Self employment / small business on spouse visa

Hi all

Partner USC is looking to start a small massage therapy business and be self-employed.

Intially this will be alongside a 'day job' and depending how it goes it might become his full income.

Is self-employment and having your own business allowed on a spouse FLR visa?

I presume he should keep all records of income received and get his books done annually by a recognised bookkeeper to be able to prove income if necessary?

Am I right in thinking his annual income will be 12x his lowest monthly income from the business?

Any other tips and advice greatfully received.

Happy 2023 everyone
G&T

Hi all

Partner USC is looking to start a small massage therapy business and be self-employed.

Intially this will be alongside a 'day job' and depending how it goes it might become his full income.

Is self-employment and having your own business allowed on a spouse FLR visa?

I presume he should keep all records of income received and get his books done annually by a recognised bookkeeper to be able to prove income if necessary?

Am I right in thinking his annual income will be 12x his lowest monthly income from the business?

Any other tips and advice greatfully received.

Happy 2023 everyone
G&T

It's allowed and the income can be used towards the financial requirement but not in the same way as with employment income as you suggest above.

It requires a full years worth of income and lots and lots of tax type paperwork. Using self employment income is not something we recommend doing unless there is absolutely no other option.

So by all means have a go (look first also at the US tax implications)  but keep the day jobs until ILR.

 Take a look here.  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1039148/1.7_-_Financial_requirement.pdf

and here  https://www.gov.uk/guidance/immigration-rules/immigration-rules-appendix-fm-se-family-members-specified-evidence

Thanks as ever Larrabee

I'll try to give some more details in the hope that someone can point us in the right direction in terms of what steps we need to take to avoid the major pitfalls.

We intend that between us we will earn the income requirement for ILR from conventional permanent PAYE roles.  Ultimately we might look to both work for ourselves but we'll do that after ILR.  To my knowledge there are no income requirements for UK citizenship or renouncing US citizenship but if I need correcting on that let me know and we'll keep our conventional jobs a little longer!

Tre will be the sole employee at his business - he's renting the unit/space above a bar inclusive of bills and wifi and will have other small miscellaneous overheads that he can presumably offset against his earnings.  Profit will then be split between paying Tre a salary/pension/NI and leaving some in the business account to cover slower months, additional training courses, new equipment etc

So it feels as uncomplicated as a business can be...but I anticipate complications tax-wise.  It's a four-parter to me atm - Tre's salary for HMRC, Tre's salary for IRS, business reporting for HMRC, and business reporting for IRS.

HMRC reporting worries me less, as I imagine we can just report earnings minus expenses/costs, minus salary.  Reporting his salary will just be the usual income minus personal allowance/NI/pension contributions and pay 20% income tax on the remainder I figure.  I'm not sure how businesses are taxed by HMRC but I assume it's a similar system where you report gross earnings and offset any business expenses and get taxed a percentage of the net? Not sure if Tre's salary gets deducted as part of that?

Onto the IRS: For his salary, I'm hopeful we essentially do what we've been doing, and report the same amount to the IRS as we do to HMRC along with the tax paid to HMRC, and cite the Foreign Earned Income Exclusion and unless his business goes stratospheric there should be nothing additional owing.

Biggest 'but' is how the IRS will want to tax his business?  I'm crossing my fingers that there are similar arrangements in place such that we can report the same gross, net and tax paid figures as we do to HMRC and basically claim to have already paid sufficient tax in the UK - is that the case?
Given the timing, ie I think he'll officially open his doors on 1 Feb, I figure the IRS will want tax up until 31 Dec 2023, but we'll report to HMRC sometime after April this year and then not until April 2024, so it feels like there's some estimating to be done? Or can we defer submitting to the IRS until after we've submitted to HMRC in 2024?

If my worse fears are confirmed and IRS won't recognise business tax paid to HMRC, can anyone provide some guidance regarding our options to help ensure Tre's unfair taxation is minimised?

