Non-UK Resident Director of UK Ltd Company - All work performed outside the UK

[NotAllThere]

Transfer pricing is an issue yes. Just wondering, does Dubai publish the names of company directors?

[BoaContractor]

Ok thanks for all your responses, definitely getting closer to understanding how it might work out.

I looked into this carefully
Answer is:

1. Take a 12.5K UK salary OR
2. Take as much as like you like in dividends (not taxed in UK if you are non resident) but you lose your personal allownace

Option 1:
So let's just make the calculation simple, we'll work with 100k revenue in the year.
£12.5k salary for each director = £25k tax free to directors
£75k remaining, minus £10k expenses
= £65k
Corporation tax @19% on 65k
= £14,250
£50,750 balance remaining no more tax to pay on this amount if continuing with £12.5k salary model

Option 2:
Assuming £10k expenses
£17,100 Corporation tax @19% on 90k (£100k - £10k)
= £72,900 dividends can be taken (tax free)

Does that look right?

[BoaContractor]

Bear in mind the complexities of residency if you return to the UK in the nearish future. You have to be out for a certain number of years.

Maybe set up a company in Dubai, and have that company bill your UK company. If that works, it should massively reduce your tax liability and the corporation tax.

Not planning spending more than 90/91? days in the UK over the next 3 years so should be ok.

A friend owns a company in Dubai, I could get him to bill my company.

Is it as simple as this?:

ABC UK Ltd bills UK client for IT consulting
XYZ Dubai bills ABC UK Ltd for IT consulting
XYZ Dubai pays into Joe's Dubai based personal bank account?

[BoaContractor]

OP. Your accountant will no doubt have informed you of transfer pricing/ withholding tax rules between UK and low tax jurisdictions.

They haven't but that's probably because this model hasn't come up. In fact, the latest from my account is what I pasted above, more or less.

[BoaContractor]

Transfer pricing is an issue yes. Just wondering, does Dubai publish the names of company directors?

Not looked into this yet, really haven't any idea so will look into it and so I don't understand the significance of the Dubai company directorship publishing issue.

I would be added as an employee of the Dubai based company though not a director so that might help?

[NotAllThere]

Transfer pricing, AIUI, is when you're in control of two separate companies, and one bills the other. According to this though https://www.gov.uk/guidance/transfer...cted-companies, you'd most likely be exempt.

But you need proper professional advice.

[BoaContractor]

Transfer pricing, AIUI, is when you're in control of two separate companies, and one bills the other. According to this though https://www.gov.uk/guidance/transfer...cted-companies, you'd most likely be exempt.

But you need proper professional advice.

Okay thanks for that NAT.

So you all have stressed getting professional advice and I have two responses from different accountants, my current and my Ex.


Current accountant's advice:

I have already discussed this with my operational manager and a senior colleague.

Wages will be taxed in the UK at source but for dividends you have a choice if you are also a non-UK domiciled.

If you are non-resident and non-domiciled, you can either chose to pay UK tax on dividends taken from a UK company OR you may wish to declare them overseas in the country where you reside. You need to get further advice from an accountant in Dubai for tax implications on overseas dividends.

https://www.gov.uk/tax-uk-income-live-abroad
https://www.pwc.com/m1/en/tax/docume...-residents.pdf

If you are still not sure, you may call HMRC on 0300-200-3310 and get an advice from them. Please note a call reference number.


Ex-accountant's advice:

1. Although Joe is not resident in the UK for tax purposes his UK income must be declared in the UK and would be subject to UK tax. As a UK passport holder he would still be entitled to his personal allowance. The best way of taking out money from the company would be a combination of salary plus dividend. I would advise a salary of £9568 and dividend of £40,702 per annum. There would be no tax nor NI on the salary of £9568. On the dividend of £40,702 there would be tax at 7.5% with the first £2k of dividend being tax free. This assumes that you have no other UK income. This would also apply to any other non-resident UK passport holders who have a UK bank account.
2. In terms of reducing your corporation tax this would involve business expenses such as salary for any other employees that you may hire in the UK to help you on the administrative side of the business. Also, pension contributions are another way of reducing corporation tax and extracting profit from the company. A company can contribute up to £40k into a Director’s pension per annum and there is a three year carry back for any unused allowances in the previous three years.

So now I'm really confused.

[eek]

Okay thanks for that NAT.

