Moving to Lithuania but keeping the LTD

[Dr Magic]

I'd like to ask about running a UK registered company from abroad. This area is all very confusing and so any help is appreciated. I have a software consultancy ltd company based in the UK with 1 employee. We are both tax residents here and our clients are all UK based as well. All is going well but for family reasons, I have decided to move permanently to Lithuania and would like to keep the company registered in the UK. I should keep it registered here and operate through it not so much for tax efficiency reasons but to continue working with UK clients as much as possible. It is a specialist area we are working in so it's imperative to retain my clients even if this means I will have to pay more tax or double the accountancy efforts.

(leaving the Brexit foreboding aside for now) I have a few questions:

1. Is it correct that if I am no longer in the UK for work (or any other) reasons then I do not need to pay any UK income tax or NI?
2. Is it true that I would carry on paying the corporation tax and VAT in the UK?
3. If the only director works in another country does it mean that the 'control' is also in that other country and so a new company must be registered there?
4. If the company had a new UK-based director would this help me? If yes, then how phoney this decision would be? ?
5. My current accountant isn't very proactive so I am looking for someone versed in this area. Do you have any recommendations? any pointers to professional support in these matters would be useful.
6. Am I missing anything obvious? tips or suggestions welcome.

For anyone else who stumbles upon this, here are few links from the forum that relate to this:
https://www.contractoruk.com/forums/...ector+resident
https://www.contractoruk.com/forums/...ector+resident
https://www.contractoruk.com/forums/...ht=remote+work

[NotAllThere]

1. Yes
2. Probably no
3. Possibly
4. Maybe
5,6... no.

[BlasterBates]

Basically a company needs to be registered wherever it does business. It can be registered in multiple locations. This is outlined in all the double taxation treaties between the UK and most other countries. If there is profit in Germany, France and Lithuania then you need to register three branches of your UK Ltd, each with their own set of accounts and each should have a tax code from the country. It is a complicated exercise.

A company does business wherever an employee is working. If you work in Lithuania you therefore need to register it there, and if you have a Director in the UK then you will be running a set of different accounts there.

I would advise using your UK Ltd for work in the UK only. I would setup a different company in Lithuania.

[Dr Magic]

Thanks to both of you. If this requires a company registered in each country then I wonder how the remote-first companies operate...

My goal would be to build a remote team spread across Europe with the company remaining registered in the UK. For now, we would carry on working only with UK-based clients and the employees (including my own salary) would be paid out from the company leaving any profits in the company in the UK.

I appreciate any suggestions.

[BlasterBates]

Thanks to both of you. If this requires a company registered in each country then I wonder how the remote-first companies operate...

My goal would be to build a remote team spread across Europe with the company remaining registered in the UK. For now, we would carry on working only with UK-based clients and the employees (including my own salary) would be paid out from the company leaving any profits in the company in the UK.

I appreciate any suggestions.

Remote first companies employ freelancers who declare and tax their income in the country they work in. If you live and work in Lithuania you need to setup a company there declare your income and charge to your UK company. If a remote company has employees they setup a subsidiary in the country where they're employing people.

For example the client pays the UK Ltd 50,000, Lithuanian company charges 40,000 to the UK Ltd. The UK company pays tax on the corporate profit of 10,000 and distributes dividends. If you employ freelancers across Europe they will simply bill your UK company and they will register their income with the local tax authorities.

You need an accountant in Lithuania and the UK.

[Dr Magic]

Thank you, a subsidiary looks like the best option for us now. Does anyone know how the VAT works with subsidiaries in the EU? If a parent company in the UK has a subsidiary in Germany or Lithuania and charges it for the work the subsidiary does, the subsidiary will add its VAT on top any charges. Reading the statement below it seems like the parent company won't be able to claim it back, essentially incurring 20% extra tax in its end-to-end operations. Is this correct?

Refunds of VAT in the UK for EU businesses:
You must meet the following conditions:

* you must not be registered, liable or eligible to be registered in the UK
* you must not have any place of business in the UK or in the Isle of Man
* you must not make any supplies in the UK (other than transport services related to the international carriage of goods, or goods and services where VAT is payable by the person to whom the supply is made)

[BlasterBates]

Thank you, a subsidiary looks like the best option for us now. Does anyone know how the VAT works with subsidiaries in the EU? If a parent company in the UK has a subsidiary in Germany or Lithuania and charges it for the work the subsidiary does, the subsidiary will add its VAT on top any charges. Reading the statement below it seems like the parent company won't be able to claim it back, essentially incurring 20% extra tax in its end-to-end operations. Is this correct?

It looks to me as if, if you charge the UK client directly from your Lithuanian company there is no VAT to charge, but if you charge from a UK company there is.

Cross-border VAT rates in Europe - Your Europe

It looks like this could be a disadvantage of operating a Lithuanian and UK Ltd company.

You need advice on this.

[Fred Bloggs]

It looks to me as if, if you charge the UK client directly from your Lithuanian company there is no VAT to charge, but if you charge from a UK company there is.

Cross-border VAT rates in Europe - Your Europe

It looks like this could be a disadvantage of operating a Lithuanian and UK Ltd company.

You need advice on this.

But a UK client reclaims UK VAT, so it makes no odds to them if they have a UK Ltd contractor working for them?

[Dr Magic]

Thanks to you both. As far as I understand, UK based clients can claim back the VAT from either EU or UK services so that doesn't matter so much as you say.

My main concern is around how to keep serving the UK clients using my existing UK company but do the actual work in Lithuania. If my UK company can't claim back the VAT from its subsidiary then it's a lot of extra taxes...

                                           UK Company                               EU Subsidiary

                                  +-------------------+                     +-----------------------+
                                  |                   |                     |                       |
                                  |  Client-facing    |                     | All the actual        |
+--------------+                  |  company.         |                     | work happens here.    |
|              |                  |                   |                     |                       |
|              |                  |  Any profits      |                     | i.e. software factory |
|   UK Client  |    +------->     |  remain here.     |    +----------->    |                       |
|              |                  |                   |                     |                       |
|              |    Fee + VAT     |  Pays subsidiary  |     Fee + VAT       |                       |
+--------------+                  |  to do the work.  |                     |                       |
                                  |                   |                     |                       |
                                  |                   |                     |                       |
                                  |                   |                     |                       |
                                  +-------------------+                     +-----------------------+