sure the business is profitable. Director’s loans however
are permitted to remain in a bank account, provided the loan is not called in."

I am not sure why there are two versions of the guidance, but if someone has a contact email for the Entrepreneur Visa team, that please let me know. I will email them to confirm whether the entire loan has to be spent or not.

luqmanzaheer wrote:i am running MONEY REMITTANCE COMPANY AND I HAVE TRANSFERRED 50000 POUND IN MY COMPANY ACCOUNT FROM PERSONAL ACCOUNT AND I WANT TO SHOW THIS AS DIRECTOR LOAN AND MY EXTENSION IS DUE IN MARCH 2015. I AM VERY CONFUSE REGARDING LIKE I TRANSFERRED FUNDS FROM PERSONAL TO COMPANY ACCOUNT IS THIS WAY IS RIGHT, WHAT YOU SAY WHAT I NEED TO DO

Get an accountant and ask him in detail! There is lot of tax matters involved whichever way you go.

why is share capital not a good choice?