LLP for non-residents

[TheGrave]

1. OK. But who will the two members? Will they be you and your mate? Will they be someone else?

I have two options - me and an ex-colleague or me and my brother (less likely to happen) but whoever it is he will work on his own contracts. Or I could involve a relative which won't be doing anything in the company - just for the mere requirement of 2 members.

2. OK. Will these contracts be in the scope of IR35? I guess you will say no. But just because it is an LLP does not mean that it is outside IR35. Out of interest, an LLP is not a company.

IR35 - I haven't heard this one in a while. There are various sources claiming IR35 is not applicable for non-residents working abroad (including this site) but I can't find substantial evidence on HMRC's website:

Contractors' Questions: Is IR35 a factor overseas? :: Contractor UK

I re-read my contract and there is nothing in it pointing to IR35. I can't imagine HMRC sending someone abroad to question my employer for our daily duties and benefits so I wouldn't worry too much about IR35.

4. You write it down as "At the end of the year we draw the line and distribute dividends in a proportion that corresponds to our real contribution (minus the individual expenses made)". As LLPs don't pay dividends, it would be worth referring to drawing profits rather than distributing dividends but nobody will care if you leave it. Or you could make it a bit more complex, it's up to you. You can draw your profit share from the LLP whenever you like. You don't need formality (although it is worth knowing what profits you have made and that the LLP is solvent).

Hm, you bring an interesting point. If they are not withdrawn in the form of dividends how are they classified in the terms of a personal tax return (UK or foreign)? Also - what do I show my local tax authority regarding this income? It should be stated normally on something like a P60 as to what kind of income it is which is normally salary or dividends but in this case won't be either. Capital gains?

5. Profits of an LLP allocated to an individual partner are free of corporation tax. Profits of an LLP allocated to a corporate partner are subject to corporation tax. An LLP does not pay dividends. If a non-resident individual has profits allocated to them then they will pay UK income tax on profits of the trade carried on in the UK. The fact that the customers are overseas does not mean that there is no trade in the UK. A DTA is unlikely to help with that.

I know nothing about VAT.

I read HMRC guidelines for determining whether a foreign company can be regarded as a UK tax resident - it has to do with exercise of control mostly (it's absolute bull if you ask me). My agency does not even have a branch in the UK. The end customer does (which is probably irrelevant) but the headquarters are abroad so their company can't be deemed a UK resident.

6. If there is no UK income tax due because the you are not resident in the UK and the trade is not carried on in the UK then the salaried members rules cannot apply. Otherwise, assuming that both of you have a significant influence on the LLP as a whole then you won't be subject to PAYE/NIC on your drawings as you will fail Condition B. Your last sentence is wrong.

Yes, BUT! Question is, as we are performing the work ourselves don't we need to put ourselves on a salary even if it's an LLP? In my country it's obligatory no matter what the legal form of the company is. You move a muscle - you pay income tax and NICs. Heck, they are even trying to force us paying NICs and income tax on certain income that cannot be regarded as employment by any normal person OR even better - for income received as a natural person

7. No dividends are paid by an LLP. It would be unusual for an overseas tax tax authority to treat an LLP as opaque and so you are likely to just pay overseas income tax / social security on your profits as they arise rather than as they are drawn.

Does it make sense? No. Why not just do what you are planning to do as two sole traders? There would potentially be two VAT registrations but you don't have to trust the other person or take on their risk (e.g. you work hard and make a lot of money, they work hard, spend a lot of money of fancy hotel rooms and but the client goes bust and pays nothing).

Sole proprietors have unlimited liability and that's a good enough reason to me. And I'm not even sure you can register as one if you don't reside or plan to do business in the UK.

Sorry, I missed this one.

[TheGrave]

You've got this all wrong! Suggest you read up about this 183 day rule, tax residency and domicile. Are you all EU citizens? You must be actually....

What's the end result of all this jiggery pokery going to achieve? It's tax avoidance isn't?

We are both EU citizens, correct. Believe me, I've read a lot about the 183-day rules and DTAs as well. The end game is decreasing the amount of taxes currently paid in a legal manner. If it's tax avoidance I wouldn't look into the UK at all. There are more than enough cannibal countries where you can incorporate, do banking and nobody can ever touch you. You want to look till the rest of your life over your shoulder? Be my guest.

So how many days will you (or your partner) spend in the UK?

Zero. We have nothing to do with the UK.

It doesn't work like that as Stek has indicated.

The 183 day rule only really works if you are a large company and even then it doesn't always apply to individual company employees or officers who are sent to work in a particular jurisdiction. Some jurisdictions such as France will tax you personally from day one regardless of what individual or company structure you work through in another EU country.

