Reply to: Contracting through a UK-registered Ltd Company but tax resident abroad

[lecyclist]

1) It is a good idea to read up on the "stickiness" of UK tax residency, and the assessment procedure based on number of connections you hold. If I remember correctly, you need to watch the number of days you spend in the UK for at least 5 years after you become non-resident (happy to be corrected).
2) If you are UK tax resident, it doesn't matter where you live or where your company is based, if HMRC determine that you are exercising control over the company remotely.
3) Latvia, like many other countries, does not have tax law that treats control in this way. So if you are Latvian resident and control a U.K. company, there is little downside.
4) Social tax is a lot higher in Latvia, so a large salary is not an option (dividends better as you mentioned).
5) 2 companies in different tax jurisdictions with different corporate tax years (Latvia is the European Jan-Dec fiscal period, UK is bespoke) provide transfer pricing opportunities.
6) Also consider incorporating in Estonia, which has no corporation tax on profits, only on drawdown, and on that basis is an attractive holding destination for non-UK tax residents looking to park profits. Search on e-residency - everything can be managed remotely.

Kind regards,
Lecyclist

[Jessica@WhiteFieldTax]

There are lots of restrictions on transfer pricing, and ipr transfer- which of course isnt news to you. I seem to recall a major evasion case centered around that involving a well known japanese car manufacturer.

And I was on the periphery of that...

[ASB]

However there is a considerable difference between a betting company or a PLC and a one person company.

The betting co/PLC will either:

(a) do enough to have control in IOM/Channel Islands, eg an office there and board meetings there

or

(b) pay tax in UK on at least some of its profits - look at transfer pricing.

Different kettle of fish to OP.

There are lots of restrictions on transfer pricing, and ipr transfer- which of course isnt news to you. I seem to recall a major evasion case centered around that involving a well known japanese car manufacturer.

[eek]

Correct - most betting companies are IoM or Channel Islands registered.

There are historic reasons for that dating back to the speed in the mid 1990s that countries could handle the legal changes to allow betting on the internet - prior to that telegraphic betting was banned everywhere . Gibraltar, Alderney and a few Caribbean Islands (St Vincent) moved very quickly to try and capture the market with a combination of leeway and decent rule enforcement.

[Jessica@WhiteFieldTax]

Correct - most betting companies are IoM or Channel Islands registered.

If I was the OP I would look seriously at incorporating in the Isle of Man or similar. If the client Co will deal with an IoM jurisdiction company, there could be big advantages regarding how you operate. Many companies appear to be trading as a UK company but when you look deeper they're IoM registered.

However there is a considerable difference between a betting company or a PLC and a one person company.

The betting co/PLC will either:

(a) do enough to have control in IOM/Channel Islands, eg an office there and board meetings there

or

(b) pay tax in UK on at least some of its profits - look at transfer pricing.

Different kettle of fish to OP.

[Jessica@WhiteFieldTax]

I have come across a number of discussions online which suggest that the HMRC regulations in terms of tax-residency are different to those of non-PSCs.

Sorry, that makes no sense. Can you clarify.

Wouldn't it be likely that I would still have to pay UK tax on all my UK-based earnings as a UK non-resident who has UK-based earnings?

If you are resident in Latvia then you won't have any UK earnings.

Most likely, if you have a UK company both jurisdictions will want a tax return, both corporate and personal, and the relevant double taxation agreement will place taxing rights in the country of residence.

However this is going to be fact based rather than principle based, and you will need to delve into the DTA and assess your situation against it.

[ASB]

If I was the OP I would look seriously at incorporating in the Isle of Man or similar. If the client Co will deal with an IoM jurisdiction company, there could be big advantages regarding how you operate. Many companies appear to be trading as a UK company but when you look deeper they're IoM registered.

That would be fine. Though its taxing jurisdiction shouldn't change. It may be IoM, it may be Latvia. It could be both.

The issue isn't so much getting the money in there, it's legitimately getting it out without it becoming subject to personal taxation

The UK end may, of course, refuse to deal with an IoM company.

A fairly common method is to set up in the UK owned by the IoM company and utilise licensing arrangements etc to migrate the turnover from the UK company as a cost to the IoM company as revenue under the licencing agreement.

However it is very dependant upon the individuals exact circumstances and individual appropriate advice (which unless you are <insert name of US company here> may well cost more than any benefit that is obtainable.

[deepblueuk]

Isn't it a case of a UK non-resident being charged on UK-based earnings?

I have come across a number of discussions online which suggest that the HMRC regulations in terms of tax-residency are different to those of non-PSCs.

Wouldn't it be likely that I would still have to pay UK tax on all my UK-based earnings as a UK non-resident who has UK-based earnings?

[Lance]

If the client Co will deal with an IoM jurisdiction company, there could be big advantages regarding how you operate. Many companies appear to be trading as a UK company but when you look deeper they're IoM registered.

If this is true (and I'm not saying it isn't) then why do most of the loan schemes use a genuine UK company as the paypoint for the agency, before sending to IoM 'trust'?
I suspect that most agents will refuse to pay money to an IoM registered company.

IANAITA

[LondonManc]

If I was the OP I would look seriously at incorporating in the Isle of Man or similar. If the client Co will deal with an IoM jurisdiction company, there could be big advantages regarding how you operate. Many companies appear to be trading as a UK company but when you look deeper they're IoM registered.

Correct - most betting companies are IoM or Channel Islands registered.

[Fred Bloggs]

If I was the OP I would look seriously at incorporating in the Isle of Man or similar. If the client Co will deal with an IoM jurisdiction company, there could be big advantages regarding how you operate. Many companies appear to be trading as a UK company but when you look deeper they're IoM registered.

[Drei]

Tedious but possible.

Is the corp tax higher in UK or Latvia? You could keep the UK Ltd then create another in Latvia, then invoice yourself from the Latvian company and even pay yourself a salary from UK to Latvia without going through PAYE as it is Latvian's issue to sort out your income tax etc not UK's.

Might be better if you keep half the money here half there? Whatever works for you and is most tax efficient. If you leave the UK make sure you also claim back any tax paid in the last 5 years. Talk to your accountant about this one, might get a nice lump sum cash but the catch is that you cannot return to the UK as a resident EVER!

Might be worth talking to your accountant about this, could end up making quite a substantial saving moving money around.

[Jessica@WhiteFieldTax]

What about him getting a UK business bank account from over there?

Tedious but possible.

[northernladuk]

What about him getting a UK business bank account from over there?

[Jessica@WhiteFieldTax]

Unfortunately, this is the case, my client doesn't want to deal with a Latvian company - it must be a UK Ltd.
On this matter, excuse my ignorance, but how can I set up a UK Ltd that will be registered in Latvia? Isn't a UK Ltd by definition one that is registered in the UK?

Thanks for your advice.

It's registered in UK, in terms of Company Registration. That makes it a UK company.

It has, like an individual, to register with an overseas tax jurisdiction, in this case Latvia, if the company is resident there (for all intents and purposes controlled from there)

It will still, in practice, be registered with UK tax authorities as well, and probably have to do returns in both jurisdictions with Double Tax Agreements settling the actual taxing rights.

It's all possible, but you need some Latvian advice.