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A guide to UK non-resident tax

If you're a non-resident director of a UK company, you need to carefully consider your tax position, whether you need to register for self-assessment in the UK and if you are paying the right amount of tax. Companies with non-resident director's also need to understand their obligations.

A guide to UK non-resident tax

Domicile status

A persons liability for income tax in the UK is dependent on their tax residence and domicile status. To check that you wont be classed as a resident in the UK, you can use the UK Government Statutory Residence Test.

Non-resident director's visiting the UK

If you're an overseas director of a UK company but classed as a non-resident, you can visit the UK for short periods of time without establishing tax residence in the UK. However, you may be liable for UK income tax and NICs – see below for more information.

Do I pay UK income tax as a non-resident director?

Non-UK resident director's of UK companies visiting the UK to undertake duties associated with their director role where salaries or fees are paid will be subject to PAYE.

Even if the non-resident director spends only one day working or attending a meeting in the UK during a tax year, you may still be subject to PAYE. Even if no money is paid by the UK company or there is a separate remuneration agreement for UK duties, then PAYE could apply. Therefore, it may be practical to agree on a salary for the UK directorship in some cases.

Income derived from your UK role

On the surface, the rules are pretty simple. Any income received by a director (executive or non-executive) for their role within the UK (e.g., attending meetings), is subject to UK PAYE. Any earnings relating to duties performed in the UK in a tax year are taxable in full.

Double tax treaties don't usually protect the director. However, if the individual isn't remunerated by the UK or overseas entities for the UK directorship, there will be no UK tax liability (see below about whether you still need to complete a self-assessment tax return).

Self-assessment & PAYE for non-resident director's

Any director of a UK company (including non-resident director's) can fall into self-assessment criteria.

The rules are as follows:

If the director is issued with a UK tax return, they must file the tax return by the relevant deadline. Even where there is no tax due a return must be filed if it is issued by HMRC. As with any other tax return, if it is filed after the deadline a penalty will be incurred.

If you're a non-resident director that receives income from your UK activities, but a UK tax return isn't issued by HMRC, then you must notify and register with HMRC in the UK. If you don't notify HMRC, there will be a penalty for failing to notify HMRC, unless the tax is paid by the filing deadline (and the return submitted).

Global roles and the UK tax consequences

If the non-resident director is paid a salary for a global role involving directorships with numerous foreign entities, then it will be necessary to establish the proportion of that salary that is in relation to the director's UK duties to be able to report this to HMRC.

HMRC can allocate a proportion of the director's total pay to the UK director role they fulfil. This is generally difficult for HMRC to do, so the responsibility is on the UK company and director to have systems and processes in place to keep track of time spent performing their UK duties and the value of income that relates to those duties.

NICs for non-resident director's

In addition, there can be employment tax and NIC obligations and liabilities to consider in relation to expenses and benefits provided to the director while they are working in the UK. But this is a complex area and will depend on many factors. We advise that you seek professional advice from accountants such as dns in this matter.

Expenses for non-resident director's

It is common for companies to reimburse or pay for expenses like travel, accommodation, and subsistence to non-resident director's. The tax treatment of expenses will follow the standard principle of the temporary workplace and whether they have been incurred wholly, exclusively, and necessarily for employment duties. A limited exemption applies to travel expenses if the director is non-domiciled and requires reviewing on a case-by-case basis. The payment of expenses can trigger additional reporting obligations and employers should therefore seek professional advice.

Tax treaties between the UK and other countries

Tax treaties don't offer protection to director's from UK tax perspective. Often people believe that if there is a tax treaty between the UK and the director's country of residence, then this will exempt their income in the UK from UK income tax. However, this isn't always the case, so seek advice. Director's need to be considered separately from other visitors if they are board director's.

HMRC checks and investigations on non-resident director's of UK companies

HMRC are increasingly checking company records for non-resident director's, so keeping accurate records, registering for self-assessment if necessary and filing a return by the deadline are crucial to remain compliant.

What to do if you're a non-resident director of a UK company

Now is the time for both director's and their companies to review existing arrangements to ensure any tax or NIC obligations in the UK are met. Consider the following:

  • How you are calculating earnings for UK duties.
  • Ensure the director knows of their obligation to complete a self-assessment tax return in the UK and how to avoid double taxation.
  • Seek advice about whether the director's earnings are liable for employee and employer Class 1 NIC.

With HMRC increasingly scrutinising company director's and those that are non-resident in the UK, its important that both the director and the company concerned understand their UK tax obligations and reporting to avoid penalties now and in the future.

Here at dns, we specialise in non-resident UK director's tax and can advise you on all the things you need to know and your obligations here in the UK. If you have questions or require help then book a free consultation or call us on 033 00 88 66 86 or email info@dnsaccountants.co.uk.

Also See: Non Resident Bank Account In UK

About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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