Switch from Tier 1 GE to Tier 1 E with an already profitable business

[saintbash]

Hi guys,
So I'm a current Tier 1 Graduate Entrepreneur that is looking to switch to the Tier 1 Entrepreneur.
I've already established a business and luckily enough it has been profitable for the last 2 years with an average operating profit of around ~£70k/year and net profits of around ~£40k/year launching the business required little to not personal financial investment on my behalf since it's a tech centred business and had a client list lined up before launch.

Now, considering that I'm the sole shareholder and director of this company, can I use the current profits of the firm as a basis for £50k funds that I require for the Tier 1 Entrepreneur application?
Furthermore, the business has spent around £18k in cost + £50k in corporation tax over the last two years would that be sufficient to claim points for the "already invested" section? the Home office has been quite vague on their guides about the points for"investing" £50k in the current business: does that include paying for corporation tax for instance? since that's technically part of operating a business in the UK.

I'm looking to use £50k profits of the business rather than relying on my own personal funds, for the sole reason that if I were to rely on my own personal money, I will have to withdraw the £50k from the business, pay dividends tax on that and then reinvest the money back into the same business and pay potential capital gains tax on that in the future. So it's literally having to pay 10s of thousands of pounds worth of tax for just taking the money out and back into the same business!

Thanks,

[zimba]

The Tier 1E rules are clear on what investment means and what is considered money invested in a business. Profits generated from the business cannot be used to claim investment points. You must invest your own funds (or third party funds under your name) via an unsecured director's loan OR invest such funds in your business in return for shares in your own company. You must provide specific documents proving this was done in order to score investment points. I suggest to read the Tier 1E guide to get a proper picture on what you are required to do. Circulating money from your business to yourself and then reinvesting it will lead to refusal

https://assets.publishing.service.gov.u ... -_0319.pdf

[saintbash]

Thanks for the answer, however I didn't quite understand the

Circulating money from your business to yourself and then reinvesting it will lead to refusal

.
If I were to pay myself £50k of dividends, pay taxes on those, leave them in my own personal bank account for 90 days and then invest them back in the company as share capital. There's nothing in the guide that prohibits that. Because In the end when I took them out as dividends and paid taxes on them they're officially my own personal funds and are no longer the business'

[saintbash]

and I should be specific and say that I'm still on a Tier 1 GE and haven't switched to the Tier 1 E, so all these question pertain to an initial application.

[zimba]

The source of your funds matters too. You cannot use your own remuneration (like a salary, dividend or a pay out) and count it as invested/spent. This is logical given that the purpose of Tier 1E route is to invest your money to help make profits in UK business(es) not to rely on the profits and then claim them as an investment. The Tier 1E guide used to mention this but for some reason it is omitted in the newer version. However the case worker guide mentions it:

Invested or spent by the applicant’s business excludes spending on all of the following:

• their own remuneration
• buying the business from a previous owner, where the money ultimately goes to that previous owner, rather than into the business being purchased, this
applies:

o irrespective of whether invested funds are received or held directly or indirectly by that previous owner
o regardless of whether the money is channelled through the business on its way to the previous owner, for example, by means of the applicant or business purchasing ‘goodwill’ or other assets which were previously part of the business

• investing in businesses (other than those the migrant is running as self employed or as a director)
• any spending which is not directly for the purpose of establishing or running their own business or businesses

https://assets.publishing.service.gov.u ... v24ext.pdf

[saintbash]

oh yeah that's for after you've actually invested the £50k in your business, you won't be able to use it to pay yourself a remuneration, which obviously makes sense.