UK Company and a Non-Resident Director. PAYE/Tax

[Tax Cow]

Hello,

I've been using UK companies as a non-resident director and sole shareholder for 10+ years.

There has never been any corporate income tax liability because the UK company is rendered non-resident under applicable tax treaty. But recently, I started to doubt in regards to personal income tax liability, filing obligations.

1. According to HMRC guidance, the days a non-resident director spends in the UK should be proportionally taxed under PAYE. Even if I spend just 1 day in the UK, a small percentage of my annual remuneration (of all my UK companies) should be taxed in the UK. No protest, it sounds perfectly fair, because the income is then made in the UK. I paid proportional tax in the UK for this exact reason.
2. What if the non-resident director spends 0 days in the UK? Again, according to HMRC guidance, the non-resident director of a UK company should always file a personal income tax return in the UK. Personally, I've never done that in such years, and it does not sound reasonable at all. I'm even on the opinion that HMRC guidance is wrong.

There's a lot of conflicting information on the topic. Google's 1st and 2nd result are outright wrong, although the information is written by reputable law firms. Other law firms seem to be on the opinion that no personal income tax return should be filed in the UK unless the non-resident director either has tax liability in the UK, or if he spent at least 1 day of that tax year in the UK.

HMRC is pretty much useless on this topic because they won't argue or explain. They keep sending me back to documents I don't agree with.

Question: The fact that a non-resident director received remuneration from a UK company does not create personal income tax liability in the UK. The non-resident director has no obligation to file a tax return in the UK unless he spent at least 1 day of that tax year in the UK. True or false, and why?

 

[xzods]

I'm in the same problem right now. I don't see why there should be taxes paid in the UK if there's no PE there nor any performed duty. Setting up a UK agency would've been better I think. How do you deal with corp tax please ?

 

[Tax Cow]

I'm in the same problem right now. I don't see why there should be taxes paid in the UK if there's no PE there nor any performed duty. Setting up a UK agency would've been better I think. How do you deal with corp tax please ?

What do you mean "deal with corp tax"? I don't pay CIT in the UK. There is no UK PE, no UK dependent agent working on behalf of my business, and no UK property-related income. I've been once asked for the tax residency certificate.

 

[fshore]

You only pay tax and PAYE to UK if you have directors meetings in the UK. You should file a tax return if they send you a request to file a tax return.

Did you inform HMRC that the company is not tax resident in the UK due to a tax treaty and they accepted that? If so it would not make sense to pay personal tax to UK due to having UK directors meetings (which would probably make the company UK resident).

Anyway, the easier way to do it is to have the UK company resident but not perform any directors services in the UK. Then the company is still UK tax resident, but your personal salary (directors or regular) is not taxed in the UK.

 

[WoWNull]

hmmm interesting
i am having ltd and some accountant says i may need to pay taxes bcuz i am the director of the company even if i am not an uk resident

 

[xzods]

@WoWNull I also want to know what's the correct % of Corp Tax and Personal income tax in case of :
- No PE in the UK
- 1 Single non resident director
- 0 days spent on the UK
- The only tie to the UK is the UK incorporated company

 

[fshore]

@WoWNull I also want to know what's the correct % of Corp Tax and Personal income tax in case of :
- No PE in the UK
- 1 Single non resident director
- 0 days spent on the UK
- The only tie to the UK is the UK incorporated company

The company is taxable in the UK (provided its a Ltd company). Your personal salary is not taxable if you don't work in the UK.

 

[WoWNull]

The company is taxable in the UK (provided its a Ltd company). Your personal salary is not taxable if you don't work in the UK.

then why people tell me you need to pay tax =_= or u only allow to take 12k per year which is under the non taxable

 

[Barney2201]

Just re-bumping this to the top in the hope someone can add a bit more detail.

I am in the same situation as the OP.

Looking to move to Antigua from the Channel Islands (been here 2 years so already non-resident for UK tax and NI)

Plan to set up new UK company in my wife's name who will not work in UK and pay most company profits as PAYE (salary + bonus) directly to her in Antigua (no income tax)

Effectively this will eradicate the UK corp tax bill and she can receive the UK co profits tax free.

Can anyone see any issues with this method?

 

[fshore]

Just re-bumping this to the top in the hope someone can add a bit more detail.

I am in the same situation as the OP.

Looking to move to Antigua from the Channel Islands (been here 2 years so already non-resident for UK tax and NI)

Plan to set up new UK company in my wife's name who will not work in UK and pay most company profits as PAYE (salary + bonus) directly to her in Antigua (no income tax)

Effectively this will eradicate the UK corp tax bill and she can receive the UK co profits tax free.

