Understanding UK tax residency
First, you must know when you officially become a “UK tax resident.” This is when you have to start paying UK taxes on the money you earn anywhere in the world.
You’re usually a UK tax resident if:
- You spend 183 days or more in the UK in a tax year.
- You have a home in the UK that you can live in for at least 91 days in a row, and you use it for at least 15 days.
- You work full-time in the UK.
If any of these things are true for you, and you plan to live in the UK for a long time, you’ll probably be a UK tax resident. You might have to pay UK income tax and National Insurance (NI) on any money you take from your overseas company.
Other special tests, like the “Sufficient Ties” and “Leaving the UK to Escape Tax,” can sometimes change your tax residency status. Talking to a tax expert about your situation is a good idea.
What it means for your overseas company
Just because you’re a UK tax resident doesn’t always mean your overseas company must also pay UK taxes. It depends on whether your company has a “permanent establishment” in the UK.
- Your overseas company might have a UK permanent establishment if:
- It uses a UK address as its official registered office
- You have company board meetings in the UK
- The company keeps many of its assets in the UK
- The company has a UK-based employee who can sign contracts for the company
- If your overseas company avoids doing these things, it should be different from having a permanent establishment in the UK. This means it can still be treated as a non-UK company and only pay corporate taxes in the country where it’s based.
The only exception is if you transfer ownership of the company to a UK-incorporated entity. Then, it would become a UK tax resident and pay UK corporation tax.
Choosing the right UK visa
When you move to the UK for a long time while running an overseas business, you must pick the right visa type. Each visa has its rules about how much money you need to invest, your English language skills, and how much money you need to support yourself. It’s good to talk to an immigration lawyer to find the best visa for your situation.
One option is to visit the UK as a visitor, which lets you stay up to 6 months. But remember, you’re not allowed to work or run a business while on a Standard Visitor Visa.
Tax reporting and payments in the UK
You’ll have some extra tax responsibilities once you’re a UK tax resident. You should complete a self-assessment tax return listing all your income, profits, and assets worldwide. If your overseas company pays you a salary or dividends, you must report that as foreign income on your UK tax return. You might get some tax breaks or relief if you already paid taxes on that money in another country. You can also pay UK taxes only on the money you bring into or use in the UK.
- Tax Planning
- Two key things can make a big difference in your tax planning.
Double Taxation Agreements (DTAs): The UK has agreements with many countries to ensure people don’t get taxed twice on the same income. These DTAs let you claim tax credits or exemptions for taxes you already paid in your home country. If you’re managing a non-UK company, you need to know the details of the DTA between the UK and your home country. This will help you follow the rules and pay the least tax possible.
Tax Planning Strategies: Good tax planning can help you make the most of your tax situation when you manage a non-UK company. This might mean setting up your company to save on taxes, using any tax reliefs and incentives that are available, and making sure you’re following all the relevant tax rules.
With the right help and advice from a personal tax accountant, you can successfully move to the UK while still owning or controlling a business in another country. Just plan your move carefully and keep up with all your responsibilities. The main thing is to be ready for extra paperwork, like visas, international payments, and cross-border tax filings.
