Director of UK Registered Company Living and Working from Ireland
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01-03-2023 11:16am#1
Hi All,
I am hoping someone can help or advise. I have tried getting advice on this topic from the relevant Irish authorities and the UK authorities but seem to be getting nowhere.
The scenario is, I am the Director of a UK-registered business. The business has one employee (me) and simply provides professional services. All work can be done remotely as long as one has an Internet connection. I might have to travel to the UK the odd time to meet clients, attend shows/fairs, etc but this is really up to me. All Clients of the business are UK businesses.
I used to live in the UK and am now based in Ireland and own a home in Ireland, I do not own a home in the UK. I earn my salary in the form of wages and dividends from the UK company. My question is, where should I be paying my taxes? I understand that Corporation Tax would be paid in the UK but I am more so concerned about personal taxes and pension contributions etc? Any help is appreciated, have a great day.
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You live in Ireland, so you are liable for tax here.
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The tax you pay as a result of a salary drawn in Ireland, will be paid in Ireland. When you refer to the company, is it a small business, or are you a contractor working via an LTD company in the UK? If its a traditional business, then there may be a case for keeping it in the UK, but if you are just contracting, would you client(s) be happy to contract with you as an Irish business? This way you could remove all complexity and just shut down the UK firm and open one here, the added advantage being that you remove the UK IR35 risk.
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Thanks Jonathan,
So I have multiple clients, and the jobs I take on usually take 1 to 2 weeks to complete. I don't think I would have any issues with IR35 as, as I say, I have multiple clients and all are small jobs in general. It's a proper business, at times Im flat out, and at times it's dead. I'd like to keep the UK business as it has been trading for 8 years (I used to live over there) and I think UK clients would be more comfortable working with a UK business.
'The tax you pay as a result of a salary drawn in Ireland, will be paid in Ireland' do you mean, if I draw my salary from UK business, because I am resident in Ireland, I would pay my personal tax in Ireland?
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If you spend more than half the year here on an ongoing basis the you are likely resident in Ireland. Then you are likely taxed in Ireland, not the UK. There are some exceptions and things like if scenarios where you are considered both resident in Ireland and the UK and then you have to take further tests into account.
But if Ireland is your main home and you are permanently living here, then it's likely Ireland is your tax residence and you should be paying your income tax here and operating PAYE here.
It's also likely that your company is controlled from Ireland and liable for Corp Tax here rather than the UK. You really need to get yourself in front of an Irish accountant to set out your situation fully and get proper advice.
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No accountant seems to be able to tell me, I even contacted the relevant state authorities and they have sent me back to HMRC to get a determination. Obviously, I am paying my taxes in any case, just want to make sure I do it right.
RE Corp Tax, I'm not so sure about that as the company is a UK company, it is registered in the UK, etc. I Could be wrong but I believe corp tax is always tied to where the company is incorporated
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I am not an expert, but one thing I learnt from the Apple case, is that in Ireland CT is charged on a company that is resident in Ireland.
To me, it looks like:
incorporation = where company was born
resident = where the company lives
Some Apple firms were in-corporated here, but are managed in the USA, so Ireland treats them as due to be taxed by US CT.
The test seems to be residency, see below, not in-corporation:
Overview
Companies resident in Ireland must pay CT on their worldwide profits if these profits include both income and capital gains.
Non-resident companies must also pay CT if:
- they trade through a branch or agency in Ireland
- or
- they are in receipt of profits or gains in respect of rental property in Ireland
The CT that a company pays is charged according to Income Tax rules. Chargeable gains are calculated in accordance to Capital Gains Tax (CGT) rules.
A company must use the Revenue Online Service (ROS) to file its return and pay any tax due under Mandatory eFiling and ePayment.
The CT payment and filing section gives information on how companies pay and file their CT.
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The rule/test is: where is the company managed? see below:
Company residency rules
Rules for companies that are incorporated in Ireland
Different residency rules may apply to a company, depending on whether it was incorporated in Ireland before or after 1 January 2015.
A company is deemed to be tax resident here if it was incorporated in Ireland on or after 1 January 2015. This will apply unless it is treated as a tax resident company in another country under a Double Taxation Agreement.
If a company was incorporated before 1 January 2015, there is a transition period up to 31 December 2020. From this date, a company will be deemed to be tax resident unless it is tax resident in another country under a Double Taxation Agreement.
