Payments not considered for extension (except own salary)

The business must spend £50,000 over three years, but certain payments are excluded when calculating the total amount spent.

Everything other than the following counts as investment/amount spent, right?-
-Own salary/dividends
-money paid to former owner to purchase a business
-money invested in purchasing any other businesses
-corporation tax payments
-VAT payments

Is there anything else that is excluded?

But my accountant says employees salary is also not counted as investment

If you've spent the funds invested on salary instead of paying it from the revenue generated, then it's considered for extension.

I understand what u mean but how to proof u r giving salary from ur investment if u look at the structure of any business all the businesses pay salaries from sales or from the revenue nobody pays salaries from his pocket ....this is really confusing we have to clear this issue

The only thing you need to prove is whether you "spent" the "investment" completely within the 3 years on allowed expenses per the guidance. It has nothing to do with how much revenue you generate. It's the same business account you are using for all the purposes.

All you need to do is clearly show the investment and the same or more amount of expenditure (allowable expenses) in the balance sheet, THAT'S ALL!

"Did you spend the 50K or 200k on allowable expenses in 3 years and can you show it on your balance sheet?", if your answer is "YES" then don't worry about revenue.

Successful extension applicants can correct me if I am wrong.

I wish what u saying is right , if salaries are included then extension would be no problem , but next year people will start applying for extension in 50k case lets c

Paying to employees is cinsidered as an investment.
The only requirement is that you should invest 50k in your business account and then spend 50k. That money can be spent in paying employees, buying thing, payment to other cimpanies for your work etc. The amount of revenue that you generate through you business has only to do with your corporation tax.

In simple words transfer 50k to you business account and show that you have spent 50k on your business.

^^ But what if you use the amount invested towards paying corporation tax? I don't think that will be counted as amount spent either.

whiteroses wrote:^^ But what if you use the amount invested towards paying corporation tax? I don't think that will be counted as amount spent either.

tax liability does not constitute investment. Be careful.

Can you REINVEST MONEY? For example, can I transfer £10k from my business acc to my personal acc as my dividents and then reinvest this money by transfering this £10k back to business acc? Any thoughts?

^^ Of course, I am not saying tax liability is investment.
The investment is only the amount that has been provided to the company through a Director's loan or share capital.

Then that amount must be spent towards paying off business liabilities and expenses, but certain expenses and purchases are excluded.
That's why I wondered whether the amount that has been been injected into the company through share capital/loan can then be used to towards paying off the company's corporation tax liability.

And yes, the amount received as dividend can be reinvested into your company as loan/capital.

whiteroses wrote:^^ But what if you use the amount invested towards paying corporation tax? I don't think that will be counted as amount spent either.

@ whiteroses, it is not possible to spent the investment fund to pay corporation tax simply because corporation tax is only paid on company profit and if you declare profit then you can pay corporation tax from the declared profit without affecting your investment funds. But if you declare very low profit or maybe loss, then your investment funds wont be affected at all because the corporation tax on very small profit will not have much effect on your investment funds. For example, if you declare profit of say £1000 for the first accounting period, then the corporation tax on £1000 profit will be either £200 or even less if you take depreciation of equipment into account.

^^ Thank you for your help.

I was curious because my company had a significant tax bill for the first year. As accounting is done on an accrual basis, some of the revenue earned for the period had not been received. The business had to pay tax on amounts that had not been received and therefore I used some of the funds that I had injected into the business to pay the tax at that time.

attahaas wrote:The only thing you need to prove is whether you "spent" the "investment" completely within the 3 years on allowed expenses per the guidance. It has nothing to do with how much revenue you generate. It's the same business account you are using for all the purposes.

All you need to do is clearly show the investment and the same or more amount of expenditure (allowable expenses) in the balance sheet, THAT'S ALL!

"Did you spend the 50K or 200k on allowable expenses in 3 years and can you show it on your balance sheet?", if your answer is "YES" then don't worry about revenue.

Successful extension applicants can correct me if I am wrong.

But your business has to show a profit you cannot make a loss as per guidence
the business should be profitable

cappachino wrote:

attahaas wrote:The only thing you need to prove is whether you "spent" the "investment" completely within the 3 years on allowed expenses per the guidance. It has nothing to do with how much revenue you generate. It's the same business account you are using for all the purposes.

All you need to do is clearly show the investment and the same or more amount of expenditure (allowable expenses) in the balance sheet, THAT'S ALL!

"Did you spend the 50K or 200k on allowable expenses in 3 years and can you show it on your balance sheet?", if your answer is "YES" then don't worry about revenue.

Successful extension applicants can correct me if I am wrong.

