The COVID-19 pandemic has affected how everyone in the UK does business. Remote working is the new normal, and many small business owners have decided to work away from their normal location, to other parts of the UK or even abroad.

Whether you’re the director of a UK limited company currently residing in another country, or you’re thinking of relocating abroad, there are some rules you’ll need to be aware of.

We strongly advise you to take specialist advice before deciding to relocate and run a UK limited company when you’re not a UK resident.

If you run your business as a sole trader, you’ll have some similar issues to deal with, but the most important question will be whether you’re ‘resident’ in the UK for tax.

Here’s some of some basic information you will need.

Limited company registered office address

Companies House does not require directors of limited companies to be UK residents. However, you must provide:

• A UK service address: This address is published on the Companies House register and is visible to the public. Many companies use an agent's services to meet this requirement. Crunch offers this service as part of our accountancy packages.
  

• Your overseas address: This is needed for Companies House to contact you.

For more information on address requirements, please refer to our Knowledge article.

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Business bank accounts

At Crunch, we always recommend you have a bank account in the name of your limited company to ensure your company’s funds are completely separate from your personal finances. 

You don’t need to have a UK bank account to run your company from overseas. In fact, it may be difficult to open a UK bank account if you don’t have a personal address in the UK. 

Again, you should take specialist advice to ensure you understand the additional costs involved in operating bank accounts when you are not resident in the UK.

For sole traders, the situation is similar: while it’s not a legal requirement, we always recommend you have a separate business bank account for your business finances.

Personal and business taxes

We strongly recommend you take specialist advice if you’re looking to work through a UK limited company while living abroad. 

Different countries have different rules about your personal tax status and any earnings you have from your UK-based company.

Even if you spend only part of the tax year in the UK, you may need to pay personal taxes on any earnings you have while visiting in addition to the personal tax you need to pay in your country of residence.

Personal tax summary

As a non-UK resident director, your UK tax obligations depend on your tax residency status, but they are typically as follows: 

• Non-resident: Generally, you only pay UK tax on UK income.
• Resident: You may be subject to UK tax on worldwide income.

As a director of a UK limited company, you may need to attend meetings in the UK or be paid a salary while spending part of the tax year in the UK. 

The rules surrounding PAYE and National Insurance for employers and employees are complex, and you’ll need to take specialist advice to ensure you pay the correct tax on any earnings while working in the UK.

Corporation Tax summary:

• If you‘re a director and shareholder of your own limited company, the company will need to pay UK Corporation Tax on its profit.
• All UK companies must pay Corporation Tax on their profits, regardless of where the directors reside.

Tax residency

As an individual, the personal tax implications are complex. First and foremost, there’s the issue of your tax residency. As we mentioned, your tax residency determines which income you pay taxes on in the UK: 

• If you’re a UK tax resident, you’re subject to Income Tax on your worldwide income. 
• If you’re not a UK tax resident, you pay UK Income Tax on your UK income only.

So how do you know whether you’re a UK tax resident or not? 

You can use the Statutory Residence Test to determine your status. The Statutory Residence Test considers:

• Days spent in the UK
• Ties to the UK (family, accommodation, work, etc.) 

If you aren’t resident in the United Kingdom for more than 183 days in the tax year, you’re deemed to be non-resident in the United Kingdom for tax purposes and as such, you’re only subject to taxes on your UK income. So salary and dividends taken from your UK company will be subject to UK Income Tax.

As you’ll be resident abroad, your country of residence may also want to tax your income from the UK and you may be entitled to double taxation relief in your home country. You’ll need to seek advice from a specialist tax adviser who knows the rules in your country of residence.

Sole Traders:

If you’re a sole trader, there’s no difference between you personally and your business. 

You’ll be expected to file a Self Assessment tax return (which you may have been doing already) and, just like a limited company director shareholder, your residency also determines if you’ll be subject to tax on your UK income only or your worldwide income. 

Our article, “Am I a UK tax resident?” explains more about the subject.

IR35

R35 affects contractors working through intermediaries. It’s important to understand if IR35 applies to you, as it impacts tax and National Insurance contributions.

If you operate through a limited company but you aren’t a UK tax resident, the good news is that IR35 doesn’t apply to you. 

HMRC states in ESM9037 that: 

• “The worker is not chargeable to tax in respect of the DDP (Deemed Direct Payment) if, or to the extent that, by reason of any combination of the factors mentioned below the worker would not be chargeable to tax”.

Two factors of interest to you state: 

• “The worker being resident or domiciled outside the UK, or meeting the requirement of section 26A ITEPA 2003” and “The services being provided outside the UK”.

If you’re a UK tax resident working through a limited company, you’ll need to ensure that you’re aware of how IR35 may impact your business.

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How can Crunch support you?

Running a UK business from abroad is manageable with the right knowledge and support. For tailored advice, contact Crunch to ensure compliance and efficient management of your UK business.

Crunch provides online accounting software and services to freelancers, contractors, and small businesses. If you can run your business from abroad, but your limited company is based in the UK, our service can support you with your UK earnings. 

Where specialist advice is needed, we can refer you to one of our partners to provide the additional support you need. Get in touch and speak to one of our friendly advisers today!

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