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  • FIRST POST
    • socialchaos
    • By socialchaos 19th May 17, 8:38 PM
    • 4Posts
    • 0Thanks
    socialchaos
    Director of a company, best route to get mortgage
    • #1
    • 19th May 17, 8:38 PM
    Director of a company, best route to get mortgage 19th May 17 at 8:38 PM
    nothing to see here
    Last edited by socialchaos; 19-05-2017 at 11:11 PM.
Page 1
    • theartfullodger
    • By theartfullodger 19th May 17, 8:43 PM
    • 8,739 Posts
    • 11,547 Thanks
    theartfullodger
    • #2
    • 19th May 17, 8:43 PM
    • #2
    • 19th May 17, 8:43 PM
    So you've been manipulating - entirely legally of course - your income to keep tax down: And now find mortgages hard to come by because of this.

    Simple solution: Pay yourself like normal people get paid (higher PAYE salary) for a few years &, job done! But you must have known that, surely, someone as "canny" as you eh?

    And you want more help from the "Government"? (You mean in reality from decent hard-working tax-payers...)

    Cheers!
    • Cliveman Pieman
    • By Cliveman Pieman 19th May 17, 8:45 PM
    • 81 Posts
    • 204 Thanks
    Cliveman Pieman
    • #3
    • 19th May 17, 8:45 PM
    • #3
    • 19th May 17, 8:45 PM
    Speak to a mortgage broker, is the direct answer to your question. Strangers on the Internet will not be much help.

    To be tangential, you are asking me as the taxpayer to support your business and now your property empire, this rankles a bit but fair play at least you're honest about it all.
    • agrinnall
    • By agrinnall 19th May 17, 8:58 PM
    • 17,676 Posts
    • 13,379 Thanks
    agrinnall
    • #4
    • 19th May 17, 8:58 PM
    • #4
    • 19th May 17, 8:58 PM
    If what you are paying yourself is all you can afford based on the profits generated by your business, and that amount is currenty below minimum wage, then I don't see how you can possibly thnk you are in any position to get a mortgage just now. You need to bide your time, build up your business so that it is making enough profit to pay yourself a decent amount (salary/dividend combination) and go to a mortgage broker with your audited accounts. I'd say that will be in several years time as a minimum.
    • rjwr
    • By rjwr 19th May 17, 9:07 PM
    • 203 Posts
    • 138 Thanks
    rjwr
    • #5
    • 19th May 17, 9:07 PM
    • #5
    • 19th May 17, 9:07 PM
    VAT is not an optional tax. Well none of them are, so if you claim VAT then you will need to submit a VAT return on a quarterly basis.

    Now if i remember correctly, the VAT threshold for a business, where it makes it viable to claim back VAT is £83,000 turnover a year.

    How can you pay corporation tax if you are a new startup? You pay corporation tax once yearly, and then you have nine months to pay it. In effect, you start work January this year, nothing to pay to the government until September 2018, at the latest.

    As a minimum you have been trading a year to have paid corporation tax and im amazed you would willingly pay it earlier than you need to.

    Usually start up businesses dont pay much in the way of any tax, the costs of setting up in the first year are usually significant and there will be many ways to avoid parting with any unnecessary cash.

    Paying yourself below the minimum wage and claiming tax credits is a new low for any company owner. I'm amazed i read that in the first place. shameful.
    My DFD: http://forums.moneysavingexpert.com/showthread.php?t=5641837
    • Cliveman Pieman
    • By Cliveman Pieman 19th May 17, 9:11 PM
    • 81 Posts
    • 204 Thanks
    Cliveman Pieman
    • #6
    • 19th May 17, 9:11 PM
    • #6
    • 19th May 17, 9:11 PM
    Now if i remember correctly, the VAT threshold for a business, where it makes it viable to claim back VAT is £83,000 turnover a year.
    Originally posted by rjwr
    It can be viable to be VAT registered as long as your input vat exceeds your output, which is possible for a newco. Another reason companies voluntarily register is that your clients do not know that you turnover less than 83k ie you can appear bigger than you actually are.
    • Cliveman Pieman
    • By Cliveman Pieman 19th May 17, 9:20 PM
    • 81 Posts
    • 204 Thanks
    Cliveman Pieman
    • #7
    • 19th May 17, 9:20 PM
    • #7
    • 19th May 17, 9:20 PM
    It's not a one cap fits all situation. I run a marginal business with lots of overheads. Fairplay if we had high margins on all of our stock. Have built this thing from the ground up, 18+ hours a day and have only just started realising a profit as predicted in my cashflow report. 0 income in the first years, robbing peter to pay paul.

    I didn't come on here to get slated or abused. It's hardly unheared of, just take a look on other business forums and you will see im not alone. Lots of directors need a handup so they can have a albeit minimal quality of life while they build a business which will eventually help fund the economy.
    Originally posted by socialchaos
    Yet despite this hardship you want to commit to 25 years worth of debt? You could just rent somewhere else and see if your business continues to grow.

