Moving overseas as a company director

If you’re considering moving overseas as a company director, with business and personal interests in other countries, planning is key as there will be implications.

When a UK company director decides to move overseas, there are questions that need asking and answering around residency, your tax position for UK personal tax, the company’s tax position, and social security benefits etc.

In this blog, we look at the key considerations when a UK limited company director moves overseas, and underlines the importance of planning and the assistance of an experienced adviser.

Can I run a UK limited company from overseas?

The simple answer is yes. There are no laws that prevent you from setting up or running a UK based limited company if you are not resident in the UK.

However, that there are some legalities of running a UK business that you must adhere when setting up a company in either England & Wales, Scotland or Northern Ireland.

If you run an established business in the UK and are considering moving either yourself and/or your business abroad, then read on as there are lots of complexities of moving abroad.

If you are considering setting up a UK company and you live abroad, you must first register your company with Companies House. Companies House in the UK incorporates and dissolves limited companies. It is also responsible for examining and storing company information and for making this available to the public.

Find out more about non-residents being UK company directors here.

Who do I need to inform if I move overseas?

If you currently run a UK registered company and you decide to relocate abroad then you must inform Companies House and make any necessary changes to the service address or addresses of the director or directors. From a personal tax perspective, you must also inform HMRC.

If you are operating through a limited company but are not a UK tax resident then the IR35 rules will not apply.

What is a director’s service address?

Any director, shareholder, secretary or person with significant control (PSC) will need to provide a service address. This is the address that will be held on public record. It can be anywhere in the world. Any statutory mail and legal correspondence will be sent to that director’s service address.

Before you move overseas

Before you move, there is some essential admin you’ll have to do for HMRC if you’re planning to move abroad permanently.

If you are self-employed, you’ll need to send your self-assessment tax return to HMRC with the SA109 section (‘residence’) amended to reflect your new overseas address.

For directors that are employed, you should inform HMRC that you’re moving abroad using the P85 form and you’ll need to get parts 2 and 3 of your P45.

Residency

One of the other key questions when you move abroad is where you, and your business, are now resident. In other words, do you now live permanently in your new country, will you business be resident in a new country as well?

If you spend a prolonged amount of time living in one country as an individual then – depending on their residency rules – you may become resident for tax purposes.

Every country will have different residency rules. For example, in the UK a company incorporated in the UK is considered to be UK resident, and also where ‘management and control’ of the company is located. Your UK residence status affects whether you need to pay tax in the UK on your foreign income.

Non-residents only pay tax on their UK income - they do not pay UK tax on their foreign income.

Residents of the UK normally pay UK tax on all their income, whether it’s from the UK or abroad. But there are special rules for UK residents whose permanent home (‘domicile’) is abroad.

If you move aboard, you will be automatically classed as a non-UK resident if:

• you work full-time (an average of at least 35 hours a week) abroad, and
• spend less than 91 days per tax year in the UK,
• of which less than 31 days are spent working.

You may be able to retain your UK residency status if the following apply

• you spent 183 or more days in the UK in the tax year
• your only home was in the UK for 91 days or more in a row - and you visited or stayed in it for at least 30 days of the tax year
• you worked full-time in the UK for any period of 365 days and at least one day of that period was in the tax year you’re checking To check whether you were counted as a UK resident for any of the tax years since 2016, use this simple online tool.

You may also be resident under the sufficient ties test if you spent a number of days in the UK and you have additional ties to the UK, like work or family.When should an Non-Resident Director file a tax return?

Overseas tests

You will be classified as a non-resident if either:

• you spent fewer than 16 days in the UK (or 46 days if you have not been a UK resident for the 3 previous tax years)
• you worked abroad full-time (averaging at least 35 hours a week), and spent fewer than 91 days in the UK, of which no more than 30 were spent working

Filing requirements for non-resident directors PAYE and income tax

The filing and reporting requirements for non-resident directors can be complex, so we would advise you to seek advice from a UK accountant, such as dns accountants that specialise in non-UK company directors

In short, it is worth knowing the following:

• According to HM Revenue & Customs (HMRC), any director of a UK company falls within the criteria for self-assessment. This includes non-resident directors.
• If HMRC issue the individual with a UK tax return, they must file the return by the relevant filing deadline. For 2022/23, the statutory filing deadline is 31 January 2024.

If the return shows that there is no UK income and the tax is NIL, then disclosure should be made on the tax return. HMRC will not necessarily issue a tax return every year, in such cases, but they will review the position every few years.

If HMRC do not issue a UK tax return but you owe UK tax, then HMRC will impose a penalty for failing to notify HMRC, unless that tax is paid by the filing deadline

In general, if a Non-Resident Director has any of the following, they are required to file a UK tax return with HMRC:

• UK workdays (If just for a day).
• A director’s fee.
• Reimbursed expenses.
• Salary or other income in the UK.

Other UK income will also impact your tax position in the UK. For example, if you rent out your UK home, you will have UK source income, or if you continue to hold savings accounts in the UK and earn UK interest. So, it is vital to seek professional advice before you move.

Will an overseas director of a UK company need to pay UK income tax?

