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Financial documents as self employed.

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llcoolj-786
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Financial documents as self employed.

Post by llcoolj-786 » Wed May 18, 2016 6:50 am

Hi all,

I am self employed and an IT contractor and I have been paying myself Lum sum money every month which includes my dividend and salary. For example, my salary should be 700 and dividend 2,000. What I have been doing is every month taking 3,000 and sometimes 4,000 and in the last 12 months all the transactions varied. In order to fulfil the requirements for my spouse visa I should be getting over 18,600 in the last 12 months which I did. But the transactions haven't been smooth as I am not organised. So in one year I have taken say 35,000 which is combining both the salary and dividend. This is what I have shown Hmrc and paid tax for it too. I am the sole director of the company. In my spouse refusal letter they have said we couldn't see your salary going in to your account. My accountant said he's going to write income letter for me and explain the transactions made and work out what was dividend, what was salary and what was directors loan. Has anyone done this before? Will this be sufficient?

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Casa
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Re: Financial documents as self employed.

Post by Casa » Wed May 18, 2016 9:40 am

You are aware that the £18,600 p.a minimum earnings from self-employment is after HMRC allowable business expenses have been deducted from the gross annual income? i.e the amount on which HMRC have calculated tax payable? :?:
(Casa, not CR001)
Please don't send me PMs asking for immigration advice on posts that are on the open forum. If I haven't responded there, it's because I don't have the answer. I'm a moderator, not a legal professional.

llcoolj-786
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Re: Financial documents as self employed.

Post by llcoolj-786 » Wed May 18, 2016 9:59 am

Yes I am
Aware the above figures are after tax deductions.

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Casa
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Re: Financial documents as self employed.

Post by Casa » Wed May 18, 2016 10:18 am

llcoolj-786 wrote:Yes I am
Aware the above figures are after tax deductions.
I think you may have misunderstood. It's not after tax deductions. It's calculated on the figure you declare to HMRC after your business expenses have been deducted from your gross income.
For example.
Gross income = £25.000
Business Expenses = £5,000
£25,000 - £5,000 = £20,000
Nett amount for HMRC tax calculation = £20,000

This nett amount (before tax/NIC deductions) must be above £18,600
(Casa, not CR001)
Please don't send me PMs asking for immigration advice on posts that are on the open forum. If I haven't responded there, it's because I don't have the answer. I'm a moderator, not a legal professional.

Wanderer
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Re: Financial documents as self employed.

Post by Wanderer » Wed May 18, 2016 10:42 am

IT Contractors usually operate via Ltd Co. and pay themselves the optimum amount tax-wise, for most people this is around £700 salary (under the income tax level) and around £2300 dividend, which are tax free (ignori the effect of the dividend tax credit for ease).

So Mr Joe IT Contractor earns around £36,000 net a year, paying no income tax at all and maybe a little bit of NI for pension credit purposes etc.

The the Ltd Co. perspective, the salary is deductable against income for Corporation Tax purposes, but the dividend isn't. So effectively the Company pays 20% CT on that because it's not deductable.

So the accounts for HMRC might show:

Income: £100000
Salaries: £8000
Expenses: £9000

£83000

Dividend £27600

Net: £55400

CT Due: £11800

Grossly simplified obvs.

So the Contractor (and employee) will have a payslip every month and dividend voucher for every distribution, usually done every month too in the IT Contracting field, totalling approx. £3000 every month gross and net.

The Ltd Co. itself will show CT paid as £11,800

If the contractor wants to draw more money they do this by dividend and then enter the heady heights if actually paying personal tax, as the tax credit is used, it's straight to the 40%. And a payment on account for the next tax year.

Salary and dividend should be drawn from bank as separate amounts, it's bad practice to lump them together, and causes issues like this were the OP is unable to match salary and dividends to the amount on the bank statements.
An chéad stad eile Stáisiún Uí Chonghaile....

llcoolj-786
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Re: Financial documents as self employed.

Post by llcoolj-786 » Wed May 18, 2016 10:50 am

The net amount before tax is roughly 50k. My only problem is that my
Accounts weren't structured. For example, I have shown that I been taking both Salary and dividend together rather than two seperate transactions. But my transfers prove that money was taken out from my business account into my personal one within my last tax period of which I had paid tax for fully already. I know it's bad practice but for the purpose of my spouse visa I have letter from accountant

Wanderer
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Re: Financial documents as self employed.

Post by Wanderer » Wed May 18, 2016 10:58 am

llcoolj-786 wrote:The net amount before tax is roughly 50k. My only problem is that my
Accounts weren't structured. For example, I have shown that I been taking both Salary and dividend together rather than two seperate transactions. But my transfers prove that money was taken out from my business account into my personal one within my last tax period of which I had paid tax for fully already. I know it's bad practice but for the purpose of my spouse visa I have letter from accountant
Do you have legal payslips and the Dividend vouchers (and the minutes from the meeting they were issued on might help - it's just a paper excercise anyway).

If you can present those, along with the withdrawals from you business account and the deposits to personal, showing clearly the money moving and balancing, can't see it being an issue.

But you have to present it clearly, so a monkey can follow it, don't bother with the accountants letter, and don't even think about a same-day appoinment, this won't be a tick-box application and the PEO guys won't take it on.
An chéad stad eile Stáisiún Uí Chonghaile....

llcoolj-786
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Re: Financial documents as self employed.

Post by llcoolj-786 » Wed May 18, 2016 11:02 am

Yes I have legal payslips and dividend. The payslip is performed in real time. I have all the relevant documents it's just that the home office was confused on how I have taken my salary and dividend. I know this was bad practice of me but I will
Show dates with transactions made and what I took that month for exnapke salary plus dividend plus expenses etc

Wanderer
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Re: Financial documents as self employed.

Post by Wanderer » Wed May 18, 2016 11:07 am

Remember it all changes this year with the introduction of the dividend tax.
An chéad stad eile Stáisiún Uí Chonghaile....

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