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

[archer100]

I looked into this carefully

Answer is:

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

Plenty on this topic here https://www.accountingweb.co.uk/any-...n-uk-residents

For me i ended up taking the personal allownace and no dividend but that was because of rental income

Hello, can you confirm that non-residents do not pay taxes on dividends in UK? Because my accountant told me otherwise. His response is this:

"UK income is always subject to UK tax but you get relief in your country of residence"

[NotAllThere]

.....

Whatever. The rules are clear and in accordance with my excellent summary.

Btw, if you are an expat, look at paying class 2 voluntary contributions. £3,05 a week, and that brings in a minimum ~£7K UK pension yearly.

[BoaContractor]

I think this article is really important for this thread.


Employees working abroad
https://www.gov.uk/guidance/paying-e...working-abroad

[BlasterBates]

Notwithstanding what _V_ said, BB and I are entirely in agreement. Just different ways of saying it. I think my formulation of the rules is simpler.

FTFY, to be entirely accurate. If you are resident in Mongolia, but come to the UK and work for a week, you are liable for tax in the UK for that week. Even if you never return to the UK and don't have a British passport. In practice, it never happens, because it's just not worth the admin. It's also easy to be under the radar.

Many countries have dual taxation agreements, whereby the withholding tax is credited to your domestic tax bill. So this is true, but mainly moot.

On the money you earned while there. Wherever the customer was.

Yes. Unless you're a US or NK citizen...

Just a point but you don't even need to be physically there to be liable for tax. There are forms of income that don't require you to physically be somewhere to work.

https://www.gov.uk/tax-uk-income-live-abroad

You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes things like:

• pension
• rental income
• savings interest
• wages

eg savings interest and pensions, also capital gains on property.

[lecyclist]

Assuming you had a NT tax code, you may still be liable for UK NI. This could be as much as £15K (roughly £10K employers', £5K employees NI) on £90K salary. Research NT tax codes.

[BoaContractor]

• Joe Bloggs is a Director of ABC Ltd company incorporated in the UK.
• Joe Bloggs is a UK citizen currently holding non-UK resident status according to RDR3 SRT (currently living in Dubai).
• All of the work that Joe Bloggs does for ABC Ltd is performed outside of the UK.
• ABC Ltd Bills UK based companies for the services it provides.
• ABC Ltd will pay Joe Bloggs into his UK personal bank account. (the money can just sit there - there is no requirement to transfer it abroad)

[LIST=1]

Based on the above and say, £100k revenue.

Can the director just take a £90k salary (tax free) and pay corporation tax on what remains of the £10k after deducting expenses?

[lecyclist]

I chuckle at the fact no one here can agree on where tax should be paid, and how much. I also smile when I think that the big tech companies achieve the goal of paying almost no tax anywhere, regardless of where the business is located, and regardless of where the income is generated. Then a bigger smile when I think no tax authority in any country takes the blind bit of notice of their blatant tax evasion.

Must watch documentaries on this subject (the first has great cameos from Chomsky and Naomi Klein, while the second has a cameo from one of my favourite authors, Chris Hedges)

https://www.imdb.com/title/tt0379225/
https://www.imdb.com/title/tt12575636/

Even as a corporation, being an immortal legal entity, gained many of the rights in the US under Ronald Reagan in the 1980s associated with being human, it's important to note that the full power of this legal category has always been denied smaller businesses with small numbers of officers/ staff. Ostensibly to combat "sham" corporate setups designed for tax avoidance, a variety of anti-avoidance measures and rules were introduced, that arguably have only raised the bar to require more sophisticated expensive sham corporate setups using opaque intermediaries to evade scrutiny.

A one man-PSC is a natural casualty of this process.

[NotAllThere]

Notwithstanding what _V_ said, BB and I are entirely in agreement. Just different ways of saying it. I think my formulation of the rules is simpler.

In fact regardless of residency you are liable for tax where ever you physically are when you earn income.

FTFY, to be entirely accurate. If you are resident in Mongolia, but come to the UK and work for a week, you are liable for tax in the UK for that week. Even if you never return to the UK and don't have a British passport. In practice, it never happens, because it's just not worth the admin. It's also easy to be under the radar.

If you own shares in a US company you will be liable for tax on the dividends in the US even if you never go there

Many countries have dual taxation agreements, whereby the withholding tax is credited to your domestic tax bill. So this is true, but mainly moot.

If you work in the UK for 3 months temporarily you will be non-resident but you are still liable for tax.

On the money you earned while there. Wherever the customer was.

residency will determine the level of tax you pay and whether you have to declare worldwide income.

Yes. Unless you're a US or NK citizen...

[_V_]

I chuckle at the fact no one here can agree on where tax should be paid, and how much. I also smile when I think that the big tech companies achieve the goal of paying almost no tax anywhere, regardless of where the business is located, and regardless of where the income is generated. Then a bigger smile when I think no tax authority in any country takes the blind bit of notice of their blatant tax evasion.

[BlasterBates]

The term tax residency is somewhat confusing and has led to people thinking that you need to be resident to be liable for tax. In fact regardless of residency you are liable for tax where ever you earn income. If you own shares in a US company you will be liable for tax on the dividends in the US even if you never go there, The tax will be deducted by the company issuing the dividend or the broker. If you work in the UK for 3 months temporarily you will be non-resident but you are still liable for tax. This is the mindset you need to have. Non-residents are sometimes exempt from certain taxes but that is the exception. Tax authorities don't use the term "tax residency" they only use the term residency because it does not determine whether you are liable for tax, though residency will determine the level of tax you pay and whether you have to declare worldwide income.

[NotAllThere]

You pay tax where you physically are located when you do the work.

You pay tax on worldwide income where you are tax resident.*

You can be tax resident in mulitiple countries.

If two countries have a claim on tax there are dual taxation treaties to ensure one is offset against the other, so you only pay one - usually the higher rate.



* Except N. Korea and the USA who continue to want money no matter where you live.

[BlasterBates]

The key issue here is not the UK, it is the country in which you're working. When you work remotely in another country you are running a business there and you need to register it and pay tax. If you run everything through a company in Dubai but you work elsewhere then this is almost certainly illegal in the country that you're working in. This is what you need to be concerned about. This actually applies even if you aren't actually resident in that country. As soon as you sit down in your remote office and work, you will be running a business. Not registering it is illegal.

[lecyclist]

And so my strategy has been to not take dividends but instead sell my shares in limited company A to company B and then treat the income as capital gains which are tax free in Switzerland and have no Uk tax element

Is there any concern in your case that your UK company is a CFC and the seat of control is (you) in CH?
Are regulations related to connected parties owning a controlling share in the UK / CH companies a concern?

IANATA. I'm sure you've had your setup approved by a tax professional, but worth checking.

[eek]

And so my strategy has been to not take dividends but instead sell my shares in limited company A to company B and then treat the income as capital gains which are tax free in Switzerland and have no Uk tax element

I know eek raised her eyebrows at this but it is absolutely possible and company b can have a negative director loan to fund the acquisition of the shares in company a

Don't remember calling you out on that one before - and can't be arsed to do it now as I've better things to do than hunt google for the common ownership rules / issues.

[NowPermOutsideUK]

And so my strategy has been to not take dividends but instead sell my shares in limited company A to company B and then treat the income as capital gains which are tax free in Switzerland and have no Uk tax element

I know eek raised her eyebrows at this but it is absolutely possible and company b can have a negative director loan to fund the acquisition of the shares in company a