Generally, a non-resident director of a UK company is classed as an office holder, and therefore income received in respect of their UK role will be treated as earnings in the UK.

Under the OECD model and International Double Tax Treaties, officeholders remuneration does not have the same level of protection from taxes like that of employed individuals income received in another jurisdiction.

Are National Insurance Contributions due for a company director resident outside the UK?

This is a complex area and depends on where the director has ongoing social tax obligations, as well as other directorships, their location, and rules in those tax jurisdictions. We recommend you seek professional advice from a UK accountant.

How social security works will depend on how long you are going abroad for. If you’re leaving the UK for up to two years, you may continue to be able to contribute to the UK social security (National Insurance) system.

The social security position is different to income tax, and both the company and employee can be liable to pay social security in both the UK and their home country in full, without any relief available for the double charge.

Whether or not the UK duties of an Non-Resident Director (NRD) trigger UK National Insurance Contributions (NIC) depends on the director’s residency and whether there is a social security agreement between the UK. Otherwise, your social security liability may move to your new country of residence.

Rules and rates are likely to be different for employees, and also employers. It’s worth noting that not all countries have pay-as-you-earn (PAYE) set up for income tax – so you may need to keep income back to pay your annual tax bill.

HMRC checks

HMRC conducts compliance checks on UK companies on a regular basis and would expect relevant NRD’s to make a tax declaration and, in some situations, PAYE on this employment.

Keeping records for Non-Resident Directors (NRDs)

We recommend that companies employing non-resident directors ensure that they have systems and processes in place to keep track of time spent on performing duties in the UK and the value of the director’s income related to the UK duties that the director is carrying out.

Can I move my UK limited company abroad?

Once an existing company has been incorporated and is a registered company in one of the UK’s three jurisdictions (England & Wales, Scotland, or Northern Ireland), the company will remain registered there until it is dissolved (closed). This means that you cannot change which jurisdiction your UK limited company is registered in.

The only way to move your company’s registration to another country is to dissolve the company in the UK at Companies House and incorporate a new company in the country you want to move to. When your new company is set up, you can transfer your business assets from the existing company.

However, note that where your business is incorporated and registered can hugely affect business taxes, so seek advice early.

Tax treaties between the UK and other countries

Often people believe that if there is a tax treaty between the UK and the director’s country of residence, this will exempt their income in the UK from UK income tax. However, this isn’t always the case.

A problem of your company becoming resident in a new country is you may end up being taxed twice – once in your home country and once in your country of residence. To avoid this problem, many countries set up ‘double tax treaties’ for use by companies and individuals.

Double taxation treaties are agreements between 2 states which are designed to protect against the risk of double taxation where the same income is taxable in 2 states.

For countries without such a treaty, both countries will look to tax the income or gains, or, in some cases, may consider an individual or entity to be resident at the same time.

If you have an established business, you don’t want to be paying taxes in two different places on your company profits. It is very easy to get into a mess when you move abroad with your business operations and taxation. You need to seek advice from qualified accountants and tax advisors, such as dns accountants, before you move overseas to avoid double taxation and to ensure you pay the correct taxes for both yourself and your company.

Have you set up a permanent establishment?

Another important question is whether your movement as a company director to a new country has created a ‘permanent establishment’. A permanent establishment is created when a company has a presence in a country and is trading via that presence.

A permanent establishment is a fixed place of business through which the activities of the business are carried on. Again, the rules are quite complex, but if you have staff working for you outside the UK, you need to consider whether their presence there could create a permanent establishment.

Your permanent establishment could be a place of management where there’s an office, factory or workplace of some sort. Warehouses generally don’t count as permanent establishments, but all the other places where you work do count, even if you’re operating via a dependent agent.

It is important that you have enough time to prepare before you move a company overseas. Unfortunately, people do move quickly without consideration and planning. This can be due to a lack of awareness of the tax rules, or a lack of understanding of the implications.

Seek professional advice

If you are thinking of moving, it’s vital to plan ahead and think through the potential impact, and take advice as to what the changes mean for you, and your company.

Moving to an overseas country and non UK resident directors tax affairs can be complex. Moving abroad both individually and/or your company can have a huge impact on both personal taxes and business taxes as well.

Where you pay corporation tax and income tax can make a huge difference to your personal tax bill and your business profits.

The way you contribute to and utilise social security in your new resident country is another key consideration.

Usually your country of residence will want to tax you on your personal income. So you’d need to seek advice about the tax reliefs and rules both in your new home country and back here in the UK.

With each country having its own rules around residence, permanent establishments, income tax and social security, it’s easy to get it wrong if you dont seek out advice.

While moving yourself and your business overseas is something you shouldnt undertake lightly, it’s perfectly possible to get it right with planning and professional advice. Professional advice may mean you avoid any potential double-tax issues and mitigate the tax impact on your profits and income.

Here at dns accountants, we have a thorough understanding of the tax consequences for non-resident directors of UK companies and can assist you in resolving any issues and ensuring compliance.

If you would like to speak with a specialist adviser and want to know more about the non-residents UK company directors, please contact dns right now.

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