UK corporation tax planning after you've left the UK

If you trade via a UK company, the general rule is that it would be subject to UK corporation tax even if the controlling directors or shareholders were non UK resident. As the company is a UK company it is classed as UK resident and is subject to UK corporation tax. Rates vary between 20% and 26%. In terms of actually extracting cash from the company this could be easily achieved by extracting dividends. If the shareholders are non resident they are taxed on dividends only to the extent that there is UK tax deducted at source. UK dividends have a notional tax credit of 1/9 attached, and the net effect is that non residents can receive dividends free of UK income tax. Therefore they can extract profits from the company free of UK tax, however these profits will still have been subject to corporation tax in the UK company. If the aim is to reduce the corporation tax on the company profits you would need to look at additional options. Salary/Bonus The simplest way is to pay salary/bonuses to employees/directors. The salary/bonus would not be subject to income tax or NIC provided the directors were non resident and carried out the duties of employment overseas (aside from any incidental UK duties). The company is permitted a tax deduction for all expenses incurred "wholly and exclusively" for the purposes of the trade. Therefore in order for the company to substantiate a tax deduction for salary or bonus payments it would need to be linked to a benefit received by the company and for the purposes of its trade. This usually means that the salary/bonus payments need to be related to: • Genuine services provided by the employees/directors to the company, and • Calculated at an arms length rate for those services. Essentially you would want to be able to argue that the company would make payments even if the employees/directors were otherwise unconnected with the company (ie not shareholders). You could for instance look at paying both a market value salary for the duties undertaken by non resident directors as well as a bonus arrangement related to their specific fields of responsibility. Other options to reduce corporation tax could be: - using an offshore recharging company - treaty migration - using offshore holding company structure. We've looked at these in detail in our article UK corporation tax planning after you've left the UK