Firstly no UK contractor who isn't closely related to you or has known you since childhood, so you are like a relation, will agree to go into business with you as it simply isn't worth their while. Secondly even if they are related to you, human nature for close relations is to protect them from trouble the main exception is when people hate their spouse/partner and know the relationship is breaking down.

183-day rule works whether you are a one-man band or a multinational corp. Even if you are stupid enough to become a permanent employee of a company in let's say Belgium if you spend there less than 183 days your are not liable to Belgian tax and you can claim it back if it's already paid (social security is another story). In case you don't spend 183 days in any particular country your are a tax resident based on your centre of vital interests. If such can't be determined than your nationality comes into play.

[stek]

We are both EU citizens, correct. Believe me, I've read a lot about the 183-day rules and DTAs as well. The end game is decreasing the amount of taxes currently paid in a legal manner. If it's tax avoidance I wouldn't look into the UK at all. There are more than enough cannibal countries where you can incorporate, do banking and nobody can ever touch you. You want to look till the rest of your life over your shoulder? Be my guest.



Zero. We have nothing to do with the UK.



183-day rule works whether you are a one-man band or a multinational corp. Even if you are stupid enough to become a permanent employee of a company in let's say Belgium if you spend there less than 183 days your are not liable to Belgian tax and you can claim it back if it's already paid (social security is another story). In case you don't spend 183 days in any particular country your are a tax resident based on your centre of vital interests. If such can't be determined than your nationality comes into play.

OMG, Epic fail!!

Good luck with this, you will need it...

Who's sockie is this? No one is this thick....

[TykeMerc]

I don't get it at all, it seems a fairly absurd scenario to me.

The most ridiculous bit seems to be that a non Brit who isn't UK resident is intending to contract outside the UK and yet you're talking about setting up a UK LLP as a contracting vehicle. There's no logic to the proposed approach and the question posed by Stek seems reasonable, the scenario is so daft that it could be yet another load of utterly fictional bollocks by a sockpuppeteer.

[Iliketax]

If they are not withdrawn in the form of dividends how are they classified in the terms of a personal tax return (UK or foreign)? Also - what do I show my local tax authority regarding this income? It should be stated normally on something like a P60 as to what kind of income it is which is normally salary or dividends but in this case won't be either. Capital gains?

Normally, you will be taxed on your share of the profits as trading income, regardless of whether or not you draw them out of the LLP.

I read HMRC guidelines for determining whether a foreign company can be regarded as a UK tax resident - it has to do with exercise of control mostly (it's absolute bull if you ask me).

Great but you need to sharpen up your googling skills. An LLP is not a company. [And anyway, even if it was a company it wouldn't be a foreign one]

Question is, as we are performing the work ourselves don't we need to put ourselves on a salary even if it's an LLP? In my country it's obligatory no matter what the legal form of the company is. You move a muscle - you pay income tax and NICs. Heck, they are even trying to force us paying NICs and income tax on certain income that cannot be regarded as employment by any normal person OR even better - for income received as a natural person

I've no idea what your local tax system does. But you should probably do a bit more googling on what a partnership is. Partners share in profit and it is the profits that are taxed. How partners draw the money out (e.g. £100 per month) is neither here nor there (unless the salaried members rules apply).

Before you spend too much time on it, it is probably worth finding out whether you would actually be able to get an A1 certificate. I know little about these but it would seems a bit Alice In Wonderland to say that you are normally self-employed in the UK for the A1 but that you don't carry on any of that self-employment in the UK for UK income tax and NIC.

[Iliketax]

There's no logic to the proposed approach and the question posed by Stek seems reasonable, the scenario is so daft that it could be yet another load of utterly fictional bollocks by a sockpuppeteer.

My guess is that the logic is:

1. Oh, I can get a A1 so I don't have to pay foreign social security.
2. Ah, but I'm not resident in the UK and so don't pay any UK tax or NIC.
3. And if the two partners are companies that a nominee of mine owns shares in, and I have nominee directors in two different tax havens then I won't have to pay any tax anywhere.

I got the last bit from the poorly worded, poorly thought through document from Dominca that the OP linked. If my last thought is right then it would be worth googling "How long is the prison sentence for money laundering and tax evasion in the UK and [local country]".

[cojak]

My guess is that the logic is:

1. Oh, I can get a A1 so I don't have to pay foreign social security.
2. Ah, but I'm not resident in the UK and so don't pay any UK tax or NIC.
3. And if the two partners are companies that a nominee of mine owns shares in, and I have nominee directors in two different tax havens then I won't have to pay any tax anywhere.

I got the last bit from the poorly worded, poorly thought through document from Dominca that the OP linked. If my last thought is right then it would be worth googling "How long is the prison sentence for money laundering and tax evasion in the UK and [local country]".

And on that happy note I think that I'll close this thread.