Contract in Saudi through Ltd Company - Tax Status

[jimmy100]

Hi

I am looking for opinions on my tax situation which seemed clear but I am getting conflicting advice from different accountants and want to get as many facts as possible before speaking to the HMRC.

I have a contract in Saudi Arabia which is through my own one man Ltd company.
- I left the UK on 4th April and will be outside for at least 12 months
- All my duties are carried out in Saudi
- Will only spend about 30 vacation days in the UK in the tax year
- Money is paid from the Saudi company direct into my UK business account
- I have no earned income arising from the UK
- I have completed the P80 before I left the country

Whilst I meet the individual criteria for non resident status there seems to be a question mark over the company. One accountant believes that as the effective control and management of the company (me) is in Saudi then it will be considered non resident for tax purposes and I wont pay UK tax on my earnings. My current accountant feels that I am receiving money from a UK source (my own ltd company) and therefore will pay tax as an individual.

Very confused at the moment so any help would be appreciated - Thanks

[Just1morethen]

I have a number of client contracting overseas and you would be non-resident for tax purposes and therefore yuo should pay all your income from your ltd co as a salary and pay no tax.

HTH.

[rootsnall]

Originally Posted by jimmy100

Hi

I am looking for opinions on my tax situation which seemed clear but I am getting conflicting advice from different accountants and want to get as many facts as possible before speaking to the HMRC.

I have a contract in Saudi Arabia which is through my own one man Ltd company.
- I left the UK on 4th April and will be outside for at least 12 months
- All my duties are carried out in Saudi
- Will only spend about 30 vacation days in the UK in the tax year
- Money is paid from the Saudi company direct into my UK business account
- I have no earned income arising from the UK
- I have completed the P80 before I left the country

Whilst I meet the individual criteria for non resident status there seems to be a question mark over the company. One accountant believes that as the effective control and management of the company (me) is in Saudi then it will be considered non resident for tax purposes and I wont pay UK tax on my earnings. My current accountant feels that I am receiving money from a UK source (my own ltd company) and therefore will pay tax as an individual.

Very confused at the moment so any help would be appreciated - Thanks

Get them to pay it into a personal offshore bank account, involving your UK Ltd Co seems a bit daft.

[NewBoy]

Non-residency is always a tricky one…I spent 9 month in the UAE and although everything suggests otherwise, for some reason my accountant believed me to be considered non-resident during this period (something to do with a special ruling re: the middle east and the Caribbean)…and despite not being able to find anything anywhere on this, I have a letter from the tax man confirming my non-residency for that period!!

In your case, it sounds like you will be fine but I agree with Rootsnall…why muddy the waters by doing it through your limited?? Just get them to pay you as an individual.

[Likely]

Originally Posted by NewBoy

Non-residency is always a tricky one…I spent 9 month in the UAE and although everything suggests otherwise, for some reason my accountant believed me to be considered non-resident during this period (something to do with a special ruling re: the middle east and the Caribbean)…and despite not being able to find anything anywhere on this, I have a letter from the tax man confirming my non-residency for that period!!

In your case, it sounds like you will be fine but I agree with Rootsnall…why muddy the waters by doing it through your limited?? Just get them to pay you as an individual.

Coz the Saudi company has to pay to another company. If not his UK ltd , he has to set up an off shore one.

[jimmy100]

Thanks for the replies.

The reason I went through this route was that it was the quickest way to get a contract agreed and be able to get out of the UK before the tax year started. The only other simple alternative for the saudi company was for me to become a full time employee which I didnt want to do for a number of reasons or contract through another persons UK ltd company.

I can get the basis of the contract changed so if my current situation turns out to be tax inefficient I will take a look at the offshore option - Thanks

[ASB]

Originally Posted by jimmy100

One accountant believes that as the effective control and management of the company (me) is in Saudi then it will be considered non resident for tax purposes and I wont pay UK tax on my earnings.

Distinguish between my and my co. I assume what you meant was:-

"One accountant believes that as the effective control and management of the company (me) is in Saudi then it will be considered non resident for tax purposes and the company wont pay UK tax on it's earnings."

This is likely the case. However you might like to discuss the corporation tax exit charge which can be payable if the company ceases to be UK resident for tax purposes. Also the company may of course become resident somewhere else - probably saudi which may have an impact.

My current accountant feels that I am receiving money from a UK source (my own ltd company) and therefore will pay tax as an individual.

I hope you have either misquoted him, misled him or misinterpreted him.

[jimmy100]

Hi ASB

Yes your interpretation of the first paragraph you highlighted is correct - I did mean the company wont pay UK tax on its earnings.

Thanks for the advice about the exit charge - I will take that up with the HMRC.

As for the second paragraph - thats is what they have said although they have said its a specialist area - maybe they had a bad day! I'm with SJD and I copied their direct quote below:

Our understanding is that you may qualify for non-residency status if you are out of the UK for the whole tax year. However, even as a non-resident, your UK income would still be liable to UK income tax and in our opinion this would include the income you receive from <My Company Ltd>. as a UK company.

[Fan_of_Norrath]

Which ever is the cheapest. Seychelles are cheap for offshore companies. If you can prove your saudi residency, setup offshore company + offshore personal account and pay yourself a salary. If you can't change the company name in the contract, consider redomiciling the UK Ltd company offshore, but that might be expensive in fees.
Personally, I would keep them separate. Offshore earnings go into offshore company, keep UK Ltd for any possible future UK earnings.