Is UK PAYE tax payable to non-resident director in zero tax country?

[Barney2201]

We live on the stunning but very tiny island of Sark. Sark is pretty unique as there is no personal tax.

We own a UK company and would like to switch from mainly dividend income to PAYE (applying for mortgage and payslips make life a lot easier).

We run the business remotely, have been away from UK over 3 years, husband and wife team. My wife does the bookkeeping, I bounce back and forth keeping under the 90 midnights.

If we move onto PAYE it would appear the tax is calculated where the work / management takes place.

Am I correct in saying my wife would benefit from 0% tax as all her work takes place outside of UK and I would just pay tax on days worked in UK?

[darthblingbling]

Your wife should be ok under an NT code. You'll personally probably need to get a s690 directive in place with HMRC in order to ensure only an estimated percentage of your employment income is subject to PAYE based on intended UK duties. You would then need to reconcile this correctly on your UK tax return. Without the s690 HMRC would expect you to subject the whole amount to PAYE, albeit this would probably generate a refund on your UK tax return later.

Also FYI under 90 days is a good rule of thumb, but is not automatically guaranteed to make you non res under the statutory residence test.

You might also need to consider National Insurance as if you're liable to UK NIC you don't get to apportion for UK workdays. Simply having a presence in the UK under a UK contract (whether written or implied) can be enough to trigger this. There is an extra statutory concession for non resident directors however, but can be very hard to adhere to the rules laid out by the ESC.

Also a payroll will become an additional admin task with risk of penalties if you do not get it correct.