International student buying a UK existing business

[Maro]

Hello I am an international student and I have a good opportunity to buy an existing UK business. The question is am I allowed to do this and there will be a manager and a deputy running the whole thing so I will just be the owner till I graduate. will this be acceptable with my current status. Your cooperation is highly appreciated.

 

[ethical PR]

Well we don't know what your current status is, so it's difficult to advise. Are you from an EU country or outside of the EU? What restrictions if any do you have on your student visa in relation to you working in the UK.

Have you done due diligence on the business you are buying to make sure that the figures stack up and that there are no outstanding debts that come with the business or liabilities around issues such as staffing (if any).

If you are from outside the EU and wanted to stay in the UK once you graduate you would then need to apply for a visa to enable you to stay in the UK once you are no longer a student.

 

[Maro]

Hello thanks for your reply. I am international not an EU and my visa allows me to work only for 20 hours per week. I am also not allowed to be self employed. I want to buy a business that is already running there is a manager in place and a deputy and the full staff we be kept in place. So I was think about buying the business as a company so I own all of the shares but I wont be working as a full time or as a director. Is this possible ?

 

[ethical PR]

I'm not sure it really depends on a whole host of personal circumstances. With some visas you are not allowed to 'engage in business'. I would get advice from your university to approach a solicitor that specialising in immigration for advice.

If you are allowed to buy a business. Then do make sure you have an accountant on board and a solicitor and that you have developed a business plan to ensure the business is viable before you go ahead.

 

[thelegalstop]

Hi Maro, despite being a foreign student you can buy any business. If you are over 18 you could set up a company that will be used as a vehicle to buy the UK business where you will be the owner as 100% shareholder and the director would be someone you appoint, in this way you will not be in breach of your visa. PM us if you need more info.

 

[The Resolver]

The issue is not whether the law allows him to buy a business through a limited company (it is clear that he can) but whether to do so breaches the prohibition of 'self-employment'. I haven't had a chance as yet to review the core legislation behind the immigration rules but we already have a well established practice whereby tax law allows HMRC to consider a person is an 'employee' even when all his work is funnelled through a limited company in which he owns all the shares. On that basis I see it as likely that such would be interpreted as a breach of the rules. In simple terms one person earns the profit from the business and owns all the controls but through the structure of a limited company. In normal layman's language ('I work for myself') he is self-employed.

If it was so easy to circumvent the rules then lots would be doing it. Its too obvious a loophole as to exist.

One answer is to have the shares owned by someone close to him who he can trust ( parent?) as well as appoint someone else (the manager ?) as director with a Directors Service Agreement to manage the legal risk of the position being abused. The company can formally employ him up to the permitted 20 hours a week on a salary. At a time when he is free from the restriction, he can take a transfer of the shares. Ideally there should be a trust agreement over the shares but that would increase the risk of the whole arrangement being seen as self-employment. There are other variations.

Obviously taking the profit out as salary is not tax efficient but he has to weight that up against the risk of otherwise breaching the rules. It sort of gets round the rules but , for that he pays more to the UK in tax - seems a 'win-win' for everybody!

There are matters I cannot discuss on this open forum so Maro you are welcome to contact me privately.

 

[thelegalstop]

Hi Resolver, I suggested for him to become a shareholder not a director or NED. You can own shares in many companies whether private limited or listed companies without being considered as you put it an "employee" or "self employed". By the very fact that you own shares does not make you doing business.

 

[The Resolver]

Yes for a minority but not when you own all the shares. In that instance you clearly control everything, since, even though you have a director, you can remove him if you do not approve his decisions, and you alone benefit from all the distributable profits/share value gain.

 

[thelegalstop]

We have to agree to disagree as you pay dividends only when there are profits if any and, if there are profits you are not obliged to declare dividends, you can use the extra cash as reserve/cash flow. Also just by being a sole shareholder does not make you an employee of the company.

Case law is conflicting on this matter thus each case is decided on its merits, however what the law clearly states that: "…an individual who holds the sole or controlling shareholding in a limited company is not to be regarded as an employee for the purposes of the ERA." I hope this clarifies.

 

[Paul Kelly ICHYB]

And phoning Immigration/Visa team is not an option because...?

 

[The Resolver]

The Legal Stop , I agree we disagree but I disagree with the reasons for which you say we disagree.For example, your remarks on dividends do not respond to anything I said. I fully agree with what you say about dividends and didn't say otherwise.

