Hi
I am doing the rental accounts and SA700 for a BVI registered company. The company owns residential apartments in the UK. The two Shareholders are Malaysian residents.
The shareholders want to accrue a salary of £5K each in the rental accounts as 'reasonable' remuneration for 'running' the UK property business.
In reality the properties are managed by the local estate agent and the shareholders visit the UK twice a year mainly for holiday, but whilst they are here they would also tend to any issues with their rented properties, very minimal I would say.
I am not comfortable with this salary accrual but cannot quote HMRC chapter and verse to them. I should be grateful for any advice on this.
Replies (2)
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Payment within 9 months
As it is the UK property business of a non-resident company, it's liable to income tax and ITTOIA applies. The expense must be wholly and exclusively for the purposes of the business (your area of doubt) and any salaries accrued must be paid within 9 months of the year-end.
If there are genuine duties being carried on, £5,000 a piece really isn't excessive. A challenge will only come if they get greedy.