Tension after getting the Tier 1 Visa!! Plzz help

[f317633]

Hi,

I applied for my Tier 1 General visa on 27 Jan 2011 and got my visa on 15 April 2011. Below is my situation for which I need guidance. I would hence appreciate if the senior
moderators can please help me and advise accordingly. I had claimed 25 points by showing £40,000 income for last 12 months. I showed my income from Salary as well as self-employment. I showed the self employed earnings till 20th Jan 2011 and sent the corresponding business bank statements and invoices to UKBA. The net profit from the business was almost £18,000 (as of 20 Jan 2011). In the month of Feb and March, I made some business expenses which has brought down my net income down from £18,700 in January 2011 to almost £11,000 by the close of financial year (05th April 2011) and so I will be filing my self assessment and will pay the tax on £11,000 net profit rather than £18,700 net profit which was in January 2011 when I applied for my visa. Now my query is regarding the income criteria for the Tier 1 General visa. Since my total income has now reduced from the time I applied for my visa, will this create any problems when I go to renew my tier 1 general in next 2 years time, and if UKBA will question me as why I have not paid the tax on the entire £18,700 profit from the self employment which I had sent to them to claim the earning points? Can home office question my eligibility of getting a tier 1 visa, as my net profit has fallen from £18,700 to £11,000.

I also have a second question. I apologise if this is a very stupid question, but I just wanted to clarify my doubts, so please bear with me.

Q: Do I need to continue earning the same level of salary for the 2 years for which I got my Tier 1 general visa?
Eg: As stated above, my visa is valid from April 2011 to April 2013. Currently I am working in a very big company and getting paid every month. Suppose, I lose my job and I literally sit idle for 6-8 months, and then again I start working from March 2012 and by the time I need to file my extension I earn the required salary level. So, is this okk or not? I understand the home office will only look for only the income for the previous 12 calendar months and they should not be bothered if I lose my job and sit idle for 6-8 months.

[Celtic]

Home office will find out when you apply for extension. Applicant normally gets same points for age and education for extension applications and HO use data from initial applications to confirm applicant's points.

You declared your net income not gross and on accountant letter agreed to pay tax on that earnings.

If you decide not to pay tax, then technically you never had enough earnings to claim necessary points to warrant tier 1 general.

[f317633]

Home office will find out when you apply for extension. Applicant normally gets same points for age and education for extension applications and HO use data from initial applications to confirm applicant's points.

You declared your net income not gross and on accountant letter agreed to pay tax on that earnings.

If you decide not to pay tax, then technically you never had enough earnings to claim necessary points to warrant tier 1 general.

Celtic - I dont understand this concept. Business financial year runs until 5th April. I had almost £18700 as net profit in Jan. But during the next 2 months (Feb and March), i had no other income from my business but I had expenses. So, what am i doing wrong if i am filing my tax correctly. I was meeting the salary criteria for Tier 1 in January, so i applied for the visa and got it. Home office needed the income for last 12 months, so i submitted the evidence which i had till January when i applied for the visa. But the business does not remain same every month, so during Feb and March i had business expenses due to which my net income for that financial year dropped. I dont know how I am at fault or why it will be an issue during my extension.

Seniors - can someone please advise. Susdmehta - please advise.

[HSK Accountancy Services]

Home office will find out when you apply for extension. Applicant normally gets same points for age and education for extension applications and HO use data from initial applications to confirm applicant's points.

You declared your net income not gross and on accountant letter agreed to pay tax on that earnings.

If you decide not to pay tax, then technically you never had enough earnings to claim necessary points to warrant tier 1 general.

Celtic - I dont understand this concept. Business financial year runs until 5th April. I had almost £18700 as net profit in Jan. But during the next 2 months (Feb and March), i had no other income from my business but I had expenses. So, what am i doing wrong if i am filing my tax correctly. I was meeting the salary criteria for Tier 1 in January, so i applied for the visa and got it. Home office needed the income for last 12 months, so i submitted the evidence which i had till January when i applied for the visa. But the business does not remain same every month, so during Feb and March i had business expenses due to which my net income for that financial year dropped. I dont know how I am at fault or why it will be an issue during my extension.

Seniors - can someone please advise. Susdmehta - please advise.

Well, you are not the only one in this scenerio. Most of the self-employed Highly skilled migrants showed 'good' net earings to get points but now they dont want to pay the tax on that earning.

