Are you a UK company director considering moving overseas?

For many, the idea of moving overseas to a place of sunshine, turquoise waters or vibrant city life, is a real attraction. Since Covid-19, the possibilities of remote-working have increased, and many traditional office-based roles can now be carried out remotely from anywhere in the world.  This article explores some of the key considerations for UK company directors wishing to consider an overseas relocation.

A company is resident in the UK if it is incorporated in the UK or if its place of central management and control is in the UK. 

If a key shareholder or director relocates overseas, the central management and control may no longer be within the UK.  In this case, it is essential to engage a tax specialist to review the double tax treaty between the UK and overseas country to establish where the company is tax resident. 

There are significant corporation tax implications when a company’s residence status changes, and it is possible that the company may be liable to double taxation if it is resident in more than one country.

In addition to obtaining advice in the UK, it is essential to consider the domestic rules of the overseas jurisdiction and to also take local advice in the country you are moving to.

In addition to the company’s residency position, it must be considered whether a taxable presence is created outside of the UK even if the residency status doesn’t change.  A shareholder, director or employee carrying out duties overseas can result in the company having an overseas permanent establishment.

This generally occurs where the company has a fixed place of business outside of the UK, from which the business is at least partly carried on.  In some cases, this could even include a home office.

Alternatively, if an agent, who is not independent, has, and habitually exercises, the authority to do business on behalf of the company, this can also result in an overseas permanent establishment. 

An overseas permanent establishment could attract foreign corporation tax liabilities, potentially resulting in double taxation.  As with corporate residency, advice should be sought in the overseas jurisdiction as well as the UK. 

A relocation overseas may also impact the tax residency status for the director.

It will be essential to consider how much time the director plans to spend in the UK as well as their UK ties, for example, where they retain homes and their new working pattern.  It is advisable to begin keeping a day count diary.

Non-UK residents are only liable to UK income tax on UK source income, but there are anti-avoidance provisions that can apply if a director is to relocate back to the UK in the future.  Careful planning of UK days is essential to prevent unwanted personal tax consequences.

Additionally, it is essential to consider the domestic legislation of the new country and to consider whether the director has a personal liability there.  The double tax treaty must be reviewed to consider which country has taxing rights over a director’s various worldwide income sources.  The tax position is more complex where there is no tax treaty or the residency requirements of any country are not satisfied.

Additionally, there may also be social security implications or PAYE obligations for both the director and the company. 

A relocation overseas can also have indirect tax consequences as well as loss of certain key UK tax reliefs such as R&D or EIS/SEIS reliefs. 

If you are considering a move overseas, please do get in contact with us.  Relocation can be a complex process and advice should be sought ahead of making a move.