T1 Extension-can purchase of company shares be counted as 20

Dear all,

I am going to purchase an existing limited company (100% of shares @ 200,000). The vendor will sell 100% of her business to me and got that 200,000 from selling her shares.

Does it count as 200K investment when I apply for extension later?

Many thanks for your advice.

The guidance specifically say it has to be cash investment into the company. The accounts (certified by the Accountant) reflect the investment.
Here's the relevant section from the guidance document
Audited or unaudited accounts must be prepared and signed off in accordance with statutory requirements and must clearly show the investment in money made directly by you, in your own name, or on your behalf and showing your name. You should indicate where this is shown on your evidence.
So I would interpret that the money paid to the current business owner cannot be considered against this 200K, as it will not turn up in the accounts.
In fact, the guidance for the initial application clearly states:
‘Spent’ by your business’ excludes spending on all of the following:
1) your own remuneration,
2) buying the business from a previous owner, where the money goes to that previous owner rather than into the business,

marcnath wrote:The guidance specifically say it has to be cash investment into the company. The accounts (certified by the Accountant) reflect the investment.
Here's the relevant section from the guidance document
Audited or unaudited accounts must be prepared and signed off in accordance with statutory requirements and must clearly show the investment in money made directly by you, in your own name, or on your behalf and showing your name. You should indicate where this is shown on your evidence.
So I would interpret that the money paid to the current business owner cannot be considered against this 200K, as it will not turn up in the accounts.
In fact, the guidance for the initial application clearly states:
‘Spent’ by your business’ excludes spending on all of the following:
1) your own remuneration,
2) buying the business from a previous owner, where the money goes to that previous owner rather than into the business,

Thank you Marcnath!

It sounds really challenging for those who consider into investing into existing business since we either buy the assets (goodwill will normally be asked apart from assets etc. and in many cases the goodwill will not be cheap at all) or buy the shares of existing company. In both cases, the money we spent but taken by the previous owner won't be counted.

In my case, if I invest 200K into buying the share of an existing company, which means I need another 200K to invest into the business.

Thanks again.

@ Younameit

As you already know, the guidance allows "joining/taking over an existing business". If it's there means, the HO/HMRC should have a specific procedure to takeover an existing business without the money directly going to the owner. So, there may be a workaround solution for your situation.

The following is just my opinion and I am not a qualified accountant.

You could first join the company as a director and invest your money as unsecured director's loan. So, now the money belongs to the "company". The previous owner/director sells her shares to the "company" and collects the money from the business account. Now, the "company" hands over all the shares to you as the new director - here is the tricky part as I am not sure (I) if the company buying shares from a director considered as an eligible expense and (ii) if the "company" can give you the shares for free. Assuming it does, you get all the shares of the company and the previous director resigns. In this entire scenario, you are only dealing with the "company" and not with any person per se.

OR

You open a Private Limited Company, invest the money as director's loan, then your company buys the other company for all its assets and shares for 200K. Then there should be a way similar to the above where you can claim all shares.

You should find something along the above lines or in between them. Discuss this with a professional accountant and see if there is a viable option.

Hi Everyone

Younameit hope you find a way around as Attahaas mentioned ,

I am a Tier 1 entrepreneur visa holder and facing the same problem , please can someone recommend me a lawyer , I am moving to Manchester

Many thanks