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Residency

Individual comes to live in the UK in Feb 2007 from Hungary.  She is employed by a multi national company initially working in the UK.  She then leaves this employment in early 2010 and sets up a company registered in the UK.

She stays in the UK for over 200 days in the 2008/09, 2009/10 and 2010/11 tax years but in 2011/12 tax year spends around 170 days in Hungary and 150 days in the UK. Future years are likely to follow a similar pattern to 2011/12.

During her time in the UK she either lives in rented accomodation or hotels.  She has her permanent home in Hungary throughout which she owns.

Her only income is through the UK registered company where she is paid £7,500 salary and balance of dividends which take her into higher rate.

Is she considered resident in the UK for 2011/12 and is she taxable in the UK on the dividends?

Thanks

Replies

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Clearly this person is going to be resident and ordinarily resident in the UK for the earlier year in 2010/11.

 

 2011/12 is not so clear though.

He is spending less than the 183 days in the UK, then he might become non resident.

However, has he made a sufficent break from the UK to loose his resident status. What is she doing when she is in the UK? What ties are there in the UK?  Given her only source of income is the UK company, this may indicate that she is still tied to the UK, and there has not been a distinct break.

Sorry, I suggest you have a look at HMRC 6, and, in particular, paragraphs 8.2.1.

This has similar marks to some tax cases, where cases have tried to argur they left the UK, but were deemed not to have made a break from the UK.

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Is residence relevant?

Regardless of whether she is resident in the UK for 2011/12 or not, she remains subject to UK tax on her salary for work done in the UK and on her dividends from a UK company.

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UK - Hungary Treaty

I agree broadly with Euan; however I think you also need to look at

1) Whether individual is also tax resident in Hungary

2) If so, where is he 'treaty-resident'

3) If found to be 'treaty-resident' in Hungary, then the maximum UK tax due on the dividends is 10%/15% as per Article 10 part 2

Obviously, there will also be Hungarian tax implications if individual is tax resident there as well.

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@Euan/Paras

Not really my area, but aren't dividends from UK companies disregarded income, and so essentially not taxable on non-residents?

Are there any circumstances where the salary wouldn't be taxable in the UK if the duties of the employment were performed partly/wholly abroad?

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George - Correct

Diviidends - Yes they can be disregarded for non-residents, however you lose your Personal Allowance.

The individual mentioned above however is clearly UK Resident but yes if non-resident then dividends can be disregarded,

Re Salary - Yes if employment carried out wholly abroad, then no UK tax if you are non-resident. The assumption made above (I presume by Euan and then by myself) is that the salary is derived from UK source income so would be taxable regardless of residency.

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@Paras/George

I did say:

"she remains subject to UK tax on her salary for work done in the UK"

I agree that if (part of) the work for her UK company is done abroad, (that part of) her salary is not taxable in the UK, provided that she is not resident in the UK.  And I agree with Paras that she remains resident in the UK, even if also resident in Hungary.

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