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Owning a UK company as an expat

Taxes to consider when you own a company and leave the UK

Financial spreadsheets with a calculator, pen and spectacles

Make sure you don’t get on the wrong side of the tax man

Income tax on dividend payments

When you leave the UK you are still able to own a UK limited company. You also have the right to distribute dividends from the company to the shareholders.

If the shareholder is non-resident in the UK, the dividend received could be treated as being “disregarded” income and the tax payable on it will be limited to the 10% notional credit that comes with it. This means that no further UK income tax is payable on the dividend payment.

However, certain exceptions apply to this rule. These exceptions have been brought in to prevent material participators of close companies benefiting from a relatively short-term non-UK resident status by distributing pre-departure trading profits during the period of temporary non-residence.

Basically put, the rule aims to stop people hoarding money in their company and then becoming non-resident for one year and paying themselves a large dividend to avoid paying UK tax.

What this rule states is that if the profits being distributed are in relation to a period where you were UK resident, then if you pay a dividend from these profits you have to remain non-resident for five or more tax years, for the profits to be counted as disregarded income.

If the distribution is a cash dividend paid in respect of the trading profits arising after the start of the period of temporary non-residence, then this will of course be treated as disregarded income too.

In basic terms – if the profits were made when you were non-resident and you paid the dividend when you were non-resident, then no UK tax will be payable on the dividend.

However, it is also important to note your local country’s tax treatment on the dividend payment – and I would suggest taking local advice in this respect.

Capital Gains Tax if the company is sold

If you are a non-resident and you sell the shares in your UK company, the gain on the sale is not taxable under UK CGT.

Temporary non-residence rules

However, it is very important to note that gains which escape UK CGT will be taxable if the individual does not remain non-resident for five complete tax years.

If you go back to live in the UK, and resume UK residence within five tax years, then you will not have completed five tax years as non-resident and this gain would be taxable in the year that you return to the UK.

VAT for companies when you are abroad

For as long as a UK company engages in a business that is not VAT-exempt it can apply to be registered for VAT in the UK if its turnover of VAT taxable services supplied during the previous 12 months is above the current registration threshold of £82,000 or the directors expect it to go above that figure in the next 30 days alone.

If, instead, the company is providing services but it has not crossed the registration threshold, it can still apply to register for VAT voluntarily, by providing documentary evidence that the company is in business.

The registration process requires the presence of one of the directors in the UK and for that director to provide his/her National Insurance number or for the company to be represented by a VAT representative or agent.

The foregoing is intended solely for information purposes. Nothing contained therein should be construed as legal or tax advice. Legal or tax advice should only be obtained from a qualified legal or tax professional.

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