By Angelo Chirulli, FCA, ADIT, TEP — Vectigalis Tax
An illustrative story reflecting recurring cross-border tax enquiries.
By the time Alex booked his one-way flight, he had already dealt with most of the practical arrangements. He had found a home abroad, planned the family’s move and told his clients that he would continue working with them.
He ran a UK consultancy. His work could be delivered remotely, and most client meetings already took place online. His company would keep its British bank account and registered office. There seemed little reason for the business to change.
A month before departure, he arranged a tax consultation. He expected to discuss his final UK tax return and how to update HMRC.
His adviser began with a different question.
“What will an ordinary working week look like after you move?”
Alex described the client calls, the decisions he would make and the trips he expected to take back to the UK.
As he talked, it became clear how much of the business would depend on the work he would be doing from his new home.
The departure date was only the beginning
Alex had assumed that his flight date would mark the end of his UK tax residence.
The UK position needed a separate assessment under the Statutory Residence Test. The number of days he would spend in Britain mattered, alongside his working arrangements and other relevant connections. Being outside the UK for most of the year would not, by itself, settle the question.
His planned visits also needed consideration. Some would involve family, others client meetings. He had kept accommodation available in the UK, and his diary was still fairly fluid.
His adviser wanted to understand the arrangements he expected to follow, including how they might change.
The year of departure required particular care. UK split-year treatment can distinguish a UK part from an overseas part of a qualifying tax year, but only where the relevant conditions are satisfied.
The destination country would apply its own rules. A UK residence conclusion would not determine when Alex became resident there or which income that country could tax.
There was no single moving date that could answer every question.
His company would remain registered in Britain
Alex was comfortable with one part of the plan: the company would remain British.
It had been incorporated in the UK, its customers knew it as a UK business and its registered office would stay where it was.
Those facts mattered. UK incorporation normally establishes UK tax residence, subject to exceptions, including the effect of an applicable treaty.
The review also needed to consider whether the new country could treat the company as resident under its own rules, and what any relevant treaty would then require.
For Alex, the practical questions concerned the authority he exercised. He approved significant spending, agreed commercial terms and decided which work the company would accept. After the move, he intended to continue doing all of that from abroad.
His adviser explained that corporate residence and a taxable business presence overseas were separate questions.
Depending on the activities and applicable rules, a company might remain UK resident while having a permanent establishment in another country. Remote working does not automatically create one, but it cannot be dismissed without examining the circumstances.
Alex had thought about where his clients would be. He had spent less time considering where the company’s management and work would take place.
That became an important part of the review.
The familiar monthly payments needed another look
The next discussion concerned Alex’s income.
For years, he had drawn salary and dividends from his company. He expected to receive the same payments into the same account after leaving.
His adviser asked for each payment to be considered according to its nature. Employment earnings, remuneration for acting as a director and dividends can raise different questions under domestic law and any relevant treaty.
Keeping the existing payment arrangements would not establish their tax treatment abroad.
There was a practical employment question too. Alex would be performing work from another country. The implications for payroll and social security needed consideration alongside his personal income tax position.
Social security has its own rules and coordination arrangements. A conclusion about income tax does not automatically determine where contributions are due.
This is also relevant to employees who move abroad with their employer’s permission. An agreement to work remotely is a useful commercial starting point, but the tax and employer obligations still need examination.
For Alex, continuing the business meant understanding what needed to support the working arrangements he wanted.
Some UK connections would remain
Alex also owned a flat in the UK, which he planned to let rather than sell.
He had treated it mainly as a decision about whether he might return one day. During the consultation, it became part of the tax discussion.
UK rental income can remain within the UK tax system after an owner becomes non-resident. A later disposal of UK property can also have UK tax and reporting consequences.
The adviser therefore needed to consider the property alongside Alex’s wider plans.
His savings and investments raised another set of questions. Being allowed to keep an account open, retaining a UK tax advantage and establishing the treatment overseas were different matters.
An ISA provides a useful example. An existing ISA can retain its UK tax benefits after the holder becomes non-resident, but that does not establish how another country will treat the income or gains.
Alex did not need to make immediate decisions about every asset. He needed to know which arrangements required attention before the move and which could be reviewed afterwards.
The treaty would need to be applied
Alex had heard that double tax treaties prevented the same income being taxed twice. He had expected that to take care of any overlap.
His adviser explained that the relevant treaty, where one existed, would form part of the analysis. It would need to be applied to the particular income and circumstances.
Tax already paid in one country would not automatically resolve the position in the other. Relief could depend on the nature of the tax, the applicable provisions and the conditions for making a claim.
A full credit for foreign tax should not be assumed. In some circumstances, the appropriate route may involve seeking a refund from the country that collected it.
For Alex, this made coordination important. His UK and overseas advisers would need a consistent account of his residence, working arrangements and income.
Otherwise, each could prepare a calculation based on an assumption that the other had never agreed.
What changed before he left
Alex still wanted to move. The consultation had given him a clearer understanding of the arrangements he intended to continue.
He now knew that his personal residence and the company’s position required separate conclusions. His income needed to be considered by category, and some UK obligations could continue after departure.
The next steps could be agreed with the advisers responsible in each country, while there was still time to organise them.
The review also had to leave room for changes. More UK work than expected, a revised family timetable or a different role in the company could affect the assessment.
That is a recurring feature of moving abroad with ongoing UK interests. The practical plan needs enough detail for the tax analysis, and the analysis needs to reflect what actually happens.
For a business owner, a useful relocation review should make those connections clear without turning the move into a succession of unanswered technical questions.
Planning your own move abroad?
You may be leaving the UK permanently, trying life overseas for a period or continuing to run a business across borders.
The advice you need will depend on your destination and circumstances, including the work, income and assets you intend to retain.
At Vectigalis Tax, I advise individuals and business owners on UK and international tax matters, including relocation and the implications of managing a business from abroad.
If you are considering a move, email angelo@vectigalistax.co.uk with your intended destination, expected timing and a brief outline of your circumstances.