Hi everyone
I'm non-UK national who used to contract for the past 5 years in the UK via a limited company. During this time I accumulated money in my company's. I moved out of the UK in May to Malta.
I went in through SRT test with a tax residency professional who confirmed that I'm non-resident in the UK for the current year. He also said that if I close the company my income tax will be due in Malta because I was a resident of Malta at the time of distribution. With one exception that, if I move back to the UK within 5 years I might still have pay tax in the UK. Following that advice I closed company and distributed the money as dividends as Entrepreneurs' Relief would apply only if I were resident in the UK anyway.
On the other hand, my accountant who usually assists me stated recently that the tax on that dividends will still be due in the UK because the reserves in my company were coming from the work carried in the UK territory. So in his opinion, the fact that I paid it out while being non-resident in the UK doesn't matter.
I know that tax residency is a complex subject so that's why decided to take professional advice on that subject... Unfortunately, I received 2 contradicting answers from 2 professionals so I hoped maybe I will find someone opinion here
Many thanks for any opinion
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Replies (10)
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You don't appear to have been given contradictory advice. It's quite possible for income to be taxable in two countries, and double-tax relief to apply . You should check the double tax agreement between the two countries.
Thank you jcace. Maybe I didn't put it clear enough. Both tax advisor and accountant are from the UK and I asked strictly about my UK obligations. First one said "no tax in the UK" and second one said "tax due in the UK". Therefore I said they're contradictory.
I understand that there's another question about my obligations in Malta and if I find that tax is due in both countries I have to check double-tax between the two countries.
However if the first one is right and there is no tax due in the UK because I was non-resident at the time of distribution then I would have to worry only about Malta taxation.
Of the two explanations you have received, the one that says you pay tax in the UK because the company’s work that generated the profits out of which the dividends were paid was carried out in the UK is the one that makes no sense to me.
Of the two explanations you have received, the one that says you pay tax in the UK because the company’s work that generated the profits out of which the dividends were paid was carried out in the UK is the one that makes no sense to me.
S.812A, John.
I would say that the accountant is forgetting s.811, however. Of course, it’s what the OP isn’t telling us which could change the analysis.
Thank you John & CTA
Your answers overlap with my own research.
With the assumption that I'm not only temporary non-resident, I can treat the dividends paid from my UK company to be treated as "disregarded income" in the UK.
However, in this case, I still need to pay income tax from my UK salary (and because I apply "disregarded income" on the dividends, I'm losing my personal allowance)
Thank you John & CTA
Your answers overlap with my own research.
With the assumption that I'm not only temporary non-resident, I can treat the dividends paid from my UK company to be treated as "disregarded income" in the UK.
However, in this case, I still need to pay income tax from my UK salary (and because I apply "disregarded income" on the dividends, I'm losing my personal allowance)
Hi Tim. Correct me if I'm wrong but as it looks like my dividends tax is not due in the UK, no double-taxation issue exists for my case. Therefore I believe I don't have to go and try to understand DTA as it won't give me an answer to my question.
There is no point going to the tax treaty until you have understood the domestic law position. So ignore those advising to start there.