Reply to: Drawing dividends from UK LTD while working& living abroad

[zerosum]

Good luck with that. Most countries have laws that if you're resident in that country, they tax you on worldwide income.

And also, many countries simply won't recognise the arrangement that you get to decide what salary to set, but generate far more as a one-man band and keep most of it stashed away in the company account. Nor will they look kindly on you running your UK LTD entirely from abroad (CFC).

[NowPermOutsideUK]

Good luck with that. Most countries have laws that if you're resident in that country, they tax you on worldwide income.

Would it be more accurate to say that the OP "no tax to pay to UK HMRC ...."

Thats how I see it

[NotAllThere]

On the other hand, if I pay myself the £12,500 annual salary while working abroad, this amount will be below the threshold and I would not need to pay any tax on it.

Good luck with that. Most countries have laws that if you're resident in that country, they tax you on worldwide income.

[dsc]

To answer your question, if I use the MVL option and liquidate my LTD, I will be able to extract my profits at 10%, plus there will be hefty fees for the whole procedure.

On the other hand, if I pay myself the £12,500 annual salary while working abroad, this amount will be below the threshold and I would not need to pay any tax on it.

You'll most likely be double taxed in both countries, ie. 0% tax in the UK as the amount is below the threshold but the £12.5k will get converted to whatever currency it is in the country where you stay, whatever local 0% tax threshold will be deducted and you will have tax to pay on whatever is left.

[Paralytic]

On the other hand, if I pay myself the £12,500 annual salary while working abroad, this amount will be below the threshold and I would not need to pay any tax on it.

Have you actually read and understood the replies you've received on this point?

Or are you waiting till someone tells you what you want to hear, and then you can blame "some random on the internet" when things go wrong in a few years.

[zerosum]

To answer your question, if I use the MVL option and liquidate my LTD, I will be able to extract my profits at 10%, plus there will be hefty fees for the whole procedure.

On the other hand, if I pay myself the £12,500 annual salary while working abroad, this amount will be below the threshold and I would not need to pay any tax on it.

So your plan is to pay no tax in the country you’re working in, or to hope that they magically accept what the UK deems to be the tax free allowance? Does this genius scheme include filing a tax return in the destination country and do you plan to declare the holdings in your business bank account? Did you speak to an accountant in the target country?


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[skysies]

If it's for two years, and you're working through a local ltd in Europe, why not liquidate your current company and benefit from ER? You should be able to open a new one after two years.

To answer your question, if I use the MVL option and liquidate my LTD, I will be able to extract my profits at 10%, plus there will be hefty fees for the whole procedure.

On the other hand, if I pay myself the £12,500 annual salary while working abroad, this amount will be below the threshold and I would not need to pay any tax on it.

[jamesbrown]

Well I mentioned, and also the OP, that taking a salary of 12.5K is a way to extract a nice sum of money from your company...tax-free. So it be with the dividends. I can live without drawing any dividends while temporary non-resident.

As long as I can pay myself the 12.5K salary and pay no tax on it, it's all good!

You have it all worked out then! Obviously, this is why you're posting here in a clueless fashion and ignoring accurate advice as "hearsay". You're the classic poster that has decided the outcome they want and doesn't actually want the truth. What could possibly go wrong?

[zerosum]

Well I mentioned, and also the OP, that taking a salary of 12.5K is a way to extract a nice sum of money from your company...tax-free. So it be with the dividends. I can live without drawing any dividends while temporary non-resident.

As long as I can pay myself the 12.5K salary and pay no tax on it, it's all good!

But you'll be tax resident in another country. UK rules are irrelevant, and only relevant if you come back within 5 years, as has been explained. For example, Italy would tax you 0.5% on any cash you have your UK bank accounts (including the business account). You need lots of advice by the sound of it.

[skysies]

Your example is completely ignorant because it talks about salary (not part of the anti-avoidance legislation, which I linked) and you imply that the dividend is taken while you are resident in the UK

Well I mentioned, and also the OP, that taking a salary of 12.5K is a way to extract a nice sum of money from your company...tax-free. So it be with the dividends. I can live without drawing any dividends while temporary non-resident.

As long as I can pay myself the 12.5K salary and pay no tax on it, it's all good!

[zerosum]

If it's for two years, and you're working through a local ltd in Europe, why not liquidate your current company and benefit from ER? You should be able to open a new one after two years.

Also bear in mind that the UK is unusual in having an April-April tax year, which can add to the difficulty in being absent for 5 tax years. You generally want the strongest proof possible that you have genuinely been elsewhere which means being registered and filing tax returns etc. elsewhere.

[jamesbrown]

Ok, let me give an example:

1. I leave the UK in tax year 2021. During that tax year, I start paying a salary for a max of 12.5K and withdraw dividends for max of 2K. These two are below the taxable threshold, so normally one won't pay any tax on them.
2. Then I come back to the UK in tax year 2023.

Do you mean that HMRC will then say that I already used all my tax-free allowances in 2021 and so I can't use them in 2023?

It's really quite simple. If you take a dividend from a close company (in which you hold a 5% or greater share) from profits accrued while in the UK and the dividend is declared while you're temporarily non-resident, then you are taxable on the full amount of that dividend in the tax year you return, if you return within 5 years, regardless of any tax treaty benefits that might otherwise accrue (e.g., whether it was taxed overseas too). Your example is completely ignorant because it talks about salary (not part of the anti-avoidance legislation, which I linked) and you imply that the dividend is taken while you are resident in the UK

[skysies]

Hearsay.

Good luck with that.

Finance Act 2013

Ok, let me give an example:

1. I leave the UK in tax year 2021. During that tax year, I start paying a salary for a max of 12.5K and withdraw dividends for max of 2K. These two are below the taxable threshold, so normally one won't pay any tax on them.
2. Then I come back to the UK in tax year 2023.

Do you mean that HMRC will then say that I already used all my tax-free allowances in 2021 and so I can't use them in 2023?

[zerosum]

Well, that's a lot of hearsay I would say. I don't see why the HMRC will tax this in your tax year of return:

1. Leave the UK and get the non-resident status for tax purposes
2. Draw dividends in the period you are non-resident. Those dividends are for profits generated through the UK company before leaving the UK.

The dividends would be taxed in the period I'm away from the UK. I'm also thinking of paying the 12.5K salary and 2K in dividends. That would imply zero tax for the periods I'm away. I'm aware that if I return to the UK in the middle of the tax year, that will be a different story.

Completely agree with jamesbrown. This is not hearsay. Some basic Googling of "temporary non-residence" and dividend will net you many results, including from accountingweb.

Additionally, the picture is complicated by Brexit. You need 5-6 full tax years outside the UK, but ensuring this has become vastly more difficult (at least within the EU, and it was always difficult outside it) by virtue of the loss of freedom of movement. If you become legally resident in an EU country by the end of the transition period, and ensure that you aren't absent for more than six months in any rolling window of time for the subsequent 5 years until you qualify for permanent residency, you're OK. But if you want to continue to operate your UK ltd (e.g. because of UK agents) there might be CFC issues to consider.

[jamesbrown]

Well, that's a lot of hearsay I would say. I don't see why the HMRC will tax this in your tax year of return:

1. Leave the UK and get the non-resident status for tax purposes
2. Draw dividends in the period you are non-resident. Those dividends are for profits generated through the UK company before leaving the UK.

The dividends would be taxed in the period I'm away from the UK. I'm also thinking of paying the 12.5K salary and 2K in dividends. That would imply zero tax for the periods I'm away. I'm aware that if I return to the UK in the middle of the tax year, that will be a different story.

Hearsay.

Good luck with that.

Finance Act 2013