No longer a UK tax resident... what to do next?

[James105]

Not quite sure where to put this question, but here feels like a good as place as any as it is related to Thailand.

 

My UK Accountant (who is a bit of an idiot), took it upon himself to force the issue of my tax residency and is insisting that I am no longer a UK tax resident.   To be fair he has a point as I haven't set foot in the UK for over 3 years mainly due to covid and then finding myself too comfortable in Thailand to make the effort to return.    So for the past 3 years I have been paying taxes as though I am a UK tax resident.   The accountant has completed and is about to file self assessments backdated to April 2020 declaring that I am no longer UK tax resident since that date and is just awaiting my approval.   

 

This leaves me with a bit of a pickle as I am not on a visa that allows me to work in Thailand (Elite visa), I have a UK Ltd company that I receive royalties into from published work, which I then take salary and dividends from, some of which I send to my Thai bank account for living expenses.   Most of my income remains in UK bank accounts/investments.   I have never registered for a tax ID in Thailand and the last time I spoke to a tax lawyer (several of them) over here they huffed and puffed stating how complicated my situation is and said I was better off staying as a UK tax resident... so I did.

 

So I appear to be in the tax residency wilderness.   If anyone can help with the following questions it would be very much appreciated:

 

1.  Do I need register for and pay taxes in Thailand dating back to April 2020?  

2.  If so, then technically all the income I have brought into Thailand is all income earned abroad (and can be easily proven so) in prior years so do I get a free pass based on not bringing money into Thailand in the same year it was earned? 

3.  Is it even advisable to raise my head above the parapet even though I am pretty sure that I am not breaking any rules related to my income and what I do for work. 

4.  Would I get in trouble for not registering for tax after 180 days here?  

5.  On the basis that I should probably pay tax somewhere is it possible to voluntarily be a UK tax resident even if I do not live there?   Everything was working just fine until my accountants intervention.   

6.  Bonus question!   Any suggestions of where to base my Uk Ltd company?   If tax residency in the UK is not an option I'm not sure keeping my company resident there with up to 25% corporation tax now is the most tax efficient place to do so.  I've (briefly) looked at Estonia which seems easy enough to set up from abroad with e-residency but with 20% corporation tax it doesn't exactly feel like a bargain, but more research is needed.  

[nigelforbes]

You have a UK company that pays you dividends etc, that income arises in the UK hence you are taxable on that income in the UK, regardless of whether you are UK tax resident or not. Your personal allowance of GBP 1.5K will give you a tax free cushion.

 

Not being UK tax resident means that you don't have to declare any income to HMRC that arises outside the UK, you still have to pay tax on any income that arises inside the UK.

 

The Thailand tax part is a red herring, you don't earn income in Thailand although you do remit income from the UK to Thailand, in the year in which it was earned so technically you are taxable here on that income. Personally, I would ignore that aspect and just pay your UK tax in accordance with the above.

Edited April 23, 2023 by nigelforbes

[nigelforbes]

Also, you ask where to base your UK company, because you are not UK tax resident. The answer is, the UK, if it was based anywhere else it wouldn't be a UK company!

[James105]

7 minutes ago, nigelforbes said:

You have a UK company that pays you dividends etc, that income arises in the UK hence you are taxable on that income in the UK, regardless of whether you are UK tax resident or not. Your personal allowance of GBP 1.5K will give you a tax free cushion.

 

Not being UK tax resident means that you don't have to declare any income to HMRC that arises outside the UK, you still have to pay tax on any income that arises inside the UK.

 

The Thailand tax part is a red herring, you don't earn income in Thailand although you do remit income from the UK to Thailand, in the year in which it was earned so technically you are taxable here on that income. Personally, I would ignore that aspect and just pay your UK tax in accordance with the above.

Thanks for your reply but according to this dividends are not taxable from a UK Ltd company paid to non-UK tax residents:

 

https://forbesdawson.co.uk/articles/2022/05/06/are-my-dividends-tax-free-now-that-i-am-non-uk-resident/#:~:text=Non-UK resident individuals can,free from UK income tax.

