Drawing dividends from UK LTD while working& living abroad Drawing dividends from UK LTD while working& living abroad
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    Default Drawing dividends from UK LTD while working& living abroad

    Hi, I'm planning on taking a new contract in Europe. I'll be moving with my family and won't return in the UK for at least 2 years. There, I will work through a local LTD.

    My question is, can I continue drawing dividends from my UK LTD while living and working abroad? Would that have any further tax implications for me?

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    Quote Originally Posted by skysies View Post
    Hi, I'm planning on taking a new contract in Europe. I'll be moving with my family and won't return in the UK for at least 2 years. There, I will work through a local LTD.

    My question is, can I continue drawing dividends from my UK LTD while living and working abroad? Would that have any further tax implications for me?
    From a UK tax perspective you continue to benefit from a 12.5K personal tax free allowance allowing you to take a salary as a uk director and 2K dividend income with no further income - If you have a wife or someone you trust both of you can do this legally

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    Quote Originally Posted by skysies View Post
    Hi, I'm planning on taking a new contract in Europe. I'll be moving with my family and won't return in the UK for at least 2 years. There, I will work through a local LTD.

    My question is, can I continue drawing dividends from my UK LTD while living and working abroad? Would that have any further tax implications for me?
    If the dividends are drawn from profits earned while in the UK in prior years and taken during a period of "temporary non-residence", then they will become fully taxable in the UK in the year you return (same for capital gains). To avoid this anti-avoidance legislation, you need 5 full tax years outside the UK. That is a simplification, but sufficient for you to know that, yes, there are tax implications for you.

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    Quote Originally Posted by jamesbrown View Post
    If the dividends are drawn from profits earned while in the UK in prior years and taken during a period of "temporary non-residence", then they will become fully taxable in the UK in the year you return (same for capital gains). To avoid this anti-avoidance legislation, you need 5 full tax years outside the UK. That is a simplification, but sufficient for you to know that, yes, there are tax implications for you.
    Are you dead certain about that - Please also confirm if the 12.5K salary tax free can continue to be taken with no UK tax liability

    This is the info I had from my accountant so its always worth double checking

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    Quote Originally Posted by LondonPM1 View Post
    Are you dead certain about that - Please also confirm if the 12.5K salary tax free can continue to be taken with no UK tax liability

    This is the info I had from my accountant so its always worth double checking
    Yes, I am not making it up. Search for "temporary non-residence rules". It was originally limited to CGT but then extended to various forms of income over which the beneficiary has control, such as dividends from close companies in which they have a 5% or greater interest.

    Do you really think that HMG would allow you to move overseas to a low-tax jurisdiction for one full tax year, extract all profits and then merrily return, no questions asked?

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    Quote Originally Posted by jamesbrown View Post

    Do you really think that HMG would allow you to move overseas to a low-tax jurisdiction for one full tax year, extract all profits and then merrily return, no questions asked?
    Well you are paying the UK dividend tax so its not like they loose anything at all is it ??

    I ll double check your info - That sounds very interesting

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    Quote Originally Posted by LondonPM1 View Post
    Well you are paying the UK dividend tax so its not like they loose anything at all is it ??

    I ll double check your info - That sounds very interesting
    Er, that is the point I am making. You will be paying dividend tax on the full amount of the dividends in the year you return, subject to the temporary non-residence rules. If you thought, by moving overseas for one full tax year, that you could escape UK tax on dividends earned from earlier profits from a UK close company in which you have a 5% or greater interest, then you were sorely mistaken.

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    Quote Originally Posted by jamesbrown View Post
    Er, that is the point I am making. You will be paying dividend tax on the full amount of the dividends in the year you return, subject to the temporary non-residence rules. If you thought, by moving overseas for one full tax year, that you could escape UK tax on dividends earned from earlier profits from a UK close company in which you have a 5% or greater interest, then you were sorely mistaken.
    Ok fair point Its also what I meant

    My understanding is you can take out 12.5 salary and 2K dividend tax free

    Anything over that you pay normal divi tax at basic rate

    The key point is that your overseas income and salary is not taken into account so you can stay as basic rate for a nice sum
    Last edited by LondonPM1; 13th September 2020 at 14:02.

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    Quote Originally Posted by jamesbrown View Post
    If the dividends are drawn from profits earned while in the UK in prior years and taken during a period of "temporary non-residence", then they will become fully taxable in the UK in the year you return (same for capital gains). To avoid this anti-avoidance legislation, you need 5 full tax years outside the UK. That is a simplification, but sufficient for you to know that, yes, there are tax implications for you.
    How do they calculate the tax owed and which tax bracket you are in if you also earn money outside the UK (be it perm or via local ltd company)? Simply take whatever salary you are on outside of the UK, convert into £ and go from there? Seems like it can get messy fairly quickly with tax paid in two countries.

    Asking, as I'm thinking of taking a perm job outside the UK and moving out altogether, just not sure for how long. Already read the bit that tax is payable on all profits earned whilst working in the UK, so fair enough on that end, but I'm not 100% sure how the detailed calcs are done when the individual in question is also working and living outside the UK.

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    Quote Originally Posted by dsc View Post
    How do they calculate the tax owed and which tax bracket you are in if you also earn money outside the UK (be it perm or via local ltd company)? Simply take whatever salary you are on outside of the UK, convert into £ and go from there? Seems like it can get messy fairly quickly with tax paid in two countries.

    Asking, as I'm thinking of taking a perm job outside the UK and moving out altogether, just not sure for how long. Already read the bit that tax is payable on all profits earned whilst working in the UK, so fair enough on that end, but I'm not 100% sure how the detailed calcs are done when the individual in question is also working and living outside the UK.
    You’ll need advice for your circumstances, but your overseas earnings etc. will be taxable overseas. This only applies to dividends on UK profits made before you became a temporary non-resident. All UK dividends will be taxed as though they were declared in your tax year of return (if you return within 5 years) and will form the top slice of income as normal. There’s no relief from double taxation either, as I recall, because this is anti-avoidance legislation. Bottom line, get professional advice before you leave in order to avoid an expensive mistake. I am not a tax professional.

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