Non UK Resident Director - Salary and Dividends

Is paying through PAYE allowed and is SATR compulsory?

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A prospect has contacted me to ask for a quote.

He moved to Spain in 2021 and became a Spanish resident there. He was a resident in the UK from 2015 until 2021. 

He owns and runs a Limited Company in the UK since 2015.

His current accountant kept submitting RTI and paying him a wage up to the primary threshold (£12,570 this year) for the whole period 2015 - 2024.

He has also been submitting his SATRs 2015 - 2024, "informing the UK government he is a resident in Spain, and informing of his UK salary and dividends". I have not checked those SATRs.

My two questions are, assuming he is not a UK resident (having passed the tests):

1) Can the director have a salary under PAYE? 

2) Must he submit SATR in the UK? 

I thought the answer for both questions was "No". His current accountant is Chartered so I might be missing something.
Many of my clients are Spanish but all of them resident in the UK so this is a new territory for me. 

Thank you in advance.

 

Replies (21)

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By David Ex
22nd Apr 2024 18:55

Is running a "Limited Company in the UK" sensible if he is now resident in Spain?

This may be relevant:

https://www.gov.uk/guidance/paying-employees-working-abroad

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By Tax Dragon
22nd Apr 2024 19:17

Do you know the tax residence of the company?

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By Matrix
22nd Apr 2024 19:26

What is the quote for? I would quote for reviewing the whole position and discussing with the Spanish accountants (which may be a very vague quote). There may not be much in it for you for compliance going forward as a UK company may be sub-optimal.

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seneca
By Seneca
22nd Apr 2024 21:24

David Ex wrote:

Is running a "Limited Company in the UK" sensible if he is now resident in Spain?

All the clients and suppliers are based in the UK, the directors comes one week per month to keep the business going.

Tax Dragon wrote:

Do you know the tax residence of the company?


I see the value of your question. I don't know it but I am almost certain is in the UK. We would have to test it but let's assume is in the UK.

Matrix wrote:

What is the quote for? I would quote for reviewing the whole position and discussing with the Spanish accountants (which may be a very vague quote). There may not be much in it for you for compliance going forward as a UK company may be sub-optimal.


The quote was for bookkeeping and accounts and then he asked me to include PAYE and SATR and that is when the case surprised me.
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Replying to Seneca:
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By David Ex
22nd Apr 2024 21:47

Seneca wrote:

David Ex wrote:

Is running a "Limited Company in the UK" sensible if he is now resident in Spain?

All the clients and suppliers are based in the UK, the directors comes one week per month to keep the business going.

My knowledge of individual tax residence matters is almost non-existent but how does that square with “assuming he is not a UK resident (having passed the tests)” in your OP?

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Replying to Seneca:
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By Matrix
22nd Apr 2024 22:14

I thought Spanish residents conducting a business had to register as self-employed and for VAT. Maybe he has a digital nomad visa but then he would have told you. Ask for a copy of the Spanish tax advice. And the UK tax advice maybe.

Why is he changing accountants?

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Replying to Matrix:
seneca
By Seneca
22nd Apr 2024 22:17

Sorry forgot to say he is registered as self employed in Spain and “pays all his taxes in Spain as a Spanish resident “!
All of it is from what he says, I haven’t asked for any documents to verify it

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Replying to Seneca:
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By David Ex
22nd Apr 2024 22:21

Seneca wrote:

Sorry forgot to say he is registered as self employed in Spain and “pays all his taxes in Spain as a Spanish resident “!
All of it is from what he says, I haven’t asked for any documents to verify it

A self employed company director? I know nothing about Spanish tax, apparently!

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Replying to David Ex:
seneca
By Seneca
23rd Apr 2024 12:47

He declares his dividends from UK compamy in Spain, what I don't know is how he declares the PAYE income as director.

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By JB101
23rd Apr 2024 09:45

1. Are you sure he isn't UK resident (possibly as well as Spanish Resident)?
2. Is the payroll giving him a State Pension credit?
3. Have you seen his last UK SATR?

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Replying to JB101:
seneca
By Seneca
23rd Apr 2024 12:50

1. I have to assume what he has told me, that he is only a Spanish resident. Taxes are usually higher in Spain than in UK so he doest not have incentive to do this, it would be bad advice by his current UK and Spain accountants if this is not the case and eh should have dual residence.
2. No.
3. No. I will ask for it.

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Replying to Seneca:
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By David Ex
23rd Apr 2024 14:28

Seneca wrote:

1. I have to assume what he has told me, that he is only a Spanish resident.

You said “the directors comes one week per month to keep the business going” so, without looking at the detailed guidance, I’m puzzled how he has managed to become non-UK resident. Maybe go back and review the HMRC guidance to take account of the 12/13 weeks a year the client spends in the UK.