 

I'm actually expecting a rebate for any dividend tax paid since April 2020.

 

[James105]

8 minutes ago, nigelforbes said:

Also, you ask where to base your UK company, because you are not UK tax resident. The answer is, the UK, if it was based anywhere else it wouldn't be a UK company!

I have a UK Ltd but the income is not sourced in the UK, it comes from the USA.   The UK Ltd I have just been using for convenience as I already had it when I started publishing my work (from my freelancing days) so there is no reason I can think of for this income to need to continue to to go into it.   Perhaps I should have been clearer in that I am considering forming a new company in another part of the world where this income can go into and will (separately) liquidate the existing UK company income into my own personal accounts when I am 100% certain I will not be subject to UK tax on this.  

Edited April 23, 2023 by James105

[nigelforbes]

1 minute ago, James105 said:

Thanks for your reply but according to this dividends are not taxable from a UK Ltd company paid to non-UK tax residents:

 

https://forbesdawson.co.uk/articles/2022/05/06/are-my-dividends-tax-free-now-that-i-am-non-uk-resident/#:~:text=Non-UK resident individuals can,free from UK income tax.

 

I'm actually expecting a rebate for any dividend tax paid since April 2020.

 

Is your income from the UK Ltd company solely dividends?

 

What is HMRC's view of you taking 100% of your income from YOUR limited company in this way....it used to be that this was not allowable and was seen as tax evasion.

 

Presumably you intend to try and skirt the two points above, by becoming not UK resident for tax? That doesn't pass my sniff test, I doubt that it will pass the HMRC sniff test either.

 

[nigelforbes]

1 minute ago, James105 said:

I have a UK Ltd but the income is not sourced in the UK, it comes from the USA.   The UK Ltd I have just been using for convenience as I already had it when I started publishing my work (from my freelancing days) so there is no reason I can think of for this income to need to continue to to go into it.   Perhaps I should have been clearer in that I am considering forming a new company in another part of the world where this income can go into and will (separately) liquidate the existing UK company income into my own personal accounts when I am 100% certain I will not be subject to UK tax on this.  

Ah....vital information emerges!

 

If you had joined an umbrella company, in Hong Kong for example, you could live in Thailand, receive your divi. income in HK and there would be no UK connection. As it stands, that income has been paid into the UK company so you can't change that. Presumably you will not pay any Corp Tax also?

 

I can't say for sure but I can't see HMRC letting you get away scot free on this, it just doesn't smell right.

[James105]

1 minute ago, nigelforbes said:

Ah....vital information emerges!

 

If you had joined an umbrella company, in Hong Kong for example, you could live in Thailand, receive your divi. income in HK and there would be no UK connection. As it stands, that income has been paid into the UK company so you can't change that. Presumably you will not pay any Corp Tax also?

 

I can't say for sure but I can't see HMRC letting you get away scot free on this, it just doesn't smell right.

Yes, I have paid UK corporation tax (19%) on all profits and will continue to do so whilst the company receives profits as that is still resident in the UK.   It's just the personal tax that I am referring to.    So when I say liquidate the profits, this is after corporation tax has already been paid on it.   

 

I appreciate it might sound a bit dodgy, but everything I have read and been told sounds legit.  If I am not a UK tax resident (and remain non UK tax resident for 5 years), there is no UK tax liability on any future dividends I take from the company even if I liquidate everything from it.

 

It's really from the Thailand side of things that I am unsure about what to do as not paying tax anywhere does sound a bit dodgy and would like to be able to prove that I have been a good little citizen when I was away should I return to the UK some day.   

[topt]

6 minutes ago, James105 said:

It's really from the Thailand side of things that I am unsure about what to do as not paying tax anywhere does sound a bit dodgy

I would suggest it does not sound dodgy unless you work for a revenue service.