    I don't think people have been particularly harsh, but what you're proposing doesn't exactly smell of roses. But if you want mortgage advice in your undoubtedly complex situation, you need to speak to a broker.
    • ellie27
    • By ellie27 19th May 17, 9:30 PM
    • 1,084 Posts
    • 719 Thanks
    ellie27
    • #8
    • 19th May 17, 9:30 PM
    • #8
    • 19th May 17, 9:30 PM
    Hi guys

    Im a director of a ltd company and Im wondering how best to go about getting a mortgage.

    My current situation is that I pay myself a salary below the tax threshold and less than minimum wage. This gets topped up by tax credits (WC & CT) and housing benefits.
    Originally posted by socialchaos
    That is disgusting! You must be ashamed to admit that?
    • rjwr
    • By rjwr 19th May 17, 9:30 PM
    • 203 Posts
    • 138 Thanks
    rjwr
    • #9
    • 19th May 17, 9:30 PM
    • #9
    • 19th May 17, 9:30 PM
    It's not a one cap fits all situation. I run a marginal business with lots of overheads. Fairplay if we had high margins on all of our stock. Have built this thing from the ground up, 18+ hours a day and have only just started realising a profit as predicted in my cashflow report. 0 income in the first years, robbing peter to pay paul.

    I didn't come on here to get slated or abused. It's hardly unheared of, just take a look on other business forums and you will see im not alone. Lots of directors need a handup so they can have an albeit minimal quality of life while they build a business which will eventually help fund the economy tenfold.

    VAT
    My accountant back then once I had hit the threshold advised me to split my company into different sectors and not to register, I ditched him. I disagree with the corporation mindset of lets dodge the taxman. Everything I'm doing is above board, fair enough there are some loopholes at play but its all in aid of survival.
    Originally posted by socialchaos

    So as per your comment above, your marginal business as you put it turns over in excess of £83,000.

    I find it exceptionally hard to believe that with the current tax system you are not in a position to financially support yourself without claiming benefits from regular tax payers.

    That said, if you need benefits, you wont be able to get a mortgage so your question is redundant.
    My DFD: http://forums.moneysavingexpert.com/showthread.php?t=5641837
    • rjwr
    • By rjwr 19th May 17, 9:34 PM
    • 203 Posts
    • 138 Thanks
    rjwr
    It can be viable to be VAT registered as long as your input vat exceeds your output, which is possible for a newco. Another reason companies voluntarily register is that your clients do not know that you turnover less than 83k ie you can appear bigger than you actually are.
    Originally posted by Cliveman Pieman
    i disagree with this. The affect of claiming back after the initial glory period of claiming back large quantities of VAT severely outweighs the short term benefit of registering for VAT below the threshold.

    I agree with your point that very few but some businesses might benefit from the perception of being larger, however the goal here is to surely increase turnover
    My DFD: http://forums.moneysavingexpert.com/showthread.php?t=5641837
    • rjwr
    • By rjwr 19th May 17, 9:36 PM
    • 203 Posts
    • 138 Thanks
    rjwr
    Hi guys

    Im a director of a ltd company and Im wondering how best to go about getting a mortgage.

    I read this below as:
    My current situation is that I (deliberately) pay myself a salary below the tax threshold and less than minimum wage. This gets topped up by tax credits (WC & CT) and housing benefits. I on occasion also take out directors loans and repay the business.

    I have an excellent credit rating with healthy monthly repayments being paid on credit cards and a 10k personal loan which I have loaned to the business.

    Just wondering how best to go about applying for a mortgage. I know some directors use some kind of a loophole where they pay all of the benefits into the business (Directors loan in) and then pay themselves the whole amount as a salary, though this may well attract some tax. This option may be inefficient, considering I need benefits to you know, live and stuff.

    Otherwise if I were to go to my bank, nationwide, surely they may refuse because I i'm in receipt of benefits?

    Also taking my income into consideration would I still be eligible for help from the government towards deposit? helptobuy etc.

    This may seem a little far fetched but it makes sense to buy if I can. House prices in my area are £750+ but mortgages are £480 per month which is much more affordable.

    Thank you in advance
    Originally posted by socialchaos

    this is your issue and the reason for the lack of willing help
    My DFD: http://forums.moneysavingexpert.com/showthread.php?t=5641837
    • Cliveman Pieman
    • By Cliveman Pieman 19th May 17, 9:39 PM
    • 81 Posts
    • 204 Thanks
    Cliveman Pieman
    i disagree with this. The affect of claiming back after the initial glory period of claiming back large quantities of VAT severely outweighs the short term benefit of registering for VAT below the threshold.