If I was his UK tax advisor, I wouldn’t make assumptions; I’d check.

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Replying to Seneca:
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By Tax Dragon
23rd Apr 2024 23:05

Seneca wrote:

it would be bad advice by his current UK and Spain accountants if this is not the case...

And it would be bad advice for you to continue that way if it is wrong.

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Replying to Tax Dragon:
seneca
By Seneca
25th Apr 2024 17:04

Prospect just informed me his accountant has confirmed he has DUAL residence, and prospect always thought it was only Spanish residence, so that's solved :)
Thansk for the help!

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By richard thomas
23rd Apr 2024 21:40

I’m going to try to answer your actual questions. Others have made very good points and any comprehensive consideration by you of the potential client’s (PC) affairs would need to include the residence of the company, both domestically and under the treaty, liability to CT, the PC’s income tax position by reference to the treaty and National Insurance contributions.

1) Can the director have a salary under PAYE?

I’m not clear what the reference to PAYE is for, given that the PC is being remunerated in the standard way for owner-managed companies with a sufficient salary to qualify for NICs credits bit to suffer PAYYE deductions, with the rest of the remuneration being dividends.

However in this situation you can only (a) create a deductions working sheet (b) deduct PAYE if appropriate having regard to the code number issued or deemed issued and (c) make a return under regulation 68B of the PAYE Regulations (RTI FPS) if the payment is of PAYE income. That only includes, in the case of a non-resident, “general earnings in respect of duties performed in the United Kingdom”. On top of that the treaty with Spain may exempt earnings anyway.

It is on those taxable earnings only that you can operate PAYE.

Remember I say nothing about NICs here.

2) Must he submit SATR in the UK?

Yes, if he has been served with a notice to file. How else will he claim the personal allowance to set against his earnings (if any) and dividends? How else will he get the benefit of s 811 ITA 2007 (limit on tax for non-residents) if it applies in his case? How else will he claim any benefits under the UK/Spain treaty?

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Replying to richard thomas:
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By FactChecker
23rd Apr 2024 22:08

I presume the reference (in your part 1) is, as you indicate, to PC being remunerated with a sufficient salary to qualify for NICs credits but without PAYE deductions.

In which case, I can see no reason why the £242 pw paid as salary shouldn't be the remuneration for the 1 day pw that PC apparently spends performing duties in the UK?

However I agree that PC's status of dual or otherwise tax residency, let alone how that may interact with the treaty in Spain, is a far more intrinsic hurdle to establish first.

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7om
By Tom 7000
24th Apr 2024 11:34

Dividends will be disregarded income maybe in UK return?

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Replying to Tom 7000:
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By richard thomas
24th Apr 2024 13:42

No they won't or shouldn’t be disregarded in the return.

They will count as disregarded income in the s 811 ITA calculation, but unless the PC is a millionaire that calculation is very unlikely to give a lower figure.

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By Rgab1947
24th Apr 2024 14:45

The UK has a number of test and requirements determining where he is resident and tax resident and domiciled. The fact that he comes back to the UK regularly to work requires you to determine the number of days, hours worked etc. to see whether he is tax resident in the UK and maybe resident in the UK as well.

Note you can be tax resident in two countries.

If he is not tax resident then the company/him can apply for a NT tax code so he would not be taxed under PAYE in the UK.

The company may be deemed foreign controlled so another area of research as that has tax implication in the UK and Spain.

Then the DTA would apply. Most likely that he is considered Spain domiciled so that UK tax is offset against Spanish tax.

I have kept it all very vague as the client by his circumstances is a complex tax client insofar you must know tax and ordinary residency rules, DTA's, foreign controlled and have a working relationship with the Spanish accountants. You need to do your own detailed research to get all the ducks in order.

Fun to do that kind of work but lots to know.

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seneca
By Seneca
25th Apr 2024 17:09

Thanks to everyone. I mixed two questions, or two posts, one should have said "can a non-resident have a PAYE salary in the UK?" and the other one a bit more detailed with the specs of this case.

In any case, client has found out he has dual residence. And after all your help, I have to decline this case for lack of experience.

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By jvenegas16
26th Apr 2024 01:38

As he is tax resident in Spain, he can obtain a tax resident certificate from the Spanish tax authorities (Agencia Tributaria). Then it is presented to HMRC in the UK, and he could receive his salary gross, and it can go on PAYE.
Does he have any other income in the UK, like rental income?
When he left the UK, he would have notified HMRC on the P85 form.

He wouldn't need to submit a SATR, unless there is a reason for it we don't know about.

If it helps I cover UK/Spanish taxes.

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