It is also 1 of the reasons why some people choose Thailand as it is currently possible to achieve this whilst staying legalish........

 

I am non resident for UK Tax but still pay tax on my UK income - generated in the UK. However I pay no tax (yet) in Thailand as I try to only transfer savings/income from previous calendar years income. I also will not complete a Thai tax return currently. 

 

The Thai implementation of CRS may complicate things moving forward but I agree with @nigelforbes that if you can avoid registering with the Thai Revenue service I would personally do so for as long as possible.

 

So for some of your questions - 

2 - Yes

3 - No

4 - currently no

[CharlieKo]

Your idiot accountant is 100% correct. Unless you have income of more Than 12,500 you do not pay tax. Dividends or interest on savings do not count as income. 

 

 

[3STTW]

1. Fire your accountants. They're giving you bad advice to keep your custom.

2. Relocate your business to Singapore using one of the many online services. They will provide local directorship and get you a bank account.

3. Operate your SGP business as a consultancy and invoice your clients accordingly. Your max company tax will be 10%, less if the income is from overseas.

4. Pay your local Thailand expenses from your SGP business account and deduct them as necessary.

[nigelforbes]

7 hours ago, CharlieKo said:

Your idiot accountant is 100% correct. Unless you have income of more Than 12,500 you do not pay tax. Dividends or interest on savings do not count as income. 

 

 

Of course dividends and interest are income, they are unearned income rather than income derived from wages but they are still income.

[nigelforbes]

8 hours ago, topt said:

I would suggest it does not sound dodgy unless you work for a revenue service.

It is also 1 of the reasons why some people choose Thailand as it is currently possible to achieve this whilst staying legalish........

 

I am non resident for UK Tax but still pay tax on my UK income - generated in the UK. However I pay no tax (yet) in Thailand as I try to only transfer savings/income from previous calendar years income. I also will not complete a Thai tax return currently. 

 

The Thai implementation of CRS may complicate things moving forward but I agree with @nigelforbes that if you can avoid registering with the Thai Revenue service I would personally do so for as long as possible.

 

So for some of your questions - 

2 - Yes

3 - No

4 - currently no

HMRC did have a crackdown many years ago on people who derived 100% of their income via dividends, they want to see a better balance of PAYE and divi's and regard 100% divi's as avoidance. What their position is today etc etc is unclear, 

[CharlieKo]

2 hours ago, nigelforbes said:

Of course dividends and interest are income, they are unearned income rather than income derived from wages but they are still income.

are you an accountant? 

 

 

Edited April 24, 2023 by CharlieKo

[nigelforbes]

7 minutes ago, CharlieKo said:

are you an accountant? 

Price Waterhouse Deloitte

[CharlieKo]

1 minute ago, nigelforbes said:

Price Waterhouse Deloitte

Forbes Dawson Tax specialists:-

 

Non-UK resident individuals can choose for their UK sourced investment income, including dividends and interest, to be disregarded for UK tax purposes.  This so-called ‘disregarded income’ can then be received free from UK income tax.

Under the Statutory Residence Test, special split year treatment rules apply where individuals move overseas mid-way through the tax year, either because they, or their partner, are starting full-time work abroad, or where they cease to have a UK home.  Where the split year rules apply, the individual is treated as becoming non-UK resident on the date they leave the UK, with the tax year split into a UK part (prior to departure) and an overseas part (after departure). 

[nigelforbes]

1 minute ago, CharlieKo said:

Forbes Dawson Tax specialists:-

 

Non-UK resident individuals can choose for their UK sourced investment income, including dividends and interest, to be disregarded for UK tax purposes.  This so-called ‘disregarded income’ can then be received free from UK income tax.

Under the Statutory Residence Test, special split year treatment rules apply where individuals move overseas mid-way through the tax year, either because they, or their partner, are starting full-time work abroad, or where they cease to have a UK home.  Where the split year rules apply, the individual is treated as becoming non-UK resident on the date they leave the UK, with the tax year split into a UK part (prior to departure) and an overseas part (after departure). 

