LLP for non-residents

[TheGrave]

Me and a colleague of mine (both IT contractors) are thinking of forming a UK LLP. None of us has anything to do with the UK in personal or professional life. What I've read so far in multiple sources:

1) If the company has no income generated from the UK - 0% corporation tax.
2) If the members of the LLP are non-residents for tax purposes in the UK - no dividend tax on dividend distribution.

Can somebody confirm?

The next, more interesting part - LLPs, unlike LTDs, do not require an appointed director. But:

1) Do they require the people that are actually doing the job that generates the income of the LLP to be on payroll?
2) Are people that are not UK tax residents supposed to pay NICs when working under LLPs and what class(es)? How about income tax on their salaries? As far as I read LLP members are treated as self-employed persons.

Also a bonus question:

1) Has anyone tried to register an LLP for VAT? How about flat-rate scheme?

[Jessica@WhiteFieldTax]

LLPs don't pay Corporation, have directors or have share capital for dividends.

They can be easily registered for VAT.

Can I suggest some further research?

[stek]

I was with an LLP - ended up with a massive tax bill, avoid....

[TheGrave]

I was with an LLP - ended up with a massive tax bill, avoid....

Why did you end up with a massive tax bill? Could it be because you satisfied the 3 conditions mentioned here in 1.5?

https://www.gov.uk/government/upload...hipsReview.pdf

I don't see any obvious risks apart from those discussed in the document above in running an LLP. We have no ties whatsoever to the UK at present. We used to work there, we both have NINs and existing bank accounts so I can only see these as an extra bonus in the formation of an LLP.

For me the 2 outstanding questions are:

1) Are you obliged to put yourself on payroll when you actually perform the work that brings the income of the LLP?
2) How do we draw up the LLP Agreement (or whatever doc needs to be generated) so that we end up in eat-what-you-kill setup?

I do realize it will be a pain in the ass for accounting purposes because we work on different rates, have different expenses but in the end of the day it's a drawback you can to live with. At the end of the year we'll have to spend a week to figure out our internal accounting so that we can distribute profits accordingly. I guess 2 LLP formations by the same members (if allowed at all) to avoid the accounting crap might trigger a red alert to the taxman?

[stek]

I thought HMRC had already targeted LLPs?

[TheGrave]

I thought HMRC had already targeted LLPs?

They did it, yes, because lots of LLPs made their employees non-designated members on a fixed salary + (eventually) a fixed profit share at the end of the year just to escape paying NICs which is something I'm definitely not planning to do:

LLPs and tax: When is a member not a member? - 24 Dec 2013 - Accountancy Age

There are also benefits from a legal point of view in doing so - fixed share partners are not regarded as employees hence reduced liability:

Tiffin vs Lester Aldridge LLP | Hedgeweek

Or "misusing" cars as a tax avoidance method (although I can't completely agree on this one, it's plain bullying to me):

LLP changes may affect 250,000 company cars - fleet news.

It's all because people try to do stupid things to avoid paying tax. In order to get on HMRC radar you need to do something on the following list (mostly):

https://www.gov.uk/government/collec...-the-spotlight

[Iliketax]

For me the 2 outstanding questions are:

1) Are you obliged to put yourself on payroll when you actually perform the work that brings the income of the LLP?
2) How do we draw up the LLP Agreement (or whatever doc needs to be generated) so that we end up in eat-what-you-kill setup?

You are asking questions without giving enough background for a sensible answer. To me, the way you are asking them suggests that you are thinking about something that might be described as dodgy. Also, your questions suggest that your understanding of partnerships isn't fully developed yet.

So, for example, what exactly is it that the LLP will be doing? And what exactly will be done in the UK? The fact that no income comes from the UK does not necessarily mean that there will be no UK tax.

Your questions also have implications with them that suggest something else. So, for example, why do you care about dividend tax if you are not UK resident? Why do you ask about putting yourself on the "payroll"? The obvious answer to that is you are worried about payroll from an employment context. Another answer to that is that you expect to make someone else a partner instead of you, the person doing the work.

How you draw up an LLP agreement is up to you. If you've got an envelope, you can draw it up on the back of that. If you have sixty pages of A4 paper you could use that. It all depends what you want to agree and how important it is to you to cover all the bits and pieces.

[stek]

Smells like an Aberdeen prostitutes crotch, extremely fishy....

[Alan @ BroomeAffinity]

Smells like an Aberdeen prostitutes crotch, extremely fishy....

Absolutely. Got a spare 10ft barge pole?

[TheGrave]

You are asking questions without giving enough background for a sensible answer. To me, the way you are asking them suggests that you are thinking about something that might be described as dodgy. Also, your questions suggest that your understanding of partnerships isn't fully developed yet.

So, for example, what exactly is it that the LLP will be doing? And what exactly will be done in the UK? The fact that no income comes from the UK does not necessarily mean that there will be no UK tax.

Your questions also have implications with them that suggest something else. So, for example, why do you care about dividend tax if you are not UK resident? Why do you ask about putting yourself on the "payroll"? The obvious answer to that is you are worried about payroll from an employment context. Another answer to that is that you expect to make someone else a partner instead of you, the person doing the work.

How you draw up an LLP agreement is up to you. If you've got an envelope, you can draw it up on the back of that. If you have sixty pages of A4 paper you could use that. It all depends what you want to agree and how important it is to you to cover all the bits and pieces.

Dodgy...don't make me laugh I explained in the first post - IT contractors. In the UK we have no business whatsoever and I just want to cover our bases - what kind of taxes and/or NICs we are liable to as non-residents. Hence my question whether we need to put ourselves on payroll. Hence my thoughts about corporate and dividend tax. I'm not worried about any of those things. I just want to do the math so that I can figure whether it's more profitable to move our business to the UK or keep it where it is. If I want to do something dodgy UK is on the bottom of the list of jurisdictions I'd do it in.