Query on Earnings

msk1977 · Post by **msk1977** » Thu Sep 15, 2011 12:07 pm

Hi All,

I just now got a contract job and am setting up a limited company. I have a query with regard to earnings.

If I have limited company, can I show income before tax as my earnings ?

i.e. suppose if my contract rate is 300 per day, can I show 75600 (300 x 21 x 12) as my income ?

Or should I consider the amount after VAT diduction as my income ?

Thanks for any help. Any refeferences to UK home office website will be great.

Thanks!

AccountantMatthew · Post by **AccountantMatthew** » Thu Sep 15, 2011 12:42 pm

Take a look at:

http://www.ukba.homeoffice.gov.uk/visas ... documents/

http://www.ukba.homeoffice.gov.uk/visas ... saccounts/

You won't be able to show the Â£75,600 as it is turnover of the company (so is before any type of expenses are deducted) and not your income. It is the profits which are assessed.

ilrtier1 · Post by **ilrtier1** » Thu Sep 15, 2011 1:53 pm

If you have a ltd company,
and have say 10k as salary, and say 50k as dividend,
then I thnk ur income for the year is 10+ 50 x 10/9 = 65.55k.
(But confirm with accountants)

msk1977 · Post by **msk1977** » Thu Sep 15, 2011 2:08 pm

Thanks Mattew,

from the uk home office reference u mentioned,

(f) dividends paid by a company in which the applicant is active in the day-to-day management, or where the applicant receives the dividend as part or all of their remuneration package.

If I show all the income as dividend, then that dividend received can be shown as earnings.. am I correct ? Thats what one of the accountant I approached said.

AccountantMatthew · Post by **AccountantMatthew** » Thu Sep 15, 2011 2:20 pm

A dividend is an appropriation of (post tax) profits.

For a certain level dividend to be declared without getting into legal difficulties (if that's an apt phrase) there must be sufficient distributable reserves in the company; I would suspect for yourself that this is going to be the profit and loss reserves (which is the amount of profit you've accumulated over the years and haven't yet distributed as a dividend).

Again it is all down to profits (and previous profits) rather than turnover. Your accountant will be able to help you determine what you should declare as a dividend.

geriatrix · Post by **geriatrix** » Wed Nov 16, 2011 7:47 pm

msk1977 wrote:Hello,

I have a limited company and my earnings get credited to my business account on weekly basis. And I will be showing my earnings as salary + dividends.

I am transfering the salary I am drawing to my personal account everymonth. Regarding the dividend can I transfer entier divident for the year in one or two transactions or do I need to transfer this also every month ?

geriatrix · Post by **geriatrix** » Wed Nov 16, 2011 7:50 pm

See also Regarding Tier1 extension through limited company

AccountantMatthew · Post by **AccountantMatthew** » Thu Nov 17, 2011 9:03 am

Dividends can be declared as often as you wish.

From a legal point of view the main thing to consider is whether there are sufficient distributable reserves within the company (which for most one person contractor companies means retained profits) - if there aren't sufficient reserves to cover the desired dividend then a dividend cannot lawfully be declared.

msk1977 · Post by **msk1977** » Fri Nov 18, 2011 10:04 pm

Thanks Mattew.

"whether there are sufficient distributable reserves within the company"

Can you kindly elaborate in laymans words pls

. I understand the english words, but did not get the complete meaning of this sentence.

thanks for any clarifications.

AccountantMatthew · Post by **AccountantMatthew** » Sat Nov 19, 2011 8:18 am

No probs - distributable reserves cover more than just retained profits but in your case it's most likely just to mean profits kept in the business. So .....

Assume you made a profit after tax of £10k in year one and £5k in year two and distribute dividends of £7k in each year ....

Year 1:

Retained profits brought forward - 0
Profit - 10
Dividends - 7
Retained profits to carry forward - 3

Year 2:

Retained profits brought forward - 3
Profit - 5
Dividends - 7
Retained profits to carry forward - 1

So in both years you can take out the dividends proposed. However if in year 2 you wanted to declare £10k of dividends then you couldn't as you don't have enough retained profits.

msk1977 · Post by **msk1977** » Thu May 31, 2012 8:08 pm

Hi All,

I need to earn 50K for my extension.(Sep 2012)
In consultation with my tax consultant, my salary and the dividends (Gross) drawn will as below.

7125 Salary from Oct 11- Aug 12 <=== shown as bank transaction
38800 Dividends Oct 11 - Aug 12 <=== shown as bank transaction
4311 Tax credit on dividends <=== NOT shown as bank transaction
Total: 50236

Would this be fine ? Can anybody also confirm that tax credit on dividend is
considered in the earning calculation but it is not shown in bank transaction (from business to personal account).

Thanks in advance.

O_Relly · Post by **O_Relly** » Thu May 31, 2012 8:29 pm

msk1977 wrote:Hi All,

I need to earn 50K for my extension.(Sep 2012)
In consultation with my tax consultant, my salary and the dividends (Gross) drawn will as below.

