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Where Taxpayers and Advisers Meet

non-resident UK income/dividend tax liability

nrguy
Posts:5
Joined:Tue Jun 08, 2021 10:11 pm
non-resident UK income/dividend tax liability

Postby nrguy » Tue Jun 08, 2021 10:25 pm

Hi Everyone

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 (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.

What's the most tax efficient way for Joe Bloggs to extract income from ABC Ltd Company?
What's the most tax efficient model for the ABC Ltd (thinking about corp tax here)?

Cheers guys.

AGoodman
Posts:1245
Joined:Fri May 16, 2014 3:47 pm

Re: non-resident UK income/dividend tax liability

Postby AGoodman » Wed Jun 09, 2021 10:29 am

If dividends: the company pays corporation tax

OR salary: company gets deduction so no CT, potentially no income tax or NI.

Obviously pay an accountant to confirm for the particular circumstances. Be wary of the rules for close companies and temporary non-residents (temporary being less than 5 full years non-residence).

nrguy
Posts:5
Joined:Tue Jun 08, 2021 10:11 pm

Re: non-resident UK income/dividend tax liability

Postby nrguy » Wed Jun 09, 2021 10:35 am

Thanks AGoodman, Before I saw your response I thought I might try to add some more detail to the scenario to clarify things a bit since I'm trying to reach a clear answer. Your answer is pretty straight forward and easy to understand though, thanks again for that. Does anything change with the below detail included?

So here's the updated Scenario to address the gaps causing uncertainty.

- 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)

2 Questions:
What's the most tax efficient way for Joe Bloggs to money into his UK personal bank account?
What's the most tax efficient model for the ABC Ltd (thinking about corp tax here)?

nrguy
Posts:5
Joined:Tue Jun 08, 2021 10:11 pm

Re: non-resident UK income/dividend tax liability

Postby nrguy » Wed Jun 09, 2021 9:45 pm

If dividends: the company pays corporation tax

OR salary: company gets deduction so no CT, potentially no income tax or NI.

Obviously pay an accountant to confirm for the particular circumstances. Be wary of the rules for close companies and temporary non-residents (temporary being less than 5 full years non-residence).
Thanks AGoodman.

So can it be as simple as this?:

100k revenue
45k salary for 2 directors totalling 90k
10k expenses

No tax to pay as long as both directors are definitely non-UK residents?

nrguy
Posts:5
Joined:Tue Jun 08, 2021 10:11 pm

Re: non-resident UK income/dividend tax liability

Postby nrguy » Thu Jun 10, 2021 12:38 pm

I've sought professional advice too as everyone always advises this on the forums and I have two responses from different accountants, my current and my Ex.


Current accountant's advice:

I have already discussed this with my operational manager and a senior colleague.

Wages will be taxed in the UK at source but for dividends you have a choice if you are also a non-UK domiciled.

If you are non-resident and non-domiciled, you can either chose to pay UK tax on dividends taken from a UK company OR you may wish to declare them overseas in the country where you reside. You need to get further advice from an accountant in Dubai for tax implications on overseas dividends.

https://www.gov.uk/tax-uk-income-live-abroad
https://www.pwc.com/m1/en/tax/docume...-residents.pdf

If you are still not sure, you may call HMRC on 0300-200-3310 and get an advice from them. Please note a call reference number.


Ex-accountant's advice:

Although Joe is not resident in the UK for tax purposes his UK income must be declared in the UK and would be subject to UK tax. As a UK passport holder he would still be entitled to his personal allowance. The best way of taking out money from the company would be a combination of salary plus dividend. I would advise a salary of £9568 and dividend of £40,702 per annum. There would be no tax nor NI on the salary of £9568. On the dividend of £40,702 there would be tax at 7.5% with the first £2k of dividend being tax free. This assumes that you have no other UK income. This would also apply to any other non-resident UK passport holders who have a UK bank account.

In terms of reducing your corporation tax this would involve business expenses such as salary for any other employees that you may hire in the UK to help you on the administrative side of the business. Also, pension contributions are another way of reducing corporation tax and extracting profit from the company. A company can contribute up to £40k into a Director’s pension per annum and there is a three year carry back for any unused allowances in the previous three years.

So now I'm really confused.

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: non-resident UK income/dividend tax liability

Postby Lambs » Fri Jun 11, 2021 11:03 am

N,

I don't think either sets of advice have actually hit the spot - meaning those from your current and former accountants. To expand a little on AG's contribution:

We might need to know Joe's domicile status to be absolutely certain but, to the extent that Joe's duties are performed outside of the UK and he is not resident in the UK, then he should NOT be taxable in the UK (although he may be taxable in the country/ies in which he is resident). Things can be more complicated where he is also a director of the company because at least some of his duties may perforce be performed in the UK. Careful and tailored guidance would be appropriate in this regard.

Likewise in relation to dividends paid by the UK company of which Joe is a shareholder. There is a question of whether the company is distributing profits deemed to have arisen prior to a period of temporary non-residence, or dividends paying out profits that have arisen while TEMPORARILY non-resident.

Depending on the circumstances, the results could be markedly different to those that would apply to an 'ordinary' UK-resident director - and result in his having much reduced exposure to UK tax.

There is also the matter of the Double Taxation Agreement between the UK and the country/ies in which Joe is now resident.

With regards,

Lambs

nrguy
Posts:5
Joined:Tue Jun 08, 2021 10:11 pm

Re: non-resident UK income/dividend tax liability

Postby nrguy » Sun Jun 13, 2021 4:25 pm

I don't think either sets of advice have actually hit the spot - meaning those from your current and former accountants. To expand a little on AG's contribution:
It's sad that it's so difficult for even qualified accountants to interpret the rules and for them to get it so wrong.
We might need to know Joe's domicile status to be absolutely certain but, to the extent that Joe's duties are performed outside of the UK and he is not resident in the UK, then he should NOT be taxable in the UK (although he may be taxable in the country/ies in which he is resident). Things can be more complicated where he is also a director of the company because at least some of his duties may perforce be performed in the UK. Careful and tailored guidance would be appropriate in this regard.
I'm sure he'd be classed as domiciled, he has family ties and bank accounts in the UK.
He's tax resident in Dubai where there's no income tax.
None of his duties are or need to be performed in the UK.
Likewise in relation to dividends paid by the UK company of which Joe is a shareholder. There is a question of whether the company is distributing profits deemed to have arisen prior to a period of temporary non-residence, or dividends paying out profits that have arisen while TEMPORARILY non-resident.
There are currently no profits in the company to be taken out. Profit will have only been generated after having attained non-resident status.
There is also the matter of the Double Taxation Agreement between the UK and the country/ies in which Joe is now resident.
No such issue to worry about here I wouldn't think since as mentioned, it's Dubai and there's no income tax. Not too sure about Corp tax but that's not that important at the moment.

Thanks for your all for your advice so far. I've reached out to some accountants and I'll update with anymore info I get. I would appreciate more advice on this though so if anyone else has any input, I'd really appreciate it.


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