Some tax questions - including overseas

maybelandlord

We will be getting professional advice on this (though can't imagine we'll find someone who can cover every angle and am a bit worried about conflicting advice).


OH just taken early retirement. Possibly going to be working overseas from next tax year. He's been advised going as a consultant with limited company is likely to be best option (though this is off the cuff advice so not attaching real weight to it but need to start somewhere). Questions:


1, Would be through a subsidiary of previous employer - how is this likely to fit with IR35 - he will have had a 9 month gap doing no work at all? The contract could possibly be done through the overseas client which would probably simplify things. Would it help if he did a small amount of consultancy work elsewhere first? He had planned on doing work for any of his contacts, it's a coincidence it's through the subsidiary and he's not had any contact with them in the rest of his working life.


2. How does the fact he will be overseas for the whole tax year impact on tax - is it the same as for employees (subject to residency etc) ? He would be in Saudi and would probably plan to be in the UK less than 16 days. Would he simply be treated as an employee within the limited company?

3. In which case - what would company's tax liability be if all income was from overseas (and probably stayed there?).


4. Assuming there is some tax liability in the UK - I believe if contract for less than 2 years he can claim cost of accommodation - I assume this would extend to house rental as would be cheaper than 2 years in a hotel? And meals etc. would be able to claim for weekends as although not working he'd only be there in the first place due to work?


5. I would be shareholder in company, lets assume based in UK. If I was to also be an employee, doing a small amount of admin work etc, how would that work if all the earnings for the company came from overseas? So basically the income earned overseas stayed there apart from money to pay my salary. Same with dividends? Or am I over-complicating things?


6. To further complicate things - we have rental properties. I can't see any advantages to changing them to limited co ownership?


As I said we'll be taking professional advice, but would like to know what we should be asking/considering.


Thanks and sorry for essay!

maybelandlord

Bumping this in the hope someone could advise on at least some of the points? We're struggling to find an accountant who seems interested.


Thanks.

xylophone

Bumping this in the hope someone could advise on at least some of the points? We're struggling to find an accountant who seems interested.

Try typing "tax accountant foreign income" into Google?

maybelandlord

Thanks - we did that and contacted some but we were too small fry - will keep on trying.

pjclar02

Hello there


I will try to tackle as much as I can:


1) IR35 will be concered more with the nature of the relationship with the ultimate client, rather than the historical employment implications. Therefore HMRC would look at rights of substitution, financial risk, hours and regularity of work etc, rather than, in my opinion, taking into account the fact that he previously worked for another group company. Taking consultancy roles elsewhere will help. with any IR35 risk;


2) Yes - he will be an employee of the limited company, and if overseas for a whole tax year, potentially he would be considered non UK resident for tax purposes in the year of absence. This gives the opportunity to pay all limited company profits as a bonus whilst overseas but will need good planning;


3) As above - if all income is paid to a UK limited company it is liable to UK corporation tax - unless all profit is paid out as a bonus, which to a non-resident director would not be liable to income tax;


4) Possibly - although in light of the above this may be academic;


5) Possibly over-complicating things - would need further investigation subject to the outcome of the above points. All being well, it may not be necessary from a tax planning perspective - but could be useful in the future if your other half continues consulting when back in the UK;


6) I agree with you - although whether you transfer beneficial ownership between you to suit your respective tax positions may be worth considering.


Hope this helps

maybelandlord

1. Thanks - that was my initial thought about substitution and financial risk.


2. Thanks - again I thought that might be possible, it's the good planning that may prove tricky!


3. That sounds to good to be true........ but great!


4. Noted


5. Thanks. Let's assume not required!


6. Thanks. Beneficial ownership is something we've thought of I will be doing all the management so it seems reasonable (to me at least ) that I get a larger share.


Many thanks for your advice, much appreciated. Speaking to tax adviser next week so this is helpful background.