My client and his wife are the two directors of their U.K. private trading company and are the controlling shareholders.They live in Portugal and their local accountant has told them that their salaries from their U.K. company should not be taxed in the U.K. but should be declared in Portugal which,apparently, has a more favourable tax regime.Most of their work for the company is carried out in Portugal by 'phone/email/fax and occasional visits there by the U.K. staff.However,the directors also make regular visits to the U.K. factory for staff meetings etc.They do not spend more than 90 days in the U.K. each year and stay in their U.K. house.They also visit their family and friends whilst in the U.K.
At the moment their salaries are taxed under PAYE and declared on their U.K. tax returns.Is this the correct treatment and, if not, what is?
Thank you
Richard Hale
Replies (3)
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Overseas Directors
Section 311 of the Companies Act 1985 prohibits gross payments to a Director of a UK Company. I think the route around this is to apply for an NT Code from the PAYE District
assuming that you can convince them that
for tax purposes the clients are non UK resident. I have not checked the Double Tax Treat to see if there are any wrinkles.
They should be paying tax in the UK on a time apportioned basis
A claim should be lodged under ITEPA Section 690 , to exempt the proportion of their pay attributable to time spent ouitside the UK from tax.
This works very well.The treaty won't shelter the UK duties of the UK Directorship