Reply to: Disregarded Income for Non-Tax Residents

[NotAllThere]

How do you know it is definitely a loop hole ?

Experience and talking to accountants over the years. HMRC might choose to see the dividends as income. If uncontested, the OP would accrue a debt to HMRC, that might even be enforceable in his country of residence.

The OP should, as you say, get professional advice to determine the level of risk.

[BlasterBates]

It's like any tax avoidance loophole - there are risks. And it definitely is a loophole, but not one, I think, that's widely exploited.

How do you know it is definitely a loop hole ?

I think only an accountant would be qualified to advise on that. There could well be restrictions on working yourself for the company from which you are earning tax free dividends. I would not assume it is a loophole unless I had an accountant doing my accounts and being upfront with HMRC about it. There's no point in hiding this from the HMRC because sooner or later they'll enquire.

There are a large number of foreigners who work seasonally or carry out short projects in the UK, if this was a loophole I would expect it to be exploited on a large scale.

[NotAllThere]

I don't see HMRC allowing foreigners to come to the UK work for 3 to 6 months and pay no tax because it is distributed as dividends. They expect earnings to be taxed. HMRC would have to clamp down because the implications in lost tax would be considerable.

I would strongly advise against it.

It's like any tax avoidance loophole - there are risks. And it definitely is a loophole, but not one, I think, that's widely exploited.

[BlasterBates]

I don't see HMRC allowing foreigners to come to the UK work for 3 to 6 months and pay no tax because it is distributed as dividends. They expect earnings to be taxed. HMRC would have to clamp down because the implications in lost tax would be considerable.

I would strongly advise against it.

[eek]

Again, I'm interested in knowing what the tax on the DIVIDENDS will be. It seems the dividends are treated in a different way. The income tax on the salary should be paid in the UK. I get that.

What does your accountant say? As this area is complex you really do need to find one with expertise in offshore directors - see my previous post as it's complex and easy to get wrong.

[NotAllThere]

Do they? From A guide to forming a UK company as a non-UK resident | Companies Made Simple

I stand corrected. Things have moved on.

Again, I'm interested in knowing what the tax on the DIVIDENDS will be. It seems the dividends are treated in a different way. The income tax on the salary should be paid in the UK. I get that.

If you earn income, as a non-UK tax resident, on dividends from a UK company, they'll be subject to the tax regime of your home country

Notwithstanding BB's comment.

[skysies]

Do they? From A guide to forming a UK company as a non-UK resident | Companies Made Simple



This The perils and pitfalls of non-UK resident directors | Tax Adviser shows that it's not as simple as just being abroad - the UK want tax on the work you do as a director of the UK firm.

Again, I'm interested in knowing what the tax on the DIVIDENDS will be. It seems the dividends are treated in a different way. The income tax on the salary should be paid in the UK. I get that.

[eek]

The director of a UK company must be resident in the UK. How will you get round that?

If you earn income, as a non-UK tax resident, on dividends from a UK, they'll be subject to the tax regime of your home company. I own shares in US companies - due to tax treaties, I get a rebate on my tax return from tax deducted by foreign entities. Same would apply if I had UK shares. I'm just waiting for the the UK to hit rock bottom before hoovering up.

Do they? From A guide to forming a UK company as a non-UK resident | Companies Made Simple

• Register a director: there must be at least one person over 16 responsible for running the company — they do not have to be a UK resident.

This The perils and pitfalls of non-UK resident directors | Tax Adviser shows that it's not as simple as just being abroad - the UK want tax on the work you do as a director of the UK firm.

[skysies]

The director of a UK company must be resident in the UK. How will you get round that?

That rule...I believe you can be a non-resident and still be a director of a UK company...

[BlasterBates]

I'm aware of that, that's why I'm asking about 'disregarded income', which includes dividends and income form interest rates. They seem to treat dividends in a different way for non-tax residents.

You need to be careful, these dividends are earned as a direct result of your work. This is not the same as dividends distributed from a UK company you happen to own. I would be very wary.

[NotAllThere]

Thanks for the reply. I really don't care if I will work with a UK-registered company or a company registered in my country. As long as I can establish my status as non-tax resident in the UK it's all good. Will it be possible to switch to such a setup? I mean to work with a foreign-registered company in the UK?

I'm in the same position. This Brexit bull*hit is getting too much for me now. I came to this country to earn money, nothing else nothing more. And it seems to me things will get worse for the next 5-10 years.

What BB said. I live in Switzerland. My company is a Swiss GmbH. When working remotely, I just invoiced my client, no VAT. When I worked in the UK through my company, I was liable to pay personal tax on any income arising from that work. My company was also liable to pay tax on any profit arising from the work. Back then, it was possible to reduce the personal income below the tax threshold, and then ensure the company made no profit. Nowadays -probably not worth the risk.

[skysies]

If you are actually traveling to and working in the UK, then even if you are non-resident i.e. spending less than 183 days, this will be taxed in the UK.

Non-residents are not exempt from tax, they are taxed on UK sourced income and not taxed on foreign income. Residents are taxed on worldwide income.

HMRC UK residence and tax

I'm aware of that, that's why I'm asking about 'disregarded income', which includes dividends and income form interest rates. They seem to treat dividends in a different way for non-tax residents.

[BlasterBates]

If you are actually traveling to and working in the UK, then even if you are non-resident i.e. spending less than 183 days, this will be taxed in the UK.

Non-residents are not exempt from tax, they are taxed on UK sourced income and not taxed on foreign income. Residents are taxed on worldwide income.

HMRC UK residence and tax

Non-residents only pay tax on their UK income - they do not pay UK tax on their foreign income.

[skysies]

The director of a UK company must be resident in the UK. How will you get round that?

If you earn income, as a non-UK tax resident, on dividends from a UK company, they'll be subject to the tax regime of your home country. I own shares in US companies - due to tax treaties, I get a rebate on my tax return from tax deducted by foreign entities. Same would apply if I had UK shares. I'm just waiting for the the UK to hit rock bottom before hoovering up.

Thanks for the reply. I really don't care if I will work with a UK-registered company or a company registered in my country. As long as I can establish my status as non-tax resident in the UK it's all good. Will it be possible to switch to such a setup? I mean to work with a foreign-registered company in the UK?

I'm in the same position. This Brexit bull*hit is getting too much for me now. I came to this country to earn money, nothing else nothing more. And it seems to me things will get worse for the next 5-10 years.

[NotAllThere]

The director of a UK company must be resident in the UK. How will you get round that?

If you earn income, as a non-UK tax resident, on dividends from a UK company, they'll be subject to the tax regime of your home country. I own shares in US companies - due to tax treaties, I get a rebate on my tax return from tax deducted by foreign entities. Same would apply if I had UK shares. I'm just waiting for the the UK to hit rock bottom before hoovering up.