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Non Resident Tax Q&A
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Non UK Resident Tax Consultancy Questions
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Tax efficient extraction of company profits as a non resident - USERNAME:davebiggam
Tax Question: I would like to clarify the UK income tax and NICS liability for the following scenario: Director of UK private limited company, single shareholder, non resident in the UK since 1997, remuneration history has been to draw dividends up to the higher rate tax threshold, has retained profits in the company that have been subject to corporation tax, performs duties for the UK company overseas. Assuming he remains non resident and has no other UK income, then: What personal tax is payable on future dividends received? Are there any limits as to the level of dividends (in relation to UK tax liability)? If retained profit is taken as salary or bonus, is he liable for UK income tax and NICS on this income and do standard UK tax thresholds/rates apply? Given that his remuneration history has been to draw dividends and at this point is looking to wind the company down (and cease trading in 2 years-he is close to retirement), are there any broad guidelines (or limitations) as to the level of salary/bonus that could be taken over this period. Thank you for your help. . . .
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Moving to US - income tax implications USERNAME: ckchowes
Tax Question: Sorry - there is a lot of info here but I think it helps to give you a good picture of our situation! First some background info: We are a married British couple with a 2 year old son. My husband's job is being permanently relocated to the USA and we are moving out there at the start of November 2010 under his L1A visa. This visa entitles me to work in the USA as his spouse although I will need to apply for a separate work permit when we arrive (once I have my social security number) which can take up to 90 days to come through. My husband's employer will be withholding his US taxes and paying this at source (their equivalent of our PAYE). He will be employed and paid by a US employer into a US bank account. Nothing will go through the UK. I have been employed by my current employer for almost 8 years and they have agreed for me to 'take my job' with me for the first 18 months, after which time we will review the situation together. We do not know how long we will stay out there at this point and they do not know whether they would want to continue my employment at that distance beyond 18 months, but if we stay beyond 18 months I would probably want to get a local part time job anyway which fits around our family life. Our visa is valid for up to 7 years and also smoothes the way to applying for a green card (which would be sponsored by my husband's employer should we decide to go down that route). I am currently full time in the UK, but plan to drop down to 22 hours per week when we reach US soil, although i will not be working at all until my work permit arrives. Our questions: 1. Should we/I be paying any kind of NIC - obligatory or voluntary? I read somewhere that we might both have to pay something for the first 52 weeks that we are out of the UK? 2. Are we still entitled to free NHS care if we move back to the UK? 3. Double taxes: we have heard first hand from a friend and a colleague who have moved to the US that this is a nightmare to deal with! I have been told that I will have to pay them because: (a) I am employed by a UK organisation (b) I will not be working full time (c) I am only planning on staying 18 months (this infact isn't entirely true - we don't know how long we will stay yet. We want to keep our options open at this point - we hope it will work out for the long term, but don't want to make it difficult to return to the UK if we don't settle). My employer is flexible about how I'm employed while in the US but favours the option of continuing my current contract with a 90 day 'sabbatical' while I'm unable to work. They would also provide me with financial support while I'm paying double tax, until my refund comes through (which can take up to 18 months?). Is there any way I can avoid paying double taxes? Does receiving my pay into a UK or US bank account have any impact/ influence on this? I know this is probably largely dependent on the factors I've listed above, but here's a scenario: if I terminated my current UK contract and completed a P85 could I declare myself as a non resident of the UK because I'm moving to the US due to my husband's permanent relocation, and then pick up work from a UK organisation as a self-employed contractor, paid into a US bank account and deal with my own taxes in the US, thereby avoiding UK tax? If we returned to the UK within a certain period would I then have to pick up a back-dated UK tax bill? And would my husband too? He will be declaring himself a non resident of the UK on his P85. Does my husband also have to pay UK tax from the outset for any period of time? We don't think he does, but thought we'd ask while we're here! My employment options are: (i) continue current UK contract, pay UK tax and NIC at source, pay US tax bill with financial assistance from my UK employer which would be returned upon receipt of the refund (ii) continue current UK contract but get paid into a US bank account - would I still have to pay double tax? (ii) terminate current UK contract, collect P45, declare myself non-resident of the UK on my P85, pick-up self-employed work from UK organisation once in the US I could be asking questions or suggesting scenarios here that are absolutely not allowed, and we know you can't tell us about the US side of things, but we are so naive on this subject that we have to ask the questions! We want to make sure we are doing this properly and in a way that carries minimal financial impact and risk, but also provides the easiest transition into staying in the US or indeed moving back to the UK! I know we can't have it all ways, but we are trying to figure out the best way to proceed in our situation. Any information you can provide, even if it falls outside of the specific questions I have listed here but seems relevant, would be very much appreciated. We know you can't advise us on the best option for my employment situation, but we need to understand the implications of each scenario and also whether my husband needs to pay anything in the UK. Many thanks in advance. . . .
