Becoming Non-Dom But Still UK Director

by **matthewjames68** on Fri Jan 13, 2012 2:17 am

Hi there,

I run a UK limited company and would like to know if I would not have to pay tax on dividends from my company under this circumstance.

If I leave the UK to Australia on April 1st 2012, and return April 30th 2013 (therefore clearly leaving for a full tax year) and do not return at all during that year, I would then become non-domiciled. Correct?

Whilst in this non-dom status, if take out dividends from my UK company into my UK bank account, and a short time later return back to the UK and become domiciled again, would any tax be due on on those dividends?

The dividends would be issued whilst I am in Australia and working in Australia.

Any help is greatly appreciated.

by **tax_schmax** on Fri Jan 13, 2012 10:26 am

No. You'd (probably) be non resident not non domiciled and you would only pay tax on your UK income such as rental income, dividends, savings interest or any salary associated to the dividend .

by **mullet** on Fri Jan 13, 2012 10:27 am

If I leave the UK to Australia on April 1st 2012, and return April 30th 2013 (therefore clearly leaving for a full tax year) and do not return at all during that year, I would then become non-domiciled. Correct?

Incorrect. You are confusing residence and domicile. Domicile is far more "fixed" than residence. It depends on your father's domicile, the location of your family, the location of your assets, the location of any business interests, under which country's law your will is made, your long-term intentions.

In simple terms domicile is about where your roots are. In early years a person's domicile will usually match that of their parents. It is possible to "re-root", but domicile does not change as often as residence might change. Even if someone lives abroad for 30 years they may still remain UK domiciled. It depends on a lot of things.

by **tax_schmax** on Fri Jan 13, 2012 10:28 am

Sorry, the answer reads badly.

No you would not be non domiciled. You'd (probably) be non resident. As such, you would pay UK tax on your UK income.

by **matthewjames68** on Fri Jan 13, 2012 1:04 pm

Thank you for your replies so far. I now understand that I would be non-resident but still domiciled.

Can somebody please explain what 'Income arising in the UK' means?

Yes the dividends will be issued from a UK company, but I am working on that company from abroad, whilst non-resident. There are no employees and no physical office in the UK. The income from the company is from clients/customers all OUTSIDE of the UK.

Will the dividend issued from my UK company therefore be outside the 'income arising from the UK' clause and be exempt from UK tax whilst I am non-resident?

Many thanks,
James

by **tax_schmax** on Fri Jan 13, 2012 3:28 pm

No. The income arises in the UK because the company is based here.

by **maths** on Fri Jan 13, 2012 4:08 pm

Dividend income from a UK resident company constitutes UK source income and thus in principle taxable to a non-UK resident individual.

However, any income tax liability is restricted to the tax credit which is attached to a UK source dividend; in short no income tax liability arises. EG, cash dividend of 90 paid to non-resident. No income tax charge arises thereon, hence net receipt is 90.

In your case however there are a number of issues:

1. whether you will in fact become non-resident (depends upon the facts).

2. whether the company's residence will change from UK to Australia and thus a possible UK export CGT charge arises.

by **matthewjames68** on Fri Jan 13, 2012 5:06 pm

Thanks tax_schmax and Maths - but conflicting answers there. Which one is correct?

Maths FYI the company will not change residence. And based upon the research I've done I will become non-resident.

So for example a 90k dividend from the company will not incur any additional tax?

Thanks again for all your help so far.

by **maths** on Fri Jan 13, 2012 5:16 pm

but conflicting answers there. Which one is correct?

Not sure to what you refer?

Maths FYI the company will not change residence.

If you say so.

And based upon the research I've done I will become non-resident.

If you say so.

So for example a 90k dividend from the company will not incur any additional tax?

Correct; as per my earlier post.

by **matthewjames68** on Fri Jan 13, 2012 5:23 pm

Thanks so much for your speedy reply! I really appreciate it. That clears things up nicely. I was a bit confused and by conflicting i was referring to:

maths wrote:Dividend income from a UK resident company constitutes UK source income and thus in principle taxable to a non-UK resident individual.

The above quote seemed to suggest that tax would be paid, whereas below suggested not.

maths wrote:in short no income tax liability arises. EG, cash dividend of 90 paid to non-resident. No income tax charge arises thereon, hence net receipt is 90.