Ltd Co contractor moving to New Zealand

[bubble99]

Hi all - interested in some advice.

I'm a kiwi who has been living in the UK for about 16 years. I'll be returning to NZ later this year to live. The last few years in the UK I have been using limited company to contract through (sole director/shareholder) and a decent level of cash has built up as my personal overheads are not huge.

I'm aware NZ has a transitional residents tax exemption (detailed here): https://www.ird.govt.nz/income-tax-i...reign-inc.html

I believe I qualify as I've lived out of NZ for 10+ years and I'm not currently a tax resident there.

It says for those that qualify, you don't pay tax on your overseas income for 48 months. Qualifying income includes dividends.

Can I.... move to NZ -> become tax resident (which I think is fairly quick process if you buy a property) -> claim the resident tax exemption (its not clear I have to actually claim it or it automatically applies upon entry) -> pay myself large dividend (tax free) to clear out company apart from enough to cover any remaining company tax or VAT -> close UK company -> live happily ever after.

Is that possible or am I living in a dream world? Does anyone have any experience with this? Obviously I want do it properly with no HMRC or IRD comeback.

Also, say I live in NZ for 2/3 years but then we can't settle and go back to the UK.... at that point would HMRC decide they actually would quite like all the tax related to the large dividend?

Any other ideas for extracting the cash reserves?

Appreciate any advice people can give. Thanks

[northernladuk]

All that stops you doing in being taxed in both countries, not avoid tax altogether no?

Does this help?

https://www.gov.uk/government/public...and-individual

[bubble99]

Thanks Northern... I don't see any mention of dividends in that form though.... it talks about royalties / interest / pensions.....

I notice in the guidance notes to this form https://assets.publishing.service.go...Notes_2018.pdf on pg 4 it says

Capital Gains Tax
You make a gain or loss if you sell or pass on all, or part of,
something you own (an asset), such as company shares or
property. You aren’t normally liable to UK Capital Gains Tax
if you’re not resident in the UK.

How does it work with MVL's? When you liquidate a company, is whats left over a capital gain? if I do it when I become non uk resident..... would I therefore not have to pay Cap Gains Tax?

[Maslins]

How does it work with MVL's? When you liquidate a company, is whats left over a capital gain? if I do it when I become non uk resident..... would I therefore not have to pay Cap Gains Tax?

Maslins had a client who left to live in NZ a few years ago. I don't know too much about how long he'd been in the UK etc, so the situation might not be identical. He ended with a fairly healthy bank balance and went through MVL Online.

He was in NZ when he got the distributions, but his NZ accountant was happy that as long as he could demonstrate tax was paid in the UK on those distributions, that NZ equivalent of HMRC wouldn't make a claim on them.

We think there might be an argument that he could have avoided UK tax on the MVL distributions too, on the grounds he wasn't UK tax resident when he received them (and as long as he didn't return to the UK within something like 5 years, I don't recall the precise rules). However, he/we agreed especially given the CGT is fairly modest that he felt more comfortable paying it. So:
1) regardless of strict laws, he could feel he'd done the right thing,
2) the funds were all generated whilst he was working in the UK, even if he wasn't living there when the distribution happened,
3) the NZ accountant had said it wouldn't be taxable in NZ if he paid tax on it in the UK.

Other than some occasional banter I haven't heard further from him, so I'm fairly confident nothing nasty ever transpired with either tax jurisdiction, as I imagine he'd have mentioned it if it had. I appreciate that could just be that in the grand scheme of things he's relatively small fry, so could be that nobody bothered to look, rather than it was all 100% squeaky clean. We felt it was fair though.

Anyway...thought the above might be of some modest use as it's similar to your current conundrum.

[bubble99]

Thanks Maslin - so basically the client you describe, took the Entrepreneurs Relief route?

[Maslins]

Thanks Maslin - so basically the client you describe, took the Entrepreneurs Relief route?

Yes.

[Fred Bloggs]

But...... It isn't really up to the individual or his accountant to decide whether he pays tax or not is it?

I think the OP could do a lot worse than download the dual tax treaty between NZ and UK. Assuming there is one. I've fairly recently used the ones between UK and Oman, UAE and Australia. They are relatively easy to understand and you should pretty much glean from the DTA what is taxable and where. The different types of income are classified by type, wages, investment income, capital gains etc... And each type of income has an article covering what is taxed where, like who gets first dibs. Then you can talk to the accountant or tax adviser in UK and NZ with some prior knowledge.