Moving away from the UK, withdrawing dividends and closing company

[zerosum]

Given reasonably large funds in ltd company (£150k+).

Given no pressing need to take additional dividends this tax year.

If one moves to another country with much lower (and non-banded) dividend tax, takes tax residency there, and is able to cut ties with the UK per the statutory residence tests, are there any issues with withdrawing all company funds as dividends in the other country (after a new UK tax year begins) and then closing the company down?

I’m aware that one could not just do this and then the next day, decide to return to the UK and set up a new company.

On the other hand, if circumstances changed (i.e. among other things Brexit gets shoved where the sun don't shine) and there was a wish to return to the UK, I would speculate that it would (theoretically?) be easier to open a new company having done this than if one had used a voluntary liquidation.

[Maslins]

Two separate things here:

1) anti phoenixing (TAAR) rules, that it sounds like you may be aware of. This is only relevant for capital gains following a liquidation anyway, which doesn't sound like something you're pursuing.

2) temporary non-residence/disregarded income. Oversimplifying a bit, if you leave the UK, become non tax resident, take huge dividends, then return to the UK within 5 years, those dividends will be taxable in the UK on your return. You basically need to stay away for >5 years. These rules have nothing to do with whether you close your company or not.

[zerosum]

2) temporary non-residence/disregarded income. Oversimplifying a bit, if you leave the UK, become non tax resident, take huge dividends, then return to the UK within 5 years, those dividends will be taxable in the UK on your return. You basically need to stay away for >5 years. These rules have nothing to do with whether you close your company or not.

Very helpful, thanks.

Again, at the risk of over-simplifying, would the dividends then likely be taxable at such a rate that it would make little difference whether one had stayed or gone?

[Maslins]

Again, at the risk of over-simplifying, would the dividends then likely be taxable at such a rate that it would make little difference whether one had stayed or gone?

Have never done it in practice, but my understanding is it will be taxable as dividends in the year of your return. Therefore the rate will depend on tax rates in place at the time, as well as your other income in that tax year.

If tax rates remain broadly the same, and your other income in the year you left is broadly the same as your other income in the year you return, then yes, it would make little difference (ie no long term saving by delaying the dividend until after you left).

[m0n1k3r]

2) temporary non-residence/disregarded income. Oversimplifying a bit, if you leave the UK, become non tax resident, take huge dividends, then return to the UK within 5 years, those dividends will be taxable in the UK on your return. You basically need to stay away for >5 years. These rules have nothing to do with whether you close your company or not.

It's usually best to set up a new company abroad, transfer the shares in the UK company to that new foreign company and then have the dividends paid to it rather than to yourself.

[zerosum]

It's usually best to set up a new company abroad, transfer the shares in the UK company to that new foreign company and then have the dividends paid to it rather than to yourself.

Do you know of anywhere this process is described in more detail? Presumably I can then withdraw the 'new' dividends from the foreign company and not fall foul of this (rather draconian) 5 year limit?

[NotAllThere]

In some countries, dividends are taxable as income. So you may have to pay tax in your country of residence. See here for example: How does it work with taxes already paid in UK? - English Forum Switzerland

[Paralytic]

Do you know of anywhere this process is described in more detail? Presumably I can then withdraw the 'new' dividends from the foreign company and not fall foul of this (rather draconian) 5 year limit?

More correctly, the dividends would be paid to the foreign company. You would then use whatever is the most tax-efficient way in that foreign country to extract those dividends from that company.

If you come back to the UK within the 5 years, those dividends were still paid to the foreign company, and not you.

[zerosum]

More correctly, the dividends would be paid to the foreign company. You would then use whatever is the most tax-efficient way in that foreign country to extract those dividends from that company.

If you come back to the UK within the 5 years, those dividends were still paid to the foreign company, and not you.

However, consider the following:

Temporary non-residents and Income Tax
Certain types of income received during the period of temporary non-residence will also be treated as arising in the year of return

- distributions paid by close companies (or those that would be close, if they were UK resident) of which you are a material participator or their associate, in the case of distributions that are dividends, those out of trade profits arising in the temporary period of non-residence are not taxable - ‘Distributions’ includes dividend income received by a person abroad which you have power to enjoy, under the Transfer of Assets Abroad code (HS262)9.

HS278 Temporary non-residents and Capital Gains Tax (2019) - GOV.UK

[m0n1k3r]

Do you know of anywhere this process is described in more detail? Presumably I can then withdraw the 'new' dividends from the foreign company and not fall foul of this (rather draconian) 5 year limit?

Look at setting up a company in Estonia if you want a simple process. You would first have to apply for an Estonian e-id (which can take months), but then you could quite easily set up a limited company in Estonia either yourself or through a service provider (highly recommended, and not expensive).

Estonia (and Latvia) have quite interesting tax laws, especially for companies. Corporation tax is only levied on dividend payments, when the company decide to pay a dividend (which might be years after the income was received).

Redistribution of dividends received from an EU/EEA/CH subsidiary is generally not taxed in Estonia.

The main trouble (like anywhere) is to set up a bank account in Estonia - all the banks want to see that you are resident in Estonia. But there are alternatives, such as Transferwise, Revolut etc.

I'm not sure how this helps with the UK 5-year rule however.