Employee of a Limited Company and paid by dividends

[ozskipper]

Hi

I've searched high and low trying to clarify my situation - I'm sure I'm not unique so I'm hoping someone can help!

I'll try to keep it brief:

I work as a Registered Nurse and my placements are through an Agency.

Rather than the Agency pay me directly, I signed up with a Managed Limited Company (FPS) and I am paid a basic salary and the remaining portion of my earnings are paid as a dividend. The dividends make up the majority of my earnings.

I can only be paid by the Managed Limited Company once the Agency has sent them the funds for the work I have performed for one of their clients (ie a hospital). The Managed Limited Company then pays me as a Employee and Shareholder.

Each week I get a payslip which shows my wage and also the dividend paid to me. This includes income tax deductions as well corporate tax deductions and is also a Tax Voucher for the dividends.

I pay tax on all my salary and also on the dividends (although at a lower rate on the dividends - it is legit!).

In terms of applying for the HSMP - I meet all the requirements including the Previous Earnings.

However, where I am really confused is what I am classified as (Salaried Employee; Independent Contractor; Self Employed) and subsequently what documents to provide.

I don't actually run the Limited Company and I don't have a business bank account. I don't bill the Agency directly but rather complete a time sheet and they then forward the funds to the Limited Company who then pay me.

Confused yet?

Anyway, if anyone has had a similar situation and can offer come advice please let me know! I'd really, really appreciate it as my partner is pulling his hair out trying to work it out!

[ball1333]

Hmmm, this might be one for an immigration lawyer, really...apeterso925 has filed the HSMP app through a solicitor who was recommended by others - maybe PM apeterso925 for the solicitor's details?

[gordon]

In your case, see this excerpt from the HSMP FAQ:


29. What is an independent contractor?
Under Previous Earnings on the application form, evidence can be submitted under three different categories, Salaried Earnings; Independent Contractor and Self-Employed. It has been designed this way to help you submit the right evidence to support your claim for previous earnings. The evidence required is different for each category and you must determine which category to use. The type of evidence you have available will help you to determine which best fits your circumstances.

We cannot advise on your employment status but there are some guidelines which you might find help you.

If you operate as a business or as a limited company you will fall into the self-employed category.

If you are an independent contractor you may consider yourself to be self-employed because you do not have continuity of employment with a single employer, but you may only be able to provide some of the required evidence from the self-employed evidence list and some from the employed salaried evidence list. To help cater for this we have created a specific category for Independent Contractors (e.g. some IT Consultants, Freelance Journalists, Artists, Management Consultants etc.)

You might find it helpful to refer to the H.M. Revenue and Customs (HMRC) definition of an independent contractor to help you - Information on employment status for NIC can be found on the HM Revenue and Customs website, under the section on Intermediaries Legislation IR35, found on the A-Z list via the site map on the HMRC website.

____

I think the boldface segment above means that you will have to supply all the supporting materials for the self-employed category.

[ozskipper]

Thanks for the replies....

However, I don't operate the Limited Company - I get paid by one who is paid by the Agency that finds my work (in theory! In practice I have to find my own work).

I'm not a director or officer of the company - just an employee who is paid via salary and dividend.

[choicebro]

Hi

I don't actually run the Limited Company and I don't have a business bank account. I don't bill the Agency directly but rather complete a time sheet and they then forward the funds to the Limited Company who then pay me.

Hey Ozskipper,

Your situation is similar to what I went through - I now have my HSMP.

The year before I applied for my HSMP I was in the UK on a WHP during which time I got a limited company setup to pay myself as an IT contractor - I was the sole director and shareholder - however it was managed by a 3rd party ( in this case 1st contact ).

When I went for my HSMP I was advised that if you own the company and are the sole director & share holder then you are fine and all dividends & wages count towards your income. However if you are not the sole director / owner you can run into problems as the dividends may not count towards your income.

A friend of mine who was paid through an umbrella company was advised that because she was not the sole owner & director that her dividends did not count. That was before the changes in November so I'm not sure if its still that way. Hopefully not as alot of people use those umbrella companys.

I guess the key question is: are you the sole share holder & director for your company? If you are then you are set. If not then you might need to ask an advisor.

The actual process was a huge headache for me, I had to apply twice and only got it on the appeal for the 2nd application. You have to make it very very clear that you are self employed and they should be looking at both dividends and payslips and even then they can easily get confused and discount the dividends.

Hope this helps!

[John]

I don't operate the Limited Company - I get paid by one who is paid by the Agency that finds my work (in theory! In practice I have to find my own work).

I'm not a director or officer of the company - just an employee who is paid via salary and dividend.

But it is your company, or at least you own a class of shares in the company. Otherwise you would not be being paid dividends, would you.

Ozskipper, what is really confusing me here is that there appears to have been no change to the "scheme" you are using, even after the Budget in March this year. Hasn't the "scheme organiser" been in touch with you? Surely, from their point of view, they will cease to offer the service to you, well at the very least organise matters very differently.

[ozskipper]

The limited company has been now wound down because of the change in legislation and I will shortly move to being a direct employee of the agency again.

I don't know that it's my company as such - I didn't set it up, I don't have anything to do with it's day to day running, I don't keep the books and according to the timesheets I'm employee and shareholder.

My partner works directly for a major international company as an employee but also is a shareholder (bought via trading on the SX) that doesn't make it their company does it?

[SYH]

Hey ozkipper, then you are really getting hung up by all the terminology and getting argumentative about whether you own the company or not or whathaveyou. You have a responsibility to prove certain things to the HO as the basis of issuing your visa, arguing the semantics isn't going to get you anywhere. You really just need to look at it from the HO point of view, how can they be sure you are making income and that you are paying taxes. If your income is solely or partially from a salary, then submit a p60, If part of your income is a result of dividends based on this scheme from this company, then you should provide the agreement explaining this arrangement, the dividend voucher and the bank statement showing it went into your account. If your income is coming from invoicing such as someone who owns a company, then you submit your invoice, and bank statement. You might also need to something from HMRC indicating that they feel you have paid your taxes accordingly. For dividends under the scheme your describe and invoicing, then this would be something the HO would be looking for. Choice Bro provides an interesting point that technically the scheme you are under is a bit dodgy which is probably why it is winding down but that was how you arranged your income so you have to submit what you got