Reply to: Moving away from the UK, leaving UK LTD open, and exit tax

[zerosum]

Zerosum I would certainly like to hear more about how you are going to get cash out of the UK limited when in a different country because that could potentially be an avenue a lot of people choose to use

It's not really "getting cash out of the UK limited". Paying for someone's services on Upwork is akin to the relationship envisaged here. Of course, one may end up paying corp tax in the UK and in the other country, but one can expense the service payment. As I understand this is not an uncommon arrangement.

The foreignCo has advantages in its own right too independently of this arrangement.

[zerosum]

Well, except he asked one question (about tax), then several posts later changed his reason to be “it’s not about tax, but about keeping UK agents happy”.

So, is it narrowly defined to be about tax or narrowly defined to be about keeping agents happy?

I'm not sure why you see this as either/or.

A UK company is an incredibly useful option to 'keep agents happy'.

But moving my personal tax residence abroad while keeping the LTD co would cause it to become treaty non-resident. That creates a possible exit tax situation. It's not so much the tax itself, as the fact that in theory one should ask HMRC for permission in advance and penalties may apply, although as eek said, exit taxes really ought *not* to apply.

The move would not be worth the hassle for a few % less corp tax or personal tax. It is worth it -- to me -- to preserve some rights otherwise lost once the transition period ends. That said, trying to keep the company around also creates a few possible tax ramifications. Temporary non-residence is another big one.

So I would rephrase your summary: "it’s not about tax, but about keeping UK agents happy"
to "it's about having the optionality to keep working with UK agents while abroad and that creates a bunch of possible tax complications."

[eek]

Zerosum I would certainly like to hear more about how you are going to get cash out of the UK limited when in a different country because that could potentially be an avenue a lot of people choose to use

I always just left the UK money in the UK and paid tax on it but if there is a way to extract out regular cash by way of billing the UK ltd from abroad I would like to hear about it

For me moving abroad has led to a massive CGT reduction on BTL property which I am putting the final touches on - I posted on here previously but it was too specialised but the paid advice I have received on that idea is that it is allowed

There is a hell of a difference between adding another company between your brain and your end UK client (as zerosum is aiming to do) and your desire to reduce tax on profitz from UK assets.

I suspect everything I could talk with zerosum about is completely irrelevant in your case.

[WTFH]

He asked a narrowly defined question for which the additional details that you all are requesting are not necessary. He didn't ask for advice on other aspects of the move -- if he had, you'd have a point on the limited details he gave. But the additional details you've asked for aren't necessary to his question.

This hasn't quite been the finest moment for this forum (and some of its better contributors, to be fair).

Well, except he asked one question (about tax), then several posts later changed his reason to be “it’s not about tax, but about keeping UK agents happy”.

So, is it narrowly defined to be about tax or narrowly defined to be about keeping agents happy?

[NowPermOutsideUK]

Thanks, WordIsBond. These are complicated issues so while I haven’t totally appreciated the tone, I do realise there are many ways to get into trouble, so I’m tempted to join in the fun and perform a bit of self-flagellation for everything I probably forgot to think of.

I have taken paid advice from two cross-border accountants. Both of them said that billing a UK company of which one is non-resident director from a foreign company of which one is also director is allowed. This was not discussed in the context of one being a branch of the other, i.e. having some obvious relationship. I specified why there might be a need to resort to this arrangement (keep UK agencies from disqualifying you at the first step). I also checked with two accountants from the destination country.

One accountant mentioned the exit tax issue, and that it might be possible to circumvent by making it clear that the value of the company resides in the director personally, rather than assets (products, a big email list to sell to, a renowned name), which is precisely what exit tax tends to get levied on. I was trying to see if there was any specific IT contractor type data to beef this up, because it’s also true that even a cross-border accountant won’t know all the specifics of each sector and whether anyone might think there are some assets here we all have by virtue of our companies which aren’t so obvious.

Banking: some will, some won’t accept non-resident directors. Santander will.

I’m more concerned about getting PII as a non-resident, that’s starting to be as much of a must for agencies as a company.


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Zerosum I would certainly like to hear more about how you are going to get cash out of the UK limited when in a different country because that could potentially be an avenue a lot of people choose to use

I always just left the UK money in the UK and paid tax on it but if there is a way to extract out regular cash by way of billing the UK ltd from abroad I would like to hear about it

For me moving abroad has led to a massive CGT reduction on BTL property which I am putting the final touches on - I posted on here previously but it was too specialised but the paid advice I have received on that idea is that it is allowed

[zerosum]

Thanks, WordIsBond. These are complicated issues so while I haven’t totally appreciated the tone, I do realise there are many ways to get into trouble, so I’m tempted to join in the fun and perform a bit of self-flagellation for everything I probably forgot to think of.

I have taken paid advice from two cross-border accountants. Both of them said that billing a UK company of which one is non-resident director from a foreign company of which one is also director is allowed. This was not discussed in the context of one being a branch of the other, i.e. having some obvious relationship. I specified why there might be a need to resort to this arrangement (keep UK agencies from disqualifying you at the first step). I also checked with two accountants from the destination country.

One accountant mentioned the exit tax issue, and that it might be possible to circumvent by making it clear that the value of the company resides in the director personally, rather than assets (products, a big email list to sell to, a renowned name), which is precisely what exit tax tends to get levied on. I was trying to see if there was any specific IT contractor type data to beef this up, because it’s also true that even a cross-border accountant won’t know all the specifics of each sector and whether anyone might think there are some assets here we all have by virtue of our companies which aren’t so obvious.

Banking: some will, some won’t accept non-resident directors. Santander will.

I’m more concerned about getting PII as a non-resident, that’s starting to be as much of a must for agencies as a company.