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Using offshore company, transfer of assets abroad and UK corporation tax - USERNAME: lhuggybear
Tax Question: 1) TRANSFER OF ASSET ABROAD RISK. I am setting up, or rather I am a partner in the setup of a management company in Luxembourg. There is no doubt possible about materiality there and so there is no need to analyse the business there. I am given 49% of the shares of that company. On setup, I subscribe to these shares through a Malta company set up for this purpose. Hence the shares have never been in my hands or in my name. Is there any risk the Revenue could see a transfer of asset abroad event here or anything similar. I am UK long term resident, non-domiciled. 2) CONTROL ISSUE IN MALTA COMPANY The sole purpose of above company is to hold the above mentioned shares and as such, there will be no other income than the dividends from Luxembourg. Whether I am a director or not, there is a risk the Revenue will consider that company to be managed and controlled from the UK, as I am the founder, sole shareholder and director of the company. I may have board meetings by myself in Turkey, but that may still not change the fact that it could be seen as managed from the UK, as I live here. Now, the dividend income stream into Malta, which is not taxable there, because of its intra-European 10%+ holding rule, would also not be taxable in the UK. Is there hence any concern for me to have? It is clear that I intend to bring back dividend into the UK, and pay tax on that, but also if the amounts are material, use the remittance mechanism to exempt part of my dividends. Thank you.... . . .
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Protecting overseas earnings from UK tax USERNAME: anon
Tax Question: I am UK domiciled, resident and ordinarily resident and provide consultancy services through my UK company. All my work is for overseas clients, mostly in Russia and the Middle East. If it would take me out of UK income tax, I could arrange to spend at least 75% of my time outside the UK for a period including a complete tax year. I do not envisage becoming tax resident in any other country. If I remain an employee of my UK company I believe NICs would be payable for the first 52 weeks only, during which period I could keep remuneration low. I would then pay out most/all profits as a bonus to minimise corporation tax. Would this route be effective and, if so, what would I need to do to implement this? Alternatively, would it be better to set up a company elsewhere that would be my employer? If so, where? . . .
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Disclosure of capital gain on property in Turkey USERNAME:JudithB
Tax Question: This is a question about whether my husband needed to provide details of the sale of a foreign holiday home on the 09-10 return. Background - We have been living in Belgium for 3 years whilst I have been seconded by my employer. My tax is taken care off by my employer under the Belgium/UK tax treaty. My husband has continued to file a UK tax return as he has received a UK military pension throughout the period and has also worked periodically on consultancy projects for UK companies for which he has been paid in the UK and paid UK tax on the sums. We sold a holiday home in Turkey before the end of the financial year and his share of the total selling price was less than the threshold of £40,400 and the profit for each of us less than £10,000. My question is does it still need to be declared irrespective of the fact that no CGT will be payable? . . .
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Non resident, living in France and tax repayment? USERNAME:cabmort
Tax Question: French non dom high net worth french national returning to France to live and work lived and worked in uk for 9 tax years and employed earning in access of £1 million pa. heard that French individuals are receiving rebates in year of departure is this true . no ongoing income will he be able to reclaim any taxes and insurances paid in the uk? . . .