Can anyone see any issues with this method?

As long as the salary is reasonable it should be good from the UK side.

 

[Barney2201]

Who would determine what a salary is reasonable?

E.g. Turnover £1.5 million, net £300K, so pay wife £200K salary plus £75K bonus and leave £25K in the pot to pay a £5K UK corp tax liability.

 

[fshore]

Who would determine what a salary is reasonable

HMRC.
You should contact some experienced UK accountants to get their view on it.

 

[ShillGates]

salary is non paye chargeable, and no paye tax is applicable. You need to get the company to put you as an employee, and register you as paye exempt. Then pay yourself whatever the heck you want. Paye is due for work performed in the UK, and yes you still ne to file a tax return since you are a director - albeit these should all be zero's. Only fle one if hmrc sends you a form.

However do bear in mind employment income might be taxed where you are, - which most likely will be some carribean craphole with their own rules

 

[fshore]

salary is non paye chargeable, and no paye tax is applicable. You need to get the company to put you as an employee, and register you as paye exempt. Then pay yourself whatever the heck you want. Paye is due for work performed in the UK, and yes you still ne to file a tax return since you are a director - albeit these should all be zero's. Only fle one if hmrc sends you a form.

However do bear in mind employment income might be taxed where you are, - which most likely will be some carribean craphole with their own rules

Maybe this is a new trick for Apple and Google, just let their Bahamas resident directors take a salary of 100bn to avoid any UK tax.

(maybe you get my point)

 

[ShillGates]

well kinda , but still need to pay the
Bahamas Social Security in 2021: Rates and Thresholds (Annual) Tax Rate Payable by:
3.9%
Employee

5.9% Employer

so 9.8% goes to bahamas instead. Also the company becomes bahama resident , althought zero tax, as its managed and controlled from there. Then you cant get a vat number in uk anymore, technically

(maybe you get my point)

 

[fshore]

well kinda , but still need to pay the
Bahamas Social Security in 2021: Rates and Thresholds (Annual) Tax Rate Payable by:
3.9%
Employee

5.9% Employer

so 9.8% goes to bahamas instead. Also the company becomes bahama resident , althought zero tax, as its managed and controlled from there. Then you cant get a vat number in uk anymore, technically

(maybe you get my point)

Anyone can get a UK vat number if required to, even foreign companies, and everyone that ships a single item valued under 135gbp to a UK personal customer.

 

[ShillGates]

Sure if you ask you will get one - however you are not entitled to one technicallly unless;

There are strict rules on the situations where a registration is permitted. Common scenarios which require a UK VAT registration include:

• importing goods into the EU via the UK
• buying and selling goods within the UK
• holding goods in a warehouse in the UK as stock
• selling goods from the UK to other EU countries
• acquiring goods from other EU countries into the UK
• distance selling to private individuals in the UK from another EU country, e.g. internet retailing.

Since the original poster wants to get this Corp managed abroad - to pay tax free salaries - i think you can imagine if you do happen to get a vat number based on the fact you declare you are doing stuff in the U.K.

 

[jerseyuser]

Just re-bumping this to the top in the hope someone can add a bit more detail.

I am in the same situation as the OP.

Looking to move to Antigua from the Channel Islands (been here 2 years so already non-resident for UK tax and NI)

Plan to set up new UK company in my wife's name who will not work in UK and pay most company profits as PAYE (salary + bonus) directly to her in Antigua (no income tax)

Effectively this will eradicate the UK corp tax bill and she can receive the UK co profits tax free.

Can anyone see any issues with this method?

But why not channel islands ?

 

[Barney2201]

Guernsey has been good but property prices are going sky high as very limited housing market unless you have a local permit. Personal tax is 20% but NI is pretty steep at 11%. Whilst our Corp Tax bill is now zero since moving from UK now looking to reduce personal tax bill as much as possible. Antigua seemed a decent place and 0% personal tax other option is Portugal NHR scheme again paying wife bulk of UK company profit as salary...

 

[AdamT1]

What do you mean "deal with corp tax"? I don't pay CIT in the UK. There is no UK PE, no UK dependent agent working on behalf of my business, and no UK property-related income. I've been once asked for the tax residency certificate.

Regarding Corp. tax a UK Ltd. company becomes tax resident by default from the moment of incorporation and all the company's revenue from any sources worldwide is taxable to Corp.tax even if there is no PE & not a single director in the UK.

In order to get exemption for some or all of the income of the UK Ltd. generated trough foreign PE it is required to apply to HMRC for Corp. tax deregistration by providing details & proof that foreign PE exists and it is taxable in some other jurisdiction. Also there are some other specific requirments to get this request approved.