I always advise to pay the tax on the amount claimed in case HO cross check at the time of extension or ILR applications. Nobody really know if HO will ever cross check or not but there is very high probability they might do.

It is upto individuals to decide if they want to take that risk or not. In your case you know more than anybody else what were those genuine business expenses?

If those expenses related to period of your accounts but you paid them on later date then you should have booked accrual for that amount. If those were genuine business expenses which you did not knew at the time of application then that should be ok as long as you could prove that at the time of investigation (if any).

Hope that help you and many others.

Cheers

[mulderpf]

I do not agree with the previous poster's advice. When you applied for your visa in January, you applied based on a picture of your situation in January (not what happened subsequent to that). You qualified based on that and the fact that your circumstances changed after the fact, so be it. When you apply for extension, the Home Office will only be interested in the year before extension - if they had to cross-check tax payments for every application then they will never get to actual visa applications.

Think about it in terms of others applying from abroad. They apply, get the visa and then resign to come to the UK. The fact that they earnings have dropped to 0 does not have any impact on their visas or extensions, as long as they then make it up again when they extend.

Business is about profit & losses - if you applied during a profit period then so be it. If you suffered losses subsequent to that, so be it. Home Office is interested in you meeting the points criteria and that's it (as long as it's done legally - e.g. if you actually earned money and didn't pay tax, it's a different story).

[innocentdevil]

tough situation. but as it is advised paying tax is a good notion but I will also agree with mulderpf, you know if you are genuine or not and if you income has dropped then there is no way you can pay higher tax while your income is low.

the application processing time would dramatically increase if HO started cross checking the income and tax payments as they will then have to liaise with HMRC at all times which would then create a big backlog.

I am not self employed so I do not really know how it works out but I do think if you do not pay tax then you become responsible.

It is different for employees like me as we get our salary after deduction of tax from employer and I do know most employers pay tax at the end of year for all of the employees but if for some reason they do not then they are responsible not the employees.

my 2 pence

[opssss]

f317633 just pay the correct tax after your expenses. If they ar etrue, you should not worry about any thing and if they are not genuine then pay the tax to avoid any investigation.

(My 2 Cents )

[tier1_PEO_applicant]

As far as your business, expenses and documents are genuine there is nothing to worry about profit/loss which happens in your business.

[f317633]

I do not agree with the previous poster's advice. When you applied for your visa in January, you applied based on a picture of your situation in January (not what happened subsequent to that). You qualified based on that and the fact that your circumstances changed after the fact, so be it. When you apply for extension, the Home Office will only be interested in the year before extension - if they had to cross-check tax payments for every application then they will never get to actual visa applications.

Think about it in terms of others applying from abroad. They apply, get the visa and then resign to come to the UK. The fact that they earnings have dropped to 0 does not have any impact on their visas or extensions, as long as they then make it up again when they extend.

Business is about profit & losses - if you applied during a profit period then so be it. If you suffered losses subsequent to that, so be it. Home Office is interested in you meeting the points criteria and that's it (as long as it's done legally - e.g. if you actually earned money and didn't pay tax, it's a different story).

In my case, everything is perfectly genuine. I am just worried as if the UKBA will create any issues when i apply for tier 1 extension in next 2 years time. Will they check my details from HMRC and see how much tax i should have paid (as per the document sent to UKBA with my visa application) and how much i have actually paid??? This is something which is bothering me. I am in all the way going to pay the taxes before the deadline. The only difference will be that i will be paying a lesser tax when comapred to my P/L statement whcih i sent to the UKBA in January 2011. This is one point which i am not sure of.

[innocentdevil]

do not worry over something which hasn't yet happened. everything will be fine. they normally don't bother with HMRC

[mulderpf]

Even if they do the checks (which is highly unlikely as the HO & HMRC are quite disjointed), you did nothing wrong. There is nothing that you claimed that was untrue or false. You are talking about something that happened after the fact and there's nothing the HO can do about that.

E.g. as a salaried employee I earned £3000 per month between June 2010 and May 2011 and claimed £18 000 as my annual income in May 2011. In June 2011 I was fired and I only started worked again January 2012 for £1000 per month. I claimed £18000 as my annual income, but claimed £9000 for tax purposes for the period April 2011 to March 2012. These are both the truth, but claim two completely different amount. This happens ALL the time! Just look at the mess the child tax credit system caused because HMRC underestimated how often people's incomes change. Your situation is no different, no worse and there is nothing to be worried about.