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UK NIC on share option gain when non resident - USERNAME:Pioroman
Tax Question: Following up on the last question... [...] I lived in the UK since 1993 till August 2004. In August 2004 I relocated to France. I am therefore not a UK resident any longer and I am not planning on returning to the UK either. I have no sources of income in the UK. Now, I have been working for company in the UK since 1999 and I am still employed by that company but since 2004 I am working for the french arm, based and paid in France and in Euros on a french contract. While employed by the company in the UK (since 1999) I got granted stock options every year. Those stock options would vest 20% the first year and 1/60 each subsequent month after the first year. In the November 2006, two years after having moved to France, I exercised and sold 5 lots of shares totaling 8000 shares, making a gain of ~90,000$ US dollars (£41K.) My company has taken tax away (£9K)from the gains (as well as employee and employer NI) and passed this onto the IR. The tax that has been taken away is at BR and they have not taken into account the fact that the share were vested while I was in France. [...] Q3. Were I suppose to be only liable to pay NIC (and employers NIC as it's passed onto employees) on the gain of shares that vested while I was in the UK or the full amount. Q4. What is the process for claiming back overpaid NIC from HMRC assume Q3 is on the partial gain Thanks in advance for the answers... . . .
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Non resident vesting of share options and UK tax USERNAME: Pioroman
Tax Questions: Hi, I lived in the UK since 1993 till August 2004. In August 2004 I relocated to France. I am therefore not a UK resident any longer and I am not planning on returning to the UK either. I have no sources of income in the UK. Now, I have been working for company in the UK since 1999 and I am still employed by that company but since 2004 I am working for the french arm, based and paid in France and in Euros on a french contract. While employed by the company in the UK (since 1999) I got granted stock options every year. Those stock options would vest 20% the first year and 1/60 each subsequent month after the first year. In the November 2006, two years after having moved to France, I exercised and sold 5 lots of shares totaling 8000 shares, making a gain of ~90,000$ US dollars (£41K.) My company has taken tax away (£9K)from the gains (as well as employee and employer NI) and passed this onto the IR. The tax that has been taken away is at BR and they have not taken into account the fact that the share were vested while I was in France. Q1. Were I supposed to get PA (£5035 in 2006/2007) relieve on the gains ? and only be liable to pay about £8K tax instead of £9 based on £41K taxable income. Q2. Were I suppose to be only liable to pay tax on the gain of shares that vested while I was in the UK. The remaining of the taxes being due in France. Thanks in advance for the answers... . . .
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Non residence/P85 questions - USERNAME: Juliet1
Tax Question: Further to my recent question re emigration and subsequent non residence: 1. In establishing whether a recent emigrant is abiding by the non residence 'rules' I would think it is very common on subsequent UK visits for one to stay with a family member (mother, brother/sister etc - who of course would still be resident in UK). There would be no fixed arrangement of accommodation being permanently available but of course they all have the ubiquitous 'spare room' which one would use. What is the attitude of HMRC (or indeed a tribunal) to this? Would the revenue prefer one to use paid accomodation such as a hotel? I predict that your answer will be that if all of the other facts point to one being non resident then this would probably not be a negative point - but lets say that the revenue's/tribunal's decision was marginal and rested on this point......just how important a factor is it? 2. If it is important, would they be requiring hotel receipts etc? My next questions would probably be answered in your tax webcast: "Completing a form P85 when you leave the UK". However, that webcast has been non-operational for some while now (despite my reporting it) so I will have to submit my most urgent questions now: 3. On the first page they ask: "will you be visiting the UK while you are living abroad......if yes, what periods do you expect to spend in the UK over the next three years?" I realise that it is a question of what factually transpires in the 3 years but I suspect that one's initial 'intention' could be important - otherwise why would they ask? Would it be too trite to answer that you intended to stay within the 90 days per year average? 4. I imagine that the section 3 accommodation question could be tricky. We will have sold our main residence on departure but will still have a small flat which we intend to sell in the following tax year to escape capital gains. We are aiming to leave near the end of the tax year and so the flat will be sold shortly after BUT strictly speaking it will be standing empty (and theoretically available to us) for a short while. I would dearly love to answer that accommodation question in the negative because a positive answer leads on to further questions and there is no facility for expanding one's answer (and in my experience, its never a good idea to tag on your own extra pages to revenue questionaires because they very often become detached (if they are even looked at in the first place!)? 5. As I mentioned in my previous query, my wife will be emigrating with me (but perhaps a little later). She currently works part time and would probably be entitled to a tax rebate but we are paranoid about her making direct contact with HMRC which just might lead to her receiving successive forms - just because she would now be on the database. Would you advise that we simply wrote off any attempt to request a rebate so that she hopefully stays below the radar? . . .