So you all have stressed getting professional advice and I have two responses from different accountants, my current and my Ex.


Current accountant's advice:

I have already discussed this with my operational manager and a senior colleague.

Wages will be taxed in the UK at source but for dividends you have a choice if you are also a non-UK domiciled.

If you are non-resident and non-domiciled, you can either chose to pay UK tax on dividends taken from a UK company OR you may wish to declare them overseas in the country where you reside. You need to get further advice from an accountant in Dubai for tax implications on overseas dividends.

https://www.gov.uk/tax-uk-income-live-abroad
https://www.pwc.com/m1/en/tax/docume...-residents.pdf

If you are still not sure, you may call HMRC on 0300-200-3310 and get an advice from them. Please note a call reference number.


Ex-accountant's advice:

1. Although Joe is not resident in the UK for tax purposes his UK income must be declared in the UK and would be subject to UK tax. As a UK passport holder he would still be entitled to his personal allowance. The best way of taking out money from the company would be a combination of salary plus dividend. I would advise a salary of £9568 and dividend of £40,702 per annum. There would be no tax nor NI on the salary of £9568. On the dividend of £40,702 there would be tax at 7.5% with the first £2k of dividend being tax free. This assumes that you have no other UK income. This would also apply to any other non-resident UK passport holders who have a UK bank account.
2. In terms of reducing your corporation tax this would involve business expenses such as salary for any other employees that you may hire in the UK to help you on the administrative side of the business. Also, pension contributions are another way of reducing corporation tax and extracting profit from the company. A company can contribute up to £40k into a Director’s pension per annum and there is a three year carry back for any unused allowances in the previous three years.

So now I'm really confused.

Shall we just say that neither accountant is that good - there are few things I would trust the opinion of NowPermOutsideUK but it's safe to say he knows this side of tax stuff better than your accountants simply because he is already subject to it.

[Lance]

Okay thanks for that NAT.

So you all have stressed getting professional advice and I have two responses from different accountants, my current and my Ex.


Current accountant's advice:

I have already discussed this with my operational manager and a senior colleague.

Wages will be taxed in the UK at source but for dividends you have a choice if you are also a non-UK domiciled.

If you are non-resident and non-domiciled, you can either chose to pay UK tax on dividends taken from a UK company OR you may wish to declare them overseas in the country where you reside. You need to get further advice from an accountant in Dubai for tax implications on overseas dividends.

https://www.gov.uk/tax-uk-income-live-abroad
https://www.pwc.com/m1/en/tax/docume...-residents.pdf

If you are still not sure, you may call HMRC on 0300-200-3310 and get an advice from them. Please note a call reference number.


Ex-accountant's advice:

1. Although Joe is not resident in the UK for tax purposes his UK income must be declared in the UK and would be subject to UK tax. As a UK passport holder he would still be entitled to his personal allowance. The best way of taking out money from the company would be a combination of salary plus dividend. I would advise a salary of £9568 and dividend of £40,702 per annum. There would be no tax nor NI on the salary of £9568. On the dividend of £40,702 there would be tax at 7.5% with the first £2k of dividend being tax free. This assumes that you have no other UK income. This would also apply to any other non-resident UK passport holders who have a UK bank account.
2. In terms of reducing your corporation tax this would involve business expenses such as salary for any other employees that you may hire in the UK to help you on the administrative side of the business. Also, pension contributions are another way of reducing corporation tax and extracting profit from the company. A company can contribute up to £40k into a Director’s pension per annum and there is a three year carry back for any unused allowances in the previous three years.

So now I'm really confused.

I reckon the current accountant is closer to correct.
For a start he's provided some links.

And secondly, the ex-accountant mentions a UK passport. I am not aware that having a UK passport makes a hoot of difference. So on that basis I suggest he knows far less than the current accountant. Is this the reason he's an ex-accountant?

But for where you are now I'd recommend that you read fully the links provided and understand them. And once fully digested ring HMRC to confirm any questions........ or talk to another accountant.

[NotAllThere]

On the dividend of £40,702 there would be tax at 7.5% with the first £2k of dividend being tax free

Again. I am overseas and non-tax resident. I do not pay any tax in the UK on dividends from UK company shares. Therefore, unless there are different rules on shares from a micro-company, I really don't think the second accountant is right, unless you are currently also tax resident in Dubai.