Things change - you told them what you knew at that time and things changed after the fact. It would be an unreasonable expectation for HO and HMRC records to match up...even for permanent employees, nevermind self-employed.

[[iD]]

There is no need to worry.
You produced UKBA your periodic accounts, not final accounts. Businesses go up and down and what's important is that you pay tax thats due at the end of financial year.

Also, everytime you go for extension you claim required points. If it means earning 40K then you have to earn 40K. Your earnings doesn't need to be same (or more than) your previous earnings. If earning less than what you earned in previous year can get you required points then you are fine with less earnings.

[f317633]

There is no need to worry.
You produced UKBA your periodic accounts, not final accounts. Businesses go up and down and what's important is that you pay tax thats due at the end of financial year.

Also, everytime you go for extension you claim required points. If it means earning 40K then you have to earn 40K. Your earnings doesn't need to be same (or more than) your previous earnings. If earning less than what you earned in previous year can get you required points then you are fine with less earnings.

Thanks Guys for the response. I spoke to 2 accountants and they advised me to pay the tax on the earnings which i showed to the UKBA (net profit till January). I was again not convinced with his advice. His reason for saying that is incase HO cross checks this with HMRC as to how much tax i had paid this year, then it might be an issue at the time of my Tier 1 extension and also during the ILR. I m not sure what to do.

[mulderpf]

Even if they do cross-check with HMRC, the fact of the matter is the period of earnings in their records does not correspond with the period of earnings in HMRC's records.

This is from the UKBA website about using tax documents:

However, while we have included tax documents in the list of acceptable documents, they will rarely be of use. This is because tax documents are usually produced at the end of a fixed tax period and will therefore not show the entire period for which you are claiming previous earnings unless they are for the exact period claimed. You should therefore be cautious about using these documents unless you are sure they show the exact amount of earnings for which you are claiming points.

I think they get it too...it just seems that it's accountants who don't understand it!

[HSK Accountancy Services]

Even if they do cross-check with HMRC, the fact of the matter is the period of earnings in their records does not correspond with the period of earnings in HMRC's records.

This is from the UKBA website about using tax documents:

However, while we have included tax documents in the list of acceptable documents, they will rarely be of use. This is because tax documents are usually produced at the end of a fixed tax period and will therefore not show the entire period for which you are claiming previous earnings unless they are for the exact period claimed. You should therefore be cautious about using these documents unless you are sure they show the exact amount of earnings for which you are claiming points.

I think they get it too...it just seems that it's accountants who don't under




Since you have taken this on all accountants, I think it is better to explain the logic behind the advice. I am not interested in starting a debate here, so please feel free to disagree if you want. The advice given in my earlier post was general and I did say to OP that if those are genuine business expenses for post accounting period then he did not need to worry.



The question here is not matching the earnings with tax records with HMRC as you quoted above, the question here is about the integrity of accounts and use of creative accounting or deception. Accounts are prepared on accrual basis and not on cash basis. It does not matter when the expenses are paid, the thing matter is period those expenses related. Now I don't know what were those expenses of around £8 k in OP in question but as per experience many people here are "consultants" with no real overheads. In such cases where a 'consultant' paid a big consultancy invoices to other 'consultant' after he had claimed his/her points will raise few questions to any person. Unless you are case worker , I don't see why a case worker will not check previous application records and not decide to randomly check some figures. I agree HO cannot check every single application but there is no harm in checking some random cases.



Lets suppose the OP paid £8 k to other consultant after he claimed points. The question here is determination of period which this £8K relates to.  If it related to past dealings then the accrual should have been booked. Hence his original accounts were not correct. If it is related to future period then he cannot take full expense of £8k in this period as he can take only proportion as rest will be prepayments. Even it is genuine expense of current period then it will also depend if it is capital or revenue expenditure.



I hope that is helpful.

[mulderpf]

Apologies for the generalisation!! I see your point of view and I was coming from the point of view that tax profit and accounting profit always differs. However, if the accounting profit reported to HO was done using creative accounting, then I agree, there are things to worry about in case a cross-check is done.

I'm not completely sure how you would "change" your profit to reflect the need to pay this increased amount of tax if it was legit in the first place.