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[eek]

The thing is that the company will, have zero assets that relate to exit tax as far as I can read the act and it would be very hard for anyone on here to know what the actual rules are as they were changed in 2018 and are still (thanks to Brexit) likely to Change again.

Which is why you may notice I posted the questions I have asked as a bigger concern would be how do you keep things going in a way that allows you company to keep a British bank account (and believe me I'm very aware of that particular issue).

And how you avoid hmrc insisting on, say, income tax for the work you do for the UK company.

[WordIsBond]

You guys act like you are talking to pscont, not zerosum. Maybe you should pull in your horns and read his history.

He's been a forum member since 2012 and has posted intelligently on substitution and other IR35 related issues. He's leaving the UK because of Brexit. He's obviously read extensively on the issues and educated himself on various aspects. Whether that was through a paid advisor or his own research is not entirely obvious but I'd suspect a paid advisor even if he hadn't said so on this forum.

He's been accused of not even telling his paid advisor everything, I don't see how anyone would know what he's told his paid advisor.

There's not the least shred of evidence that he's involved in any kind of tax avoidance.

He asked a narrowly defined question for which the additional details that you all are requesting are not necessary. He didn't ask for advice on other aspects of the move -- if he had, you'd have a point on the limited details he gave. But the additional details you've asked for aren't necessary to his question.

This hasn't quite been the finest moment for this forum (and some of its better contributors, to be fair).

[eek]

Indeed. This is of course not about lowering tax, fraud, sneaking around in Spain while one is actually in Southampton or vice-versa, as so many here have lazily assumed/projected (uk corp tax already very competitive), but satisfying agents that they have a UK-registered company on the contract. It would be an idiotic idea to pretend that’s all there is to it - agreed.

Another problematic issue; even if you can have a UK company on the contract and agree with the agency that the work can be subcontracted (doable), it’s increasingly the case that private indemnity insurance is specified tightly and that is going to be hard to get as a non-resident.

The thread wandered far away from exit tax but I’m satisfied the respondents do not have much idea, hence why the thread became about other issues.


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And it's because the company is going to be actively used that I haven't got a clue about what your actual problem is as I am aware of at least 3 potential areas of HMRC interest none of which you've even mentioned yet. And that's before I ask how you think your company will keep a bank account.

Which is why I said before that you need to get a decent accountant (I.e. One that is fully aware of cross country issues which will rule out all the typical contractor firms) and get some decent advice.

[zerosum]

It is causing difficulty because UK clients do not want to do business with overseas companies. To some extent that's even understandable. It's a b2b relationship, in case sth went wrong, they would need to go to the foreign court. They would need to find out if IR35-equivalent exists etc.

In my case, it was a hard 'no' to use a non-UK company, but the client doesn't mind I'm not physically in the UK.

Indeed. This is of course not about lowering tax, fraud, sneaking around in Spain while one is actually in Southampton or vice-versa, as so many here have lazily assumed/projected (uk corp tax already very competitive), but satisfying agents that they have a UK-registered company on the contract. It would be an idiotic idea to pretend that’s all there is to it - agreed.

Another problematic issue; even if you can have a UK company on the contract and agree with the agency that the work can be subcontracted (doable), it’s increasingly the case that private indemnity insurance is specified tightly and that is going to be hard to get as a non-resident.

The thread wandered far away from exit tax but I’m satisfied the respondents do not have much idea, hence why the thread became about other issues.


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[ContractorPL]

add to that moving the UK LTD company to a different tax regime entirely. Which I'm pretty sure is not possible despite what the OP thinks.

Quite why moving abroad and wanting to still contract to UK clients is causing difficulty I don't know. The simplest (and therefore the best) is to export services to the UK either as a company or as an individual (depending on the tax regime of the residency).

It is causing difficulty because UK clients do not want to do business with overseas companies. To some extent that's even understandable. It's a b2b relationship, in case sth went wrong, they would need to go to the foreign court. They would need to find out if IR35-equivalent exists etc.

In my case, it was a hard 'no' to use a non-UK company, but the client doesn't mind I'm not physically in the UK.

[wattaj]

add to that moving the UK LTD company to a different tax regime entirely. Which I'm pretty sure is not possible despite what the OP thinks.

Quite why moving abroad and wanting to still contract to UK clients is causing difficulty I don't know. The simplest (and therefore the best) is to export services to the UK either as a company or as an individual (depending on the tax regime of the residency).

Agreed. I can't help thinking that trying to "Double-Irish" or "Dutch-Sandwich" a one-man band is for the ******* birds... despite what one might stumble upon via Google.

[Lance]

Tax avoidance by dint of being resident in a lower tax country.

add to that moving the UK LTD company to a different tax regime entirely. Which I'm pretty sure is not possible despite what the OP thinks.

Quite why moving abroad and wanting to still contract to UK clients is causing difficulty I don't know. The simplest (and therefore the best) is to export services to the UK either as a company or as an individual (depending on the tax regime of the residency).

[wattaj]

I don’t I der stand zero sum what you are trying to achieve.

Tax avoidance by dint of being resident in a lower tax country.

[NowPermOutsideUK]

I for one would like to see this thread continuing

I am out of Uk in perm employment and have a ltd in Uk which continues trading in real estate. I extract a salary and dividends from the Uk ltd and pay Uk tax on this. I then declare this and the tax paid in my EU based foreign country.

This is all pretty simple and the only difference between before and after is that my self assessment is declared as non tax resident and the number of days in the Uk and the number of ties.

It’s been running like this for a few years without any problems and the paid professional (who frankly is a form filler) submits normal corp tax and self assessments

I don’t I der stand zero sum what you are trying to achieve. You can keep the Uk company open even if the only director is not Uk tax resident