7125 Salary from Oct 11- Aug 12 <=== shown as bank transaction
38800 Dividends Oct 11 - Aug 12 <=== shown as bank transaction
4311 Tax credit on dividends <=== NOT shown as bank transaction
Total: 50236

Would this be fine ? Can anybody also confirm that tax credit on dividend is
considered in the earning calculation but it is not shown in bank transaction (from business to personal account).

Thanks in advance.

You will claim earnings for Gross dividends (Net Dividends + Tax credit) and Gross earnings, so yes your above calculation is fine.

msk1977 · Post by **msk1977** » Fri Jun 22, 2012 9:41 pm

Hi

I have a question again, with regard to my last question above..

I have to pay the corporate tax in Sept end or Oct which is about £12500

My visa expiry being on 15th Sept, I will apply for extension around 20th August.

I calculated that, by 20th August, after deducting all the salary and dividend, the balance in my business account will be around £10000

Is there any rule that I need to maintain minimum amount that should cover the corporate taxes ? I will anyway be having earnings in Sept with which my account balance will exceed the amount of tax.

My second question is in case I get personal appearance appointment say after August 25th, would that be fine, considering my visa expires on 15th Sept ?

Thanks for any info and answering all my previous queries.

msk1977 · Post by **msk1977** » Sun Jun 24, 2012 11:44 am

Hi All,
Any info on my last post ?

Also the dates on my payslips and the date of transfer of salary from my business accnt to personal accnt, do not match(transfer date is after one month in some cases), will that be of concern to UKBA ? Do I need to include a covering letter to explain this difference ?

Thanks again

geriatrix · Post by **geriatrix** » Sun Jun 24, 2012 3:58 pm

1. Does the policy guidance say anything about it? Read it and you'll know.
2. You may apply until 23:59:59 hours on the date of expiry of current leave.
3. Explanation from accountant will be required as to why it is so.

geriatrix · Post by **geriatrix** » Wed Jun 27, 2012 9:23 pm

msk1977 wrote:Hi

Can someone point me to the form for Tier 1(General) extension ?

Is this same as the one for Tier 1 (General) form ?

Thanks.

geriatrix · Post by **geriatrix** » Wed Jun 27, 2012 9:27 pm

msk1977 wrote:Is this same as the one for Tier 1 (General) form ?

That "is" the form for extension.

msk1977 · Post by **msk1977** » Mon Jul 02, 2012 8:33 pm

sushdmehta Thank you.

One more question relating to funds.

On one particular day I have a money out transaction on my account
that brings down my balance below the required minimum fund maintenance for Tier1 extension. But on the same day again there is a money-in transaction which brings back my balance above the min. fund requirement.

So is this OK ? I think if we consider the balance at the end of the day, it should not be an issue am I correct ?

apologies if such a question has already been asked.

Thank you.

Editing to add one more question on funds. On ukba site it is mentioned that

Dependents of Tier 1 applicants who have been in the UK for less than 12 months min. fund maintenance is 1800 pounds.

Whats confusing for me here is,
is it the dependent being less than 12 months OR the main applicant being less than 12 months ?

Thanks again

msk1977 · Post by **msk1977** » Mon Jul 02, 2012 8:44 pm

I found the answer to my first question above from the guidance document.

It says:
"the most recent closing balance "

So I am safe.

Can anyone please clarify my second question on 12 months for dependent or main applicant please.

Thanks.

geriatrix · Post by **geriatrix** » Mon Jul 02, 2012 10:06 pm

Principal PBS migrant.

msk1977 · Post by **msk1977** » Sat Jul 07, 2012 9:44 pm

Thanks sushdmehta,

And is this the right form for Tier 1 dependant's extension ?

http://www.ukba.homeoffice.gov.uk/visas ... ependants/

msk1977 · Post by **msk1977** » Wed Jul 11, 2012 9:46 pm

Can any one confirm this please ?

Thanks

msk1977 · Post by **msk1977** » Mon Jul 16, 2012 11:50 am

Hi All,

For two of my invoices (of the same date), there has been one payment.
Will that be an issue ?

i.e. I have two invoices of say 1000 each for one particular day. But the agency has made one payment of 2000.

Any issue with that ?

Thank you.

ankitv · Post by **ankitv** » Mon Jul 16, 2012 4:07 pm

Hi All,

For two of my invoices (of the same date), there has been one payment.
Will that be an issue ?

i.e. I have two invoices of say 1000 each for one particular day. But the agency has made one payment of 2000.

Any issue with that ?

Thank you.

Dude - You need an accountant. Hire one, it'll go a long way generally for your ltd company and even for your visa application

kannit · Post by **kannit** » Wed Jul 25, 2012 1:23 pm

ilrtier1 wrote:If you have a ltd company,
and have say 10k as salary, and say 50k as dividend,
then I thnk ur income for the year is 10+ 50 x 10/9 = 65.55k.
(But confirm with accountants)

Why multiplication with 10/9?

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Query on Earnings

Query on Earnings