Changing tax residency and charging own UK LTD

[twickenkam]

Hello,

With Covid in place and extensive remote work I wanted to consider this setup:
-I now work through my UK registered LTD, which invoices my UK Client
-I want to move from UK to a country in EU and set up there as self-employed for a year-ish
-The move would change my tax residency, so I would pay my tax in the other country
-I keep my UK LTD to raise invoiced with my Client. This helps keeping hassle free invoicing for the Client.
-My self-employment raises invoice to my UK LTD to charge back for the work. This would be 100% (or close) of the LTD's rate.
-To confirm, I fully own the UK LTD as well as the EU based self-employment
-Before I proceed my Client would have to say they are OK with such setup for clarity with them

Also a thought - would above keep me out of IR35 as I would not be UK Tax resident?

Is such setup, where my non-UK self-employment charges back my UK LTD fine?
Posting here for second opinion/experience/thoughts please

[malvolio]

Do you understand the concept of "UK-based earnings"?

[twickenkam]

So if I register as self employed and invoice my client directly rather than via the LTD (while living abroad and being foreign tax resident), I still pay tax in the UK?

[NotAllThere]

So if I register as self employed and invoice my client directly rather than via the LTD (while living abroad and being foreign tax resident), I still pay tax in the UK?

I am not UK resident. Haven't been for years and years. Even HMRC don't think I'm UK resident. I invoiced my clients in the UK (for whom I was working remotely) through my Swiss company. There was no tax to pay in the UK. And I didn't charge VAT either.

So the direct answer to your question is no. Probably.

It's really not difficult. You pay tax where you do the work. Tax is due where you are resident.

[Fred Bloggs]

Read RDR3. You must be out of the UK for a full tax year before you can be considered as non-UK tax resident. You can apply for split year treatment in the year of leaving and returning. You must pass one of the non-resident tests in RDR3 or it gets very complex.

[jamesbrown]

"For a year-ish".

Well, just be aware that HMRC are wise to "temporary non-residence" (defined in legislation).

So you can expect to be taxed on any dividends or capital gains associated with UK profits/gains (i.e., profits or gains accrued while UK tax resident) in the year you return, if you return within five years.

Also be aware that it's harder to lose residency than you might expect, depending on your ties to the UK and how often you return.

So if this is a tax wheeze.... don't bother.

But if you actually want to move overseas and work, then why not set yourself up properly there rather than invoicing through a UK company (you should be able to retain the UK company, if you want, although bear in mind that its corporate residence will probably move with you).

[northernladuk]

What is with the raft of stupid tax evading ideas recently?

[zerosum]

Agree with jamesbrown. There are many good reasons to move tax residency away from the UK, but it’s a long-term play.

[twickenkam]

Read RDR3. You must be out of the UK for a full tax year before you can be considered as non-UK tax resident. You can apply for split year treatment in the year of leaving and returning. You must pass one of the non-resident tests in RDR3 or it gets very complex.

Thank you for this, it indeed requires quite a commitment and strict count of days out of the UK as well as working and non-working days in the UK. Following:
RDR3: Statutory Residence Test (SRT) notes - GOV.UK

2.3 Third automatic overseas test
You’ll be non-UK resident for the tax year if you work full-time overseas over the tax year and:

you spend fewer than 91 days in the UK in the tax year
the number of days on which you work for more than 3 hours in the UK is less than 31
there is no significant break from your overseas work

[Fred Bloggs]

Thank you for this, it indeed requires quite a commitment and strict count of days out of the UK as well as working and non-working days in the UK. Following:
RDR3: Statutory Residence Test (SRT) notes - GOV.UK

2.3 Third automatic overseas test
You’ll be non-UK resident for the tax year if you work full-time overseas over the tax year and:

you spend fewer than 91 days in the UK in the tax year
the number of days on which you work for more than 3 hours in the UK is less than 31
there is no significant break from your overseas work

You should be aware that you can quite easily be tax resident in multiple countries at the same time. For example I was tax resident in three countries for 2017 to 19. Then I was tax resident in two countries despite meeting automatic overseas test number 1. I paid UK tax on UK income arising during my absence. And I paid overseas tax in those jurisdictions too on overseas income. The various tax treaties in place ensure you only pay tax once on each pot of income. But it's complex and bad timing can cost you very dearly indeed.