    I agree with your point that very few but some businesses might benefit from the perception of being larger, however the goal here is to surely increase turnover
    Originally posted by rjwr
    I have at least a dozen clients that voluntarily VAT register. You don't know what the OP is selling. What if it's zero rated items? He would be a fool not to voluntarily register if that were the case.
    • rjwr
    • By rjwr 19th May 17, 9:46 PM
    • 203 Posts
    • 138 Thanks
    rjwr
    I have at least a dozen clients that voluntarily VAT register. You don't know what the OP is selling. What if it's zero rated items? He would be a fool not to voluntarily register if that were the case.
    Originally posted by Cliveman Pieman
    Thats a good answer and yes i agree with this. I am aware of zero vat items but clearly not to the extent you seem to be,

    It seems unlikely the OP is selling zero vat items, it would have been mentioned before now,
    My DFD: http://forums.moneysavingexpert.com/showthread.php?t=5641837
    • pleasedelete
    • By pleasedelete 19th May 17, 10:44 PM
    • 2,101 Posts
    • 3,528 Thanks
    pleasedelete
    To get mortgage you have to provide 2 or 3 year proof of income by providing your HMRC SA302 tax calculation- you can access this through your personal online tax account . This shows your total income and the tax that you have paid and that is used as the basis for calculating the amount that you can borrow. The company income has no relevance as you are getting a mortgage and not the company.
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    • katebl
    • By katebl 19th May 17, 10:51 PM
    • 571 Posts
    • 265 Thanks
    katebl
    Surely after 5 years if you can't even pay yourself minimum wage your business isn't viable - at least on paper? Isn't this sort of thing supposed to be investigated?
    • csgohan4
    • By csgohan4 20th May 17, 8:15 AM
    • 3,483 Posts
    • 2,164 Thanks
    csgohan4
    I hope OP gets what they deserve, good luck
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    • AdrianC
    • By AdrianC 20th May 17, 9:18 AM
    • 14,416 Posts
    • 12,741 Thanks
    AdrianC
    I have at least a dozen clients that voluntarily VAT register. You don't know what the OP is selling. What if it's zero rated items? He would be a fool not to voluntarily register if that were the case.
    Originally posted by Cliveman Pieman
    ...or if their customers were all VAT registered businesses, so there's no cost implication to them.

    I don't see a great issue with the OP's situation, as he describes it.
    Hi guys

    Im a director of a ltd company and Im wondering how best to go about getting a mortgage.

    My current situation is that I pay myself a salary below the tax threshold and less than minimum wage. This gets topped up by tax credits (WC & CT) and housing benefits. I on occasion also take out directors loans and repay the business.

    I have an excellent credit rating with healthy monthly repayments being paid on credit cards and a 10k personal loan which I have loaned to the business.

    Just wondering how best to go about applying for a mortgage. I know some directors use some kind of a loophole where they pay all of the benefits into the business (Directors loan in) and then pay themselves the whole amount as a salary, though this may well attract some tax. This option may be inefficient, considering I need benefits to you know, live and stuff.

    Otherwise if I were to go to my bank, nationwide, surely they may refuse because I i'm in receipt of benefits?

    Also taking my income into consideration would I still be eligible for help from the government towards deposit? helptobuy etc.

    This may seem a little far fetched but it makes sense to buy if I can. House prices in my area are £750+ but mortgages are £480 per month which is much more affordable.

    Thank you in advance
    by socialchaos
    He is taking a minimum salary from the business. The rest of the business's profit is remaining in the business - it's not his money. That money is available to the business for reinvestment and growth.

    If he takes a loan from the business, that loan needs to be repaid or converted to (taxable) income. There's no mention of taking any income via dividends - but these would be taxable anyway. In fact, he actually states that there's only recently been a profit after years of establishing the business and making losses - no dividends can be paid if no profit has been made.

    OP - your problem in getting a mortgage will not be because you're in receipt of benefits, but because you only have a small income... The answer is simple. Make more income...
    • AdrianC
    • By AdrianC 20th May 17, 9:19 AM
    • 14,416 Posts
    • 12,741 Thanks
    AdrianC
    Surely after 5 years if you can't even pay yourself minimum wage your business isn't viable - at least on paper? Isn't this sort of thing supposed to be investigated?
    Originally posted by katebl
    The minimum wage does not apply to company directors.
    • MobileSaver
    • By MobileSaver 20th May 17, 9:21 AM
    • 1,161 Posts
    • 1,586 Thanks
    MobileSaver
    I have at least a dozen clients that voluntarily VAT register.
    Originally posted by Cliveman Pieman
    +1

    There are lots of different (perfectly legal and financially sound) reasons why voluntarily registering for VAT is a good idea.

    if you can't even pay yourself minimum wage your business isn't viable - at least on paper? Isn't this sort of thing supposed to be investigated?
    Originally posted by katebl
    Investigated by who and for what?!??! Have you ever heard of an online company called Amazon? It took Amazon 9 years of trading before they made an annual profit...
    Respect to 3 of the greatest actors of all time; amazing people who are totally believable as the characters they play & almost single-handedly make the shows they starred in:

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    • katebl
    • By katebl 20th May 17, 12:49 PM
    • 571 Posts
    • 265 Thanks
    katebl
    The minimum wage does not apply to company directors.
    Originally posted by AdrianC
    I though it was relevant where tax credits are claimed though, due to low wages?
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