What are the implications for a UK company director resident in Canada

What are the implications for a UK company...

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I am dealing with a new UK small company which has been formed recently and preparing the first set of accounts.

There are 4 directors, all of which have 25% of the shares in the company.

3 of the director/shareholders are UK residents, however the 4th one is resident in Canada.

Each of them received a dividend in the year paid out of profits of the company.

What are the implications of this for the director resident in Canada? (He was born in the UK by the way and lived here and paid tax here under PAYE for most of his life).

Presumably he must complete a UK tax return and the dividend income reported on that? And if that is the case, does he still get a full UK personal allowance against which he can offset this income?

If so then there will be no UK tax for him to pay, as we are looking at a net dividend of £5,000. As far as I am aware, he has no other UK income.

Also, I note there is a Double Taxation relief form on HMRC's site https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373910/canada-individual.pdf

I'm a little confused though. Does he need to complete

a. Both a SA return and the Double Taxation relief form?

b. Just one of these?

Any help would be much appreciated.

Replies (12)

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Portia profile image
By Portia Nina Levin
19th Dec 2014 11:30

You appear to need an accountant

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By The Innkeeper
19th Dec 2014 11:34

@Portia

Are you feeling OK ? That was quite polite for you

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Portia profile image
By Portia Nina Levin
19th Dec 2014 11:37

It is Christmas (nearly)

And I am feeling lucky.

The OP should perhaps google disregarded income.

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By froth
31st Dec 2014 11:31

Thanks for the input.

So after reading SAIM1170, which states

‘Disregarded income’ is savings and investment income (dividends and stock dividends from UK-resident companies, interest, purchased life annuity payments, deeply discounted securities, distributions from unauthorised unit trusts, transactions in deposits), annual payments, and certain types of pension income, social security income, and certain payments made through UK brokers.

The effect is that the liability of a non-UK resident in respect of savings and investment income is limited to the income tax deducted from it or treated as deducted or paid in respect of it (at the savings rate, dividend rate, or basic rate, as appropriate - SAIM1080), or the tax credit it carries.

 

I conclude that the individual must complete a UK Self Assessment Tax Return and that they will be liable to pay over the deemed tax credit on their dividend income to HMRC. ie £555.55 on the net dividend received of £5000.

Is this correct?

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By Minnie136
31st Dec 2014 17:14

No
It is not correct. He receives a uk dividend and has no additional uk compliance to do if he is not uk resident, just as if he owned shares in BT or BP and received a dividend.

That is what it says in the section you pasted above, you should discuss with your accountant if you do not understand.

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Replying to Kevin KashGone:
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By froth
02nd Jan 2015 10:25

Thanks

Minnie136 wrote:
It is not correct. He receives a uk dividend and has no additional uk compliance to do if he is not uk resident, just as if he owned shares in BT or BP and received a dividend. That is what it says in the section you pasted above, you should discuss with your accountant if you do not understand.

 

OK, many thanks for the advice.

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By cparker87
31st Dec 2014 18:37

Have a read of
HMRC6 (just google it, it's a manual - make sure you get the current version).

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Portia profile image
By Portia Nina Levin
02nd Jan 2015 16:55

HMRC6 and current version?

HMRC6 and current version should no longer be found in the same sentence. The guidance that was in HMRC6 is replaced by that in RDR1/RDR2/RDR3 since the statutory residence test was introduced, and the OP still clearly needs an accountant.

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Replying to gainsborough:
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By froth
06th Jan 2015 10:55

RDR1

Portia Nina Levin wrote:

HMRC6 and current version should no longer be found in the same sentence. The guidance that was in HMRC6 is replaced by that in RDR1/RDR2/RDR3 since the statutory residence test was introduced, and the OP still clearly needs an accountant.

Thanks. I want to make sure I get this right, so have read RDR1 which states

10.22 If you are not UK resident and you receive a qualifying dividend from aUK company, you are only entitled to take the tax credit into account whencalculating your UK tax liability if you are: a citizen of a state within the European Economic Area (EEA) a current or a former employee of the British Crown (for example a civilservant, a diplomat or a member of the armed forces) a UK missionary society employee The shareholder who is domiciled in Canada is a former member of the British Armed Forces and therefore qualifies to have the tax credit on their dividend taken into account. I have now called HMRC's tax helpline and they have advised that as he is a director of a UK company then he does definitely have to complete a UK Self Assessment return, but that he will not have to repay the notional tax credit applied to his dividend income.   

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Replying to atleastisoundknowledgable...:
By Tim Vane
06th Jan 2015 11:04

HMRC tosh

froth wrote:

I have now called HMRC's tax helpline and they have advised that as he is a director of a UK company then he does definitely have to complete a UK Self Assessment return, but that he will not have to repay the notional tax credit applied to his dividend income. 

Utter tosh. HMRC are talking rubbish. Speak to an accountant.

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Portia profile image
By Portia Nina Levin
06th Jan 2015 11:05

Balderdash!

As always, HMRC's "Help" line is completely incorrect.

As a director of a UK company he does not have any obligation to complete an SA tax return, unless HMRC issue him with a notice to deliver.

It would be a complete waste of everybody's time for HMRC to issue such a notice, and he could be within his rights to make an application under section 8B, although it would probably then be less painful to simply file the return.

As a non-resident the dividends from the UK company are disregarded income and the NOTIONAL tax credit is an irrelevance. He does not have a UK tax liability.

Go and see an accountant!

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By The Innkeeper
06th Jan 2015 11:14

@froth

HMRC are talking rubbish. There is no statutory requirement for an individual to complete a self - assessment tax return merely by virtue of being a director. To say this topic has been death on here is a vast understatement

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