I also fully agree that you cannot be an employee of a company in which you own all the shares. Once again, I did not say otherwise. I was referring to the situation where he did not own any of the shares.

 

[The Resolver]

Consultant - can't see anyone here saying such is not an option. It is, of course, but unwise to rely solely on it. I suspect the question would be ducked.

 

[The Resolver]

I also fully agree that you cannot be an employee of a company in which you own all the shares.

I meant to add , as it was posited ".... for the purposes of the Employment Rights Act"

 

[UK Contractor Accountant]

Agree with the legalstop on this one.

Owning 100% shares in a company as an investment on which you may or may not make a return on via dividend payments does not make you employee or indeed self-employed.

The OP states that he does not intend to work in the business until his visa status permits so it will bit of a stretch to argue that he is self-employed?

 

[The Resolver]

I don't know what else I have to say to make it clear that I also do not agree that such would amount to employment.

However as to "self -employment" all definitions include owning a Company. Whether you do a days work for the company is entirely irrelevant. How HMRC deal with this matter tax wise is also Irrelevant. We are just talking about how immigration interpret the rules.

 

[UK Contractor Accountant]

Do have any decided case law or rulings which you can point us to where it had been decided that owning a controlling shareholding has been regarded as self-employment?

 

[The Resolver]

I am not an immigration lawyer so I have no precedent decisions to hand. I have set up a BAILII search ("student visa" and self-employed) . If Maro or anyone else wants to look for such - click here - On each entry you can search in your browser for 'self-employed' or 'self-employment' , 'limited compant' etc etc. I did a quick scan of one or two and find that the phrase is a given and not really interpreted.

 

[ethical PR]

The elephant in the room here is why the OP wants to buy a company in the UK and whether he sees it as a way to extend his right to stay in the UK once his student visa expires....in his original post he says "so I will just be the owner until I graduate"....implying he wants to stay in the UK.

To me there are several key issues he needs advice on...1) Can he own a business on his student visa 2) if he sees owning a business as a way of being able to stay in the UK, will this be the case 3) he needs professional help to do due diligence before purchasing a business of the scale which has managers and employees.

This is why I suggested he speaks to his university, an immigration lawyer and got professional advice from an accountant and lawyer regarding the viability of the business he wants to buy.

 

[UK Contractor Accountant]

Here is the text from the Home Office Tier 4 Publication

Can I work whilst in the UK?

319. If you are following a course at NQF 6 or QCF 6 or SCQF 9 or above with a sponsor which is a UK recognised body or a UK HEI, or you are undertaking a short-term study abroad degree programme at an overseas recognised body or HEI the following work is allowed:

• no more than 20 hours a week during term time;

• full-time during vacations;

• on a work placement as part of the course, providing the work placement does not amount to more than 50% of the course;

• as a postgraduate doctor on a recognised Foundation Programme, providing you are being sponsored by the UK Foundation Programme Office or Health Education South London.

• as a postgraduate dentist on a recognised Foundation Programme, providing you are being sponsored by Health Education Yorkshire and Humber or Health Education South London;

• as a student union sabbatical officer for up to two years.

If you are following a course at NQF 3/4/5 or QCF 3/4/5 or SCQF 6/7/8, with a sponsor which is a UK HEI, the following work is allowed:

• no more than 10 hours a week during term time;

• full-time during vacations;

• on a work placement as part of the course, providing the work placement does not amount to more than 33% of the course;

323. If you are allowed to work, you must not be self-employed unless you are either on the Doctorate Extension Scheme and you have successfully completed your course, or:

• you have successfully completed a course at degree level or above at a sponsor that is a UK recognised body or a body in receipt of public funding as an HEI from the Department of Employment and Learning in Northern Ireland, the Higher Education Funding Council for England, the Higher Education Funding Council for Wales or the Scottish Funding Council; and

• you have made an application for leave to remain as a Tier 1 (Graduate Entrepreneur) Migrant which is supported by an endorsement from a qualifying Higher Education Institution before your Tier 4 leave has ended (and any appeal against that decision has been determined);

 

[UK Contractor Accountant]

As self-employed is not defined in the Home Office Publications would it not take its ordinary meaning - working for oneself as a freelancer/owner of business rather than for an employer that pays a salary or wage?

Unless the phrase has been defined by Immigration Case Law or rulings I can not quite see what else you can rely upon?