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QROPS/SIPPS tax questions USERNAME:andreaapb
Tax Question: We have lived in Italy for 8 years; have no intention of ever returning to UK except for the odd holiday. Our children attend school here, one was in fact born here. We have disposed of all UK assets to off Shore Company in IOM. The only remaining attachment to UK is a pension. We are led to believe that in order to become EX DOM we need to deal with the situation of the pension. My husband has just turned 61 and no longer draws any salary from the UK, subject to PAYE or otherwise. The pension is a self administered pension scheme, which was established in 1991 through Scottish Equitable, who showed very little interest and subsequently passed on there pension book to an operation called Hazell Carr. In April 2006 because of what they termed as 'A Day' Hazell Carr resigned as administrators and passed over the responsibility to my Husband, who is the also the sole beneficiary of the pension. The situation had the blessing of the Inland Revenue, and they have received accounts on an annual basis, as it is a LTD company entity. My husband has sole responsibility for the bank account. After discussions with people in the IOM, It was suggested that the fund be transferred to the IOM in the form of a SIPS through the QROPS channel, and full written permission has been gained from the HRMC. The pension fund is some £250,000. Whilst we have had the benefits of the offshore SIPS explained, we are uncomfortable with certain aspects. From experience from previous administrators if we wished to invest into commercial property, we get the feeling that as discussions on this subject of this pension, are now on their 10th month any process is painstakingly long! If the administrators do control the account, any seller of commercial property would have got bored, died or sold it to some one else. Your see our concern. Since it has been a SAPS/SIPS all of these years, there is only 1 beneficiary (my husband), he has controlled the bank account, with complete knowledge of the Inland Revenue all of these years. He does not feel comfortable handing over control. 1. Does he have too? 2. If so why and is there any way around it? 3. Is it possible for us to form 'our own pension scheme or similar' 4. If there a possibility of winding up the present scheme and taking the money and run, so to speak? Are the any penalties if it is possible? We would also add that whilst we understand a SAPS/SIPS can invest into property etc, the provider seems keen on more financial based investments which we are uncomfortable with in today's volatile markets what would be the outcome if THEY invest badly, do we lose out or are they contracted/committed to fulfil there annual prophesy? . . .
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Non UK resident structuring loan finance for UK tax deduction
Tax Question: I am HONG KONG (non UK) resident considering buying property in London, UK. I would most likely buy to let the property and plan to finance around 50% by borrowing in Hong Kong in Hong Kong dollars and then transferring the total amount to UK sterling to purchase the property in UK. I am try to ascertain how best to do the financing in Hong Kong so that I can deduct the interest payment against the rental income when preparing UK annual return But for the purpose of providing annual returns in the UK, what do I need to show as documentation as proof of the interest payments. Say can I borrow off a personal friend in HK or what is the best way for me to borrow this money so as to satisfy the requirements when filing UK tax return. what do you think? Thanks . . .
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Defining the "power to enjoy the income" for the transfer of asset provisions
Tax Question: Defining the "power to enjoy the income". Suppose I give a contract loan to an off-shore company owned by a trust of which I am a beneficiary, and the Co pays me a fixed interest taxed in UK. Is a loan (on commercial terms) a "transfer of assets"? The HMRC language on "transfer of assets" mentions disposals, purchase of shares, settlements, gifts, etc., but not loans. As a separate question, the HMRC has a "transfer of assets provision" that may tax me on all income (and capital gains?) made by the Co using my transferred funds, if I have power to enjoy them. (From HMRC: "An individual may have power to enjoy the income arising to a non-resident as a shareholder of an overseas company, as a beneficiary of a non-resident trust, or by benefiting in some other way.") The Co shares are fully owned by the off-shore trust (I am a beneficiary of the trust). But I have no power to tell the directors of the Co to make a distribution to the trust, which would allow the discretionary trustees to pass the income to me. Does it mean that "I have no power", and the "provision" would not apply to me (until a real distribution is made out of the Co)? . . .