Thanks everyone! Happy to repost this in another thread if it belongs better elsewhere
G&T

Thanks as ever Larrabee

I'll try to give some more details in the hope that someone can point us in the right direction in terms of what steps we need to take to avoid the major pitfalls.

We intend that between us we will earn the income requirement for ILR from conventional permanent PAYE roles.  Ultimately we might look to both work for ourselves but we'll do that after ILR.  To my knowledge there are no income requirements for UK citizenship or renouncing US citizenship but if I need correcting on that let me know and we'll keep our conventional jobs a little longer!

Tre will be the sole employee at his business - he's renting the unit/space above a bar inclusive of bills and wifi and will have other small miscellaneous overheads that he can presumably offset against his earnings.  Profit will then be split between paying Tre a salary/pension/NI and leaving some in the business account to cover slower months, additional training courses, new equipment etc

So it feels as uncomplicated as a business can be...but I anticipate complications tax-wise.  It's a four-parter to me atm - Tre's salary for HMRC, Tre's salary for IRS, business reporting for HMRC, and business reporting for IRS.

HMRC reporting worries me less, as I imagine we can just report earnings minus expenses/costs, minus salary.  Reporting his salary will just be the usual income minus personal allowance/NI/pension contributions and pay 20% income tax on the remainder I figure.  I'm not sure how businesses are taxed by HMRC but I assume it's a similar system where you report gross earnings and offset any business expenses and get taxed a percentage of the net? Not sure if Tre's salary gets deducted as part of that?

Onto the IRS: For his salary, I'm hopeful we essentially do what we've been doing, and report the same amount to the IRS as we do to HMRC along with the tax paid to HMRC, and cite the Foreign Earned Income Exclusion and unless his business goes stratospheric there should be nothing additional owing.

Biggest 'but' is how the IRS will want to tax his business?  I'm crossing my fingers that there are similar arrangements in place such that we can report the same gross, net and tax paid figures as we do to HMRC and basically claim to have already paid sufficient tax in the UK - is that the case?
Given the timing, ie I think he'll officially open his doors on 1 Feb, I figure the IRS will want tax up until 31 Dec 2023, but we'll report to HMRC sometime after April this year and then not until April 2024, so it feels like there's some estimating to be done? Or can we defer submitting to the IRS until after we've submitted to HMRC in 2024?

If my worse fears are confirmed and IRS won't recognise business tax paid to HMRC, can anyone provide some guidance regarding our options to help ensure Tre's unfair taxation is minimised?

Thanks everyone! Happy to repost this in another thread if it belongs better elsewhere
G&T

Yes, pop this in the tax forum, you'll get more help there. 

https://talk.uk-yankee.com/index.php?board=11.0

Here's a site where IT contractors talk about running their business and paying tax. 
https://forums.contractoruk.com/   

They will be able to provide detailed answers about how to pay tax on the business, along with good recommendations for accountants.  Be sure to avoid posting in the "general" section as the other sections are moderated for professional responses. It's UK based, so will be spot on about HMRC.  They'll be less able to give specific advice about the US side of things. 

Good Luck!   

Hi all

Tre now has a small business of his own, and we need to submit his UK tax return to HMRC before January 2025 (that's HMRC's cutoff date for 2023-2024 taxes).

We want to to ILR in September, and citizenship asap after that, hopefully by the end of the year.

When's the best time to slot in doing the tax return? I'm not sure I'd want to do it while an application was pending in case it threw up questions, so maybe we're best to get it done this month before the ILR goes in? Or between ILR and citizenship?

In theory after citizenship is also possible but if that runs on past the end of January he'd be late with the return.

But if we do it now and HMRC have questions I don't want it jeopardising his ILR as that's the most important thing! So maybe do ILR on the one-week turnaround, then take a week to submit a tax return, then put the citizenship application in??

If anyone has any advice or experience it would be appreciated!
Cheers
Greg