If you are planning to establish a life overseas while owning a stake in a UK company, the first question you are likely to ask is whether you can remain a director.
In short, yes. Non-residents and foreign nationals are permitted to be directors of UK companies even without residency in the UK or British citizenship.
You can enjoy the flexibility of living and working abroad without the need to visit the UK, provided you comply with important tax and legal conditions.
What are the personal tax responsibilities for overseas company directors?
A move abroad typically changes your personal tax residence, so it is crucial to review how much time you are likely to spend in the UK.
While non-UK residents are typically only subject to UK income tax on income originating from the UK, remuneration received as a director of a UK company may still be taxable in the UK.
Returning to the UK can complicate your tax position
There are anti-avoidance rules that can apply if you move abroad and later return to the UK.
For directors who were a UK resident for at least four of the seven tax years before locating abroad, they may be treated as a temporary non-resident.
In practice, this means that gains on assets you owned before leaving, including dividends received while acting as a company director, can be liable for tax upon your return.
If you return to the UK within five full tax years of leaving, while qualifying as a temporary non-resident, certain company dividends and capital gains may be pulled into the UK tax net.
At the same time, for directors’ salaries, if you return to the UK for even a short trip to perform director duties, such as attending a meeting, those duties may be subject to UK income tax.
Temporarily visiting the UK as a non-resident director
It is critical to plan any visits to the UK carefully to avoid unwanted personal tax consequences.
You should also consider the domestic legislation of the country you have relocated to, including whether you will become tax resident there and what tax liabilities may arise.
Even if you are no longer a UK tax resident, many Double Taxation Treaties permit the UK to tax the income you receive as a director.
As an example, a tax treaty may allocate one country the right to tax certain income, while the other participating country provides credit for that tax.
This means an individual will generally only pay the higher of the two tax burdens, without having to pay tax on the same income in two jurisdictions.
Reviewing the treaties can allow you to see which country has taxation rights over your income and how relief is awarded if both countries claim taxation rights.
How might the company be impacted?
Aside from your individual tax position, there may also be some tax implications for the company you are acting as a director of.
Firstly, a taxable presence may be created outside the UK despite the residency of the company not officially changing.
For example, acting as a director abroad and carrying out duties outside of the UK can lead to a company creating a permanent overseas establishment.
A company with an overseas permanent establishment may result in foreign corporation tax liabilities and potentially double taxation.
Moreover, if a key shareholder or director relocates overseas and key commercial decisions are regularly made in the new country, the authorities may argue the company is managed there.
Central management control outside the UK can change tax residency and may also result in double taxation.
Speak to an accountant before you leave the UK
As relocating overseas while remaining a company director can have complex tax and compliance considerations, get in touch with an expert before booking your flight.
MGI Midgley Snelling’s international accountants can assess your UK tax residency status and whether you may qualify as a temporary non-resident, advising on how long you can spend in the UK to avoid extra liabilities.
An evaluation of how your overseas operations may impact your corporate tax residency and the risks associated with double taxation can help avoid unwanted tax consequences.
Planning on moving overseas? Contact our experts for guidance on managing your personal and corporate tax affairs, helping ensure you do not pay more tax than necessary.
