The Principle: As You Move Your Company Moves with You
As I work with my clients like you who are business owners and are actively engaged in their day to day running of their overseas business and investment companies, I notice the surprise when you learn that you risk bringing your overseas company to the UK as you obtain your own personal tax residence in the UK.
Some of my clients obtained their own UK tax advice prior to moving to the UK, while I encourage my other clients to do so.
I notice that even when you did go and obtain your UK tax advice, which also details that you are a director of an overseas company, the UK tax advice remains silent about the UK tax implications to your overseas company.
Company migration is the legal term used in international tax law, which is enshrined in the OECD Model Tax Convention on Income and on Capital. This model convention serves as a template for many bilateral and multilateral tax treaties negotiated between the contracting parties, which are States.
It is the principle of company migration that when a director based in a new country is appointed as director of the company in its original jurisdiction, the company may migrate to the new country, which is the residence of the new director.
What are the implications of the company migration?
There are several implications of company migration:
- It is now treated as the company incorporated and operating under the laws of the new country;
- It establishes its tax residence in the new country and becomes taxable in the new country.
Therefore, by moving to the UK and establishing your personal tax residence in the UK, you can also move the seat of your overseas entity to the UK and make it taxable in the UK.
What are Some of the Characteristics of Your Overseas Entities?
An overseas entity may be a legal entity or an entity, which has no legal personality.
Legal entities are incorporated entities under the respective laws of the country. This normally means it has a separate legal personality from the owners and directors of the company.
It has the power to create its own legal obligations and honour them.
Entities that have no legal personality, such as, Trusts
There are overseas entities that are based on agreements instead and are unincorporated and as such do not have the legal personality.
Under English law a trust is formed between the settlor and a trustee. Once the trust is formally formed, the trustee now has the legal obligations to the beneficiaries of the trust and how it manages the assets that the settlor gave away to the trust.
A common law trust is an excellent tool to protect and preserve family’s assets and wealth throughout several generations.
There are a number of overseas entities that hold real estate in the UK. In fact, HMRC is now on the mission to connect UK real estate to beneficiaries resident in the UK.
Therefore, when addressing the trusts, the tax residence of the Trustees and Beneficiaries is important.
The trustees of an overseas trust are able to move the tax residence of an overseas trust if Trustees or one of the Trustees becomes a tax resident in the UK.
Beneficiaries are the persons who may benefit from the overseas trust. The move of beneficiaries to a new country of residence does not affect the legal seat of the Trust or the Trustees.
However, the Trustees when making distributions to the beneficiaries need to be aware of legal, tax and reporting requirements that may affect beneficiaries resident in the UK, for instance.
The tax treatment of the overseas trusts and beneficiaries resident in the UK have been tightening during the last decade.
You will also need to revisit UK tax implications if you decide to claim remittance basis of taxation while in the UK.
How to keep up with the numerous requirements for overseas entities in the UK?
You can only do your best and demonstrate that you did your best. Unfortunately, this may not be always sufficient as HMRC may act aggressively if it determines that you did not pay as much tax as you were due.
This is not the best of circumstances to find oneself in. Therefore, I encourage all my clients to be proactive:
- Obtain correct UK tax advice in advance;
- Monitor your UK tax advice as your circumstances change;
- Monitor the changes in UK tax legislation and what it means to you and your overseas entities.
Not sure where to start or what is the best solution for you:
- Explore our offer: Your Global Wealth Strategy with the Emphasis on UK Tax Planning;
- Book a call with me to discuss with me whether this offer right for you or how it needs to be further tailored and adjusted to accommodate your specific needs and circumstances;
- Book a consultation with me.
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Saule Voluckyte, M.A.E.S, LL.B, FAIA
I have been working exclusively with UHNWI in Mayfair, London since January 2008. I built specialist knowledge and expertise required to serve ultra high net worth individuals investing, operating and relocating to the UK or Switzerland.
Within the industry, I am the single adviser who is able to traverse the different areas of expertise and bring a comprehensive approach across: global structuring, UK immigration, international taxation and FOREX to develop their global wealth strategy, while they build, grow and expand their wealth worldwide.
Previous experience as one of the senior advisors for the government, made me a go-to person when delicate and uncomfortable scenarios involving heads of state need to be handled with care and preserve privacy.