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UK property owned by offshore company and UK tax on transfer
Tax Question: I am a non-dom non-resident in full-time employment overseas for the last 30 years. I have recently bought a UK property with an offshore company to avoid future IHT. I am the sole shareholder of the offshore company but not the director (the director lives in the ME). My question is : is it possible for me to gift the shares in the offshore company to my non-domiciled adult children and UK-domiciled wife (who is likely to use the house as her main residence) ? and if so what are the implications of this gift tax-wise for all of us ? e.g stamp duty on the transfer of the shares to them; current or future capital gains ? IHT ? and could my wife claim in future (as owner of 30 or 40 or 50 percent owner of the company shares ) the UK-company owned house as her main residence ? what are the implications for me if I retained a shareholding in the company but UK-willed my share to my wife.What are the tax implications for the adult children on their shares gift ? Thank you . . .
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Structuring investment in Guernsey company and future non residence
Tax Question: Hi, I am about to invest in a Guernsey based company and I am looking at the best way to mitigate against Capital Gains Tax when I sell the shares or income received on them. So could you please advise if I stay in the UK how this would be best achieved and what percentage I would have to pay. Ultimately I am looking to move to the Alps and set up a chalet / mountain guiding business. Ideally I would want to use the capital realised from this investment so can you advise if it is going to be better to move out of UK first and get employment abroad to tax advantage of not having to pay capital gains tax and take advantage of any tax benefits the country offered, or whether I should set up a foreign company to put this investment through and exercise this investment having left the UK. If so, would I be better basing that company in Guernsey or in the country I choose. Switzerland is a possibility but their tax laws are more beneficial if you don't intend to work or run a business I believe. So advice around where I could be based and still run a business from the Alps and gain the tax advantage would be appreciated. . . .
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Bed and breakfasting properties as non resident and offshore bonds
Tax Questions: Having been out of the UK for more than 10 years. I am considering becoming a tax resident again for a number of years, before emigrating again on a 'permanent' basis. My offshore CGT exposure is significant. I understand that if i crystallise any gains whilst offshore and then invest in Offshore bonds, then i could enjoy the Capital Gains on those tax free, once I had re-emigrated, whilst drawing down on up to 5% p.a. from the bonds whilst in the UK, on a tax free basis. A couple of questions please: 1) if the 5% is above the 20% tax threshold , would it still be free of tax or is this just a credit capped at 20%? 2) If I have other assets with significant gains on them, how easy is it to 'Bed and Breakfast' them prior to returning to UK, so as to mitigate any CGT exposure? I am talking real estate, not equities that can be traded easily. Are there strict rules to ensure that such transactions are arms length? . . .
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Non resident moving to Malta and UK tax on LLP profits
Tax Question: I'm wondering what the best form of incorporation would be for the following business/situation. My wife is a Polish born citizen to Polish parents and has lived in the UK for the last 8 years. I am a dual UK/Irish Citizen and have lived in the Uk all of my life except for 2 years in Ireland about 10 years ago. We are about to start a new business, the business in question is currently VAT exempt so we won't need to register or worry about that side of things. We are planning to relocate to Malta in the next 2 years. My wife will relocate as a permanent resident, I expect to spend my time split between the UK and Malta but will involve me spending large blocks of time in the UK working with the business. Due to the highly regulated nature of the industry we will not be in a position to turnover companies. So my question is this. What type of incorporation will be the most tax efficient? If we set up an LLP with my wife as an equity member of say 90% would she be liable to UK tax? If we set up an LLP with an offshore company under my wifes control as the main equity member could we remove profits without taxation. To sum it up is there a way to run a UK business without taxation using my wifes future permanent residency status in Malta. If not which is the best way to go LLP or LTD. . . .
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