Contracting through a UK-registered Ltd Company but tax resident abroad

[deepblueuk]

Hello, this is my first post on this site.

Over the last 5 years, I have been contracting, through my UK-based Ltd company, with London based clients in the IT sector. At the same time, I have been tax-resident in the UK.

I do 100% of the work remotely from my laptop and, hence, I have occasionally been performing the work from my home country - Latvia.

I am planning to relocate to Latvia in a few months, and would come to London for fewer than 5-6 days a year, so in effect I would become a tax resident of Latvia and cease to be a tax-resident in the UK.

One issue that is clear to me is that, since I would continue to work through my UK Ltd Company, the company would continue to pay corporation tax in the UK (at 20%) on all company profits and continue to submit the annual accounts to the UK authorities.

However, what is unclear to me (after spending a lot of time reading a large volume of sources), is whether I would be able to declare and pay all my dividend earnings from my existing UK Ltd company in my new tax-resident country, or if I would need to continue to declare them in the UK and continue to pay tax on them here. I would prefer them to be taxed in Latvia, as the dividend tax rate is much lower there.

I have read that one of the factors to determine this is where the work is performed. In my case, I would be working through my laptop from Latvia, hardly ever coming to the UK. However, the work performed would all be with UK clients, through a UK limited company. So, could i legally declare all my dividends in Latvia and pay tax on them there?

Thanks in advance for any advice on this.

[BlasterBates]

Hello, this is my first post on this site.

One issue that is clear to me is that, since I would continue to work through my UK Ltd Company, the company would continue to pay corporation tax in the UK (at 20%) on all company profits and continue to submit the annual accounts to the UK authorities.

Actually that is probably not correct. You will be working in Latvia so your UK company should be registered in Latvia. A UK Ltd can and should be registered wherever you do the business.

If you are spending 5 or 6 days only in the UK then these would be considered as business trips so there should be no tax to pay at all in the UK.

I would actually advise setting up a new company to make it easier to differentiate between your UK business before you leave the UK and afterwards. Otherwise you will have to keep two sets of accounts. Preferably you would be better with a Latvian company but if your UK client doesn't want to deal with a Latvian company, then set up a UK Ltd and register in Latvia. Plenty of European companies especially in Germany do exactly this.

[LondonManc]

If you have right of substitution, could you sub-contract from your UK business to its Latvian subsidiary company?

One option that an accountant with that sort of knowledge may be able to help with.

[northernladuk]

Substitution is not the same as subcontracting.

[LondonManc]

Substitution is not the same as subcontracting.

True, but you know the general abstract I was looking at.

[ASB]

- The uk company may cease to be uk resident and become latvian resident (my belief is as describe by you it would). There may be latvian regulations to cope with.

- As a non resident taxpayer you dont declare dividends here.

- It is possible to be tax resident in more than one jurisdiction. Though that does not seem likely here.

[deepblueuk]

Clarification

but if your UK client doesn't want to deal with a Latvian company, then set up a UK Ltd and register in Latvia. Plenty of European companies especially in Germany do exactly this.

Unfortunately, this is the case, my client doesn't want to deal with a Latvian company - it must be a UK Ltd.
On this matter, excuse my ignorance, but how can I set up a UK Ltd that will be registered in Latvia? Isn't a UK Ltd by definition one that is registered in the UK?

Thanks for your advice.

[Jessica@WhiteFieldTax]

Unfortunately, this is the case, my client doesn't want to deal with a Latvian company - it must be a UK Ltd.
On this matter, excuse my ignorance, but how can I set up a UK Ltd that will be registered in Latvia? Isn't a UK Ltd by definition one that is registered in the UK?

Thanks for your advice.

It's registered in UK, in terms of Company Registration. That makes it a UK company.

It has, like an individual, to register with an overseas tax jurisdiction, in this case Latvia, if the company is resident there (for all intents and purposes controlled from there)

It will still, in practice, be registered with UK tax authorities as well, and probably have to do returns in both jurisdictions with Double Tax Agreements settling the actual taxing rights.

It's all possible, but you need some Latvian advice.

[northernladuk]

What about him getting a UK business bank account from over there?

[Jessica@WhiteFieldTax]

What about him getting a UK business bank account from over there?

Tedious but possible.