UK non-resident tax guide for 2022

If youre a non-resident director of a UK company, you need to carefully consider your residence status as this will affect your UK tax position. You need to understand whether you need to register for self-assessment in the UK, if your earn UK taxable income, if you and if you need to pay tax or are paying the right amount of tax. Companies with non-resident directors also need to understand their obligations to pay tax in the UK.

A guide to UK non-resident tax

What is my residence status?

A persons liability for paying tax in the UK is dependent on their tax residence and domicile status. To check your residence status and that you wont be classed as a resident in the UK, you can use the UK Government Statutory Residence Test.

Non-resident directors visiting the UK

If youre an overseas director of a UK company but classed as a non-resident, you can visit the UK for short periods of time without establishing tax residence in the UK. However, you may be liable for paying tax for income tax purposes and NICs – see below for more information.

Do I pay UK income tax as a non-resident director?

Non-UK resident directors of UK companies visiting the UK to undertake duties associated with their director role where salaries or fees are paid will be subject to PAYE.

Even if the non-resident director spends only one day working or attending a meeting in the UK during a tax year, you may still be subject to PAYE. Even if no money is paid by the UK company or there is a separate remuneration agreement for UK duties, then PAYE could apply. Therefore, it may be practical to agree on a salary for the UK directorship in some cases.

Income derived from your UK role

On the surface, the rules are pretty simple. Any income received by a director (executive or non-executive) for their role within the UK (e.g., attending meetings), is subject to UK PAYE. Any earnings relating to duties performed in the UK in a tax year are taxable in full.

Double tax treaties dont usually protect the director. However, if the individual isnt remunerated by the UK or overseas entities for the UK directorship, there will be no UK tax liability (see below about whether you still need to complete a self-assessment tax return).

Non resident tax returns

Any director of a UK company (including non-resident directors) can fall into self-assessment criteria.

The rules are as follows:

If the director is issued with a UK tax return, they must file a Self Assessment tax return by the relevant deadline. Even where there is no tax due a return must be filed if it is issued by HMRC. As with any other tax return, if it is filed after the deadline a penalty will be incurred.

If youre a non-resident director that receives income from your UK activities, but a UK tax return isnt issued by HMRC, then you must notify and register with HMRC in the UK. If you dont notify HMRC, there will be a penalty for failing to notify HMRC, unless the tax is paid by the filing deadline (and the return submitted).

Tax returns and compliance for non-resident directors

If an individual meets the requirements as a non-resident to report their income to HMRC, they are required to notify HMRC of this by 5 October following the relevant tax year end. The deadlines for tax returns to be submitted to HMRC are as follows:

• 31 October, if a paper return is filed.
• 31 January, if the return is filed online.

You must have a UTR (Unique Taxpayer Reference), which is issued by HMRC to be able to file online.

What is the tax year-end?

The tax year end in the UK is 5 April every year.

What are the compliance requirements for tax returns in the United Kingdom for non-residents and income tax?

Married people or people in civil partnerships are treated separately for tax purposes, and spouses are individually responsible for completing their own tax return. Their tax liabilities are calculated separately.

Filing your tax return as a non-resident

After the end of the tax year, a tax return or notice to file will be received from HMRC (if you don’t receive this and you need to file a tax return then you must notify HMRC by the above deadline). You must then complete and file your tax return.

Late filing penalties for non-residents

There is a strict penalty regime in the UK for people who don’t file tax returns online this begins if you miss the filing deadline with a late filing penalty of GBP100 if a return is not submitted by the filing date.

If you still haven’t filed your tax return for more than 3 months after the filing date, a daily penalty of GBP10 may be charged.

Penalties continue increase if you still haven’t filed after a period of 6 months and 12 months.

If you deliberately, conceal or withhold the tax return, you could face penalties of 100 percent of the tax liability (in some cases involving offshore matters the penalty can exceed 100 percent of the tax.

Global roles and the UK tax consequences

If the non-resident director is paid a salary for a global role involving directorships with numerous foreign entities, then it will be necessary to establish the proportion of that salary that is in relation to the directors UK duties to be able to report this to HMRC.

HMRC can allocate a proportion of the directors total pay to the UK director role they fulfil. This is generally difficult for HMRC to do, so the responsibility is on the UK company and director to have systems and processes in place to keep track of time spent performing their UK duties and the value of income that relates to those duties.

NICs for non-resident directors

In addition, there can be employment tax and NIC obligations and liabilities to consider in relation to expenses and benefits provided to the director while they are working in the UK. But this is a complex area and will depend on many factors. We advise that you seek professional advice from accountants such as dns in this matter.

Expenses for non-resident directors

It is common for companies to reimburse or pay for expenses like travel, accommodation, and subsistence to non-resident directors. The tax treatment of expenses will follow the standard principle of the temporary workplace and whether they have been incurred wholly, exclusively, and necessarily for employment duties. A limited exemption applies to travel expenses if the director is non-domiciled and requires reviewing on a case-by-case basis. The payment of expenses can trigger additional reporting obligations and employers should therefore seek professional advice.

Capital gains tax for non-residents

As a general rule, non-resident individuals are not normally subject to UK capital gains tax on disposals. However, disposals of UK residential property is one exception.

UK property disposals should be reported online to HMRC and any tax due paid within 60 days sale via HMRC’s online Capital Gains Tax on UK property service.

Tax treaties between the UK and other countries

Tax treaties dont offer protection to directors from UK tax perspective. Often people believe that if there is a tax treaty between the UK and the directors country of residence, then this will exempt their income in the UK from UK income tax.

However, this isnt always the case, so seek advice. Directors need to be considered separately from other visitors if they are board directors.

HMRC checks and investigations on non-resident directors of UK companies

HMRC are increasingly checking company records for non-resident directors, so keeping accurate records, registering for self-assessment if necessary and filing a return by the deadline are crucial to remain compliant.

What to do if youre a non-resident director of a UK company

Now is the time for both directors and their companies to review existing arrangements to ensure any tax or NIC obligations in the UK are met. Consider the following:

How you are calculating earnings for UK duties.

Ensure the director knows their residency status and their obligation to complete a self-assessment tax return in the UK and how to avoid double taxation.

Seek advice about whether the directors earnings are liable for employee and employer Class 1 NIC.

With HMRC increasingly scrutinising company directors and those that are non-resident in the UK, its important that both the director and the company concerned understand their UK tax obligations and reporting to avoid penalties now and in the future.

Here at dns, we specialise in non-resident UK directors tax and can advise you on all the things you need to know and your obligations here in the UK. If you have questions or require help then book a free consultation or call us on 03300 886 686 or email enquiry@dnsaccountants.co.uk.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.