But your business has to show a profit you cannot make a loss as per guidence
the business should be profitable

The guidance doesn't really say "the business should be profitable" or "show a profit".

Please go through the last para of A21 on page 54 of 59 in Tier 1 (Entrepreneur) – Policy Guidance UPDATED 06 November 2014, it says

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.

That doesn't "REQUIRE" you to make your business attain certain profitability. The context provided is to warn the visa holders not to put your money idle in the account and claim points for "investment" but to actually make an effort and use the money so as to move the business towards profitability. It's a caution not a command.

When you submit your documentation for extension I am sure the case worker will understand if you made a "genuine effort" to make your business profitable or not, even if you didn't make a profit at all, while meeting the other extension requirements. It is impossible to foresee with absolute certainty that a business will be profitable at any cost.

More experience members may shed more light on this.

cappachino wrote:

attahaas wrote:The only thing you need to prove is whether you "spent" the "investment" completely within the 3 years on allowed expenses per the guidance. It has nothing to do with how much revenue you generate. It's the same business account you are using for all the purposes.

All you need to do is clearly show the investment and the same or more amount of expenditure (allowable expenses) in the balance sheet, THAT'S ALL!

"Did you spend the 50K or 200k on allowable expenses in 3 years and can you show it on your balance sheet?", if your answer is "YES" then don't worry about revenue.

Successful extension applicants can correct me if I am wrong.

But your business has to show a profit you cannot make a loss as per guidence
the business should be profitable

The guidance doesn't really say "the business should be profitable" or "show a profit".

Please go through the last para of A21 on page 54 of 59 in Tier 1 (Entrepreneur) – Policy Guidance UPDATED 06 November 2014, it says

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.

That doesn't "REQUIRE" you to make your business attain certain profitability. The context provided is to warn the visa holders not to put your money idle in the account and claim points for "investment" but to actually make an effort and use the money so as to move the business towards profitability. It's a caution not a command.

When you submit your documentation for extension I am sure the case worker will understand if you made a "genuine effort" to make your business profitable or not, even if you didn't make a profit at all, while meeting the other extension requirements. It is impossible to foresee with absolute certainty that a business will be profitable at any cost.

More experienced members may shed more light on this.

cappachino wrote:

attahaas wrote:The only thing you need to prove is whether you "spent" the "investment" completely within the 3 years on allowed expenses per the guidance. It has nothing to do with how much revenue you generate. It's the same business account you are using for all the purposes.

All you need to do is clearly show the investment and the same or more amount of expenditure (allowable expenses) in the balance sheet, THAT'S ALL!

"Did you spend the 50K or 200k on allowable expenses in 3 years and can you show it on your balance sheet?", if your answer is "YES" then don't worry about revenue.

Successful extension applicants can correct me if I am wrong.

But your business has to show a profit you cannot make a loss as per guidence
the business should be profitable

The guidance doesn't really say "the business should be profitable" or "show a profit".

Please go through the last para of A21 on page 54 of 59 in Tier 1 (Entrepreneur) – Policy Guidance UPDATED 06 November 2014, it says

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.

That doesn't "REQUIRE" you to make your business attain certain profitability. The context provided is to warn the visa holders not to put your money idle in the account and claim points for "investment" but to actually make an effort and use the money so as to move the business towards profitability. It's a caution not a command.

When you submit your documentation for extension I am sure the case worker will understand if you made a "genuine effort" to make your business profitable or not, even if you didn't make a profit at all, while meeting the other extension requirements. It is impossible to foresee with absolute certainty that a business will be profitable at any cost.

More experienced members may shed more light on this.

Does anyone have an email address through which we can contact the UKBA to receive a clarification on what expenses are counted for the purpose of extension?

cappachino wrote:

attahaas wrote:The only thing you need to prove is whether you "spent" the "investment" completely within the 3 years on allowed expenses per the guidance. It has nothing to do with how much revenue you generate. It's the same business account you are using for all the purposes.

All you need to do is clearly show the investment and the same or more amount of expenditure (allowable expenses) in the balance sheet, THAT'S ALL!

"Did you spend the 50K or 200k on allowable expenses in 3 years and can you show it on your balance sheet?", if your answer is "YES" then don't worry about revenue.

Successful extension applicants can correct me if I am wrong.

But your business has to show a profit you cannot make a loss as per guidence
the business should be profitable

There are numerous big businesses that do not make profit for the first few years of commencing operation so the wording of HO doesn't say you must make profit, it mean that you should use your money to trade and not leave money idle in business account. Nobody can guarantee a profit for a business and that's why business always spend money as investment to grow the business in order that they can make profit at the long run

ThIs is risky
it does say profitable
hence you make a loss and might be in for a surprise at the time of extention HO needs just one reason to reject your application n this might be it