Indeed, except that is not what you described or said. You wrote, "Unless you have income of more Than 12,500 you do not pay tax (ergo, if you do, you must pay tax). Dividends or interest on savings do not count as income". You did not specify the status of the taxpayer as non-UK resident, you just made a blanket statement which was incorrect. 

[James105]

3 hours ago, nigelforbes said:

HMRC did have a crackdown many years ago on people who derived 100% of their income via dividends, they want to see a better balance of PAYE and divi's and regard 100% divi's as avoidance. What their position is today etc etc is unclear, 

The income I take from the company is the typical mixture of salary/dividends that is standard practice.   I am merely guilty of not paying a penny more tax than I have to, which is a perfectly normal and legal thing to do.  

[nigelforbes]

1 minute ago, James105 said:

The income I take from the company is the typical mixture of salary/dividends that is standard practice.   I am merely guilty of not paying a penny more tax than I have to, which is a perfectly normal and legal thing to do.  

Then that's probably OK, I overlooked the part earlier where you said you took a salary also, sorry.

 

With regard to Thai Revenue.

 

I really don't think that they will be interested in this unless there are large amounts involved. To be eligible to pay tax here you would need to have been here for more than over 183 days per tax year, for each of the years involved, plus, you would need to have remitted funds here during the tax year they were earned (Jan-Dec). Whilst Thai Revenue does have the right to go after that income, in practise they don't, not unless it falls into their lap by chance or somebody comes along and volunteers.

[James105]

11 hours ago, topt said:

I would suggest it does not sound dodgy unless you work for a revenue service.

It is also 1 of the reasons why some people choose Thailand as it is currently possible to achieve this whilst staying legalish........

 

I am non resident for UK Tax but still pay tax on my UK income - generated in the UK. However I pay no tax (yet) in Thailand as I try to only transfer savings/income from previous calendar years income. I also will not complete a Thai tax return currently. 

 

The Thai implementation of CRS may complicate things moving forward but I agree with @nigelforbes that if you can avoid registering with the Thai Revenue service I would personally do so for as long as possible.

 

So for some of your questions - 

2 - Yes

3 - No

4 - currently no

Thanks, the only thing I am concerned about with this approach is that should I return to the UK one day and HMRC asks me where I have been paying personal tax I would then have to own up to the fact I have not been and not sure if this is a good idea.    This 'income from previous calendar years that is subject to zero tax' does seem ideal, but I am wondering if I should have a tax ID and an accountant here to make it official so I have some paperwork to show HMRC should it be required in the future.   

[nigelforbes]

Between 1990 and 2005 I frequently worked overseas whilst maintaining a UK company and home there, most of my time was spent overseas. Between 2005 and 2018 I was living in Thailand full time but in 2018 I bought a UK flat and attempted to become UK resident again. I filed UK taxes for two years and HMRC didn;t ask any question. In 2020 abandoned my plans and once again became UK non-resident for tax, I also amended my past year returns to reflect nom-residency and HMRC said nothing.

[KannikaP]

13 hours ago, nigelforbes said:

Your personal allowance of GBP 1.5K will give you a tax free cushion.

is it not £12500 per annum?

[James105]

5 minutes ago, nigelforbes said:

Between 1990 and 2005 I frequently worked overseas whilst maintaining a UK company and home there, most of my time was spent overseas. Between 2005 and 2018 I was living in Thailand full time but in 2018 I bought a UK flat and attempted to become UK resident again. I filed UK taxes for two years and HMRC didn;t ask any question. In 2020 abandoned my plans and once again became UK non-resident for tax, I also amended my past year returns to reflect nom-residency and HMRC said nothing.

That is good to know, thank you.   In that case my head will remain below the parapet over here!   

[nigelforbes]

16 minutes ago, KannikaP said:

is it not £12500 per annum?

Yes, 12,550 pa