There is an exception to this rule if, after 31 December 2014, a company has both:
- a change of ownership
- a major change in the nature and conduct of the business.
In these circumstances, the company will be tax resident from the date of the change in ownership.
Before these rules were introduced, the central management and control rule was used to decide if a company was resident. A company was regarded as resident if its central management and control was performed in Ireland. This was the case whether the company was incorporated in Ireland or not. This rule will continue to apply, on a transitional basis, to Irish companies that were incorporated before 1 January 2015.
Rules for companies that are not incorporated in Ireland
The central management and control rule applies to foreign incorporated companies. If a company is incorporated in a foreign country and is centrally managed and controlled in Ireland, it is resident in Ireland for tax purposes.
The central management and control test
Revenue will consider the highest level of control to decide where central management and control exists. Certain critical questions are included in this assessment to discover where:
- company policy is decided
- investment decisions are made
- major contracts are defined
- the company’s head office is located
- the majority of directors live.
Cessation of residency
When a company is no longer tax resident its assets will be deemed to be disposed of at market value. The company must pay tax on any capital gains received from the disposal, except where:
- the assets continue to be used in Ireland by a branch or agency of the company
- the company is controlled by residents of a European Union (EU) or tax treaty country.
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Apply the tie-breaker provisions of the Ireland/UK DTA to determine your jurisdiction of residence for treaty purposes.
Then refer to the employment income article of the treaty. Note that for the purposes of the employment article, directors income will be treated as employment income.
Consider whether the UK company has a permanent establishment in Ireland, and the possible tax implications of this.
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You have managed to complicate this significantly. A U.K. incorporated company is tax resident in the U.K. unless a double taxation agreement tie breaker determines its resident elsewhere. If the sole director is resident in Ireland and carries out his directors duties in Ireland it will be treated as Irish resident for Irish corporation tax purposes. Since 2019, a decision can be made by the Irish Revenue and HMRC (the competent authorities) to determine where its tax residence is.
directors pay from a U.K. company is generally subject to U.K. tax irrespective of whether the director is IK tax resident. Salary by contrast is not subject to U.K. tax if he employee is not U.K. resident and no duties are carried out in the U.K. To get paid without U.K. PAYE you would need a PAYE exclusion order.
In the U.K. you might pay yourself with a combination of salary and dividends but this is likely to be tax inefficient if you are resident here.
It is questionable whether you should continue to charge U.K. VAT if the services are not supplied from there.
All in all, you have issues under all tax heads in both jurisdictions.
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while you are tax resident in Ireland and remuneration from employments are taxable were duties are carried out, “director fees” under Article 4 of the Ireland U.K. DTA are taxable where the company is based.
so HMRC may seek to tax the income first and then Revenue will tax it again but will give you a credit for tax paid to HMRC.
you potentially may want to split your income between employment salary and director fees.
just also be aware that Ireland and Revenue treat dividends very differently from how HMRC treats dividends.
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Read the UK/Ireland DTA and you will find that my comments are correct. My comments regarding the tie-breaker provisions related to establishment of the OPs personal tax residence position and not the company’s tax residence position.
This is important as it will determine which jurisdiction has taxing rights over his directors remuneration. As noted before directors remuneration is treated as employee income for the purposes of the Ireland/UK DTA. Generally employees income will be taxable where the employment is carried out. An employment is carried out where the employee is physically present when carrying out employment duties to which the income relates. There are certain exceptions to the main rule which do not appear to apply here.
it would appear that the OPs company should operate shadow payroll on the directors remuneration received and deduct and remit the relevant taxes owed to the Irish tax authority.
Regarding the company’s tax residence. The place of effective management is a concept that has been contested before the courts on many occasions. It relates to the highest level of control that can be exercised. For example if a sole director spends 300 days in Ireland and 65 in the UK and runs the day-to-day operations of the company in Ireland but negotiates and concludes contracts in the UK and those contracts account for 60% of the company’s annual recurring revenue then there is a strong arguement that the company is tax resident in the UK. So tread carefully here.
Regarding VAT, the company does not have a place of legal establishment in Ireland yet. Whether or not the OPs home could be considered a fixed establishment in Ireland for VAT purposes will be depend on the facts and circumstances of the case.
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The tie-breaker clause of the treaty for the company is predicated on a decision of the two competent authorities. Place if effective management has almost never been litigated in these jurisdictions - you are thinking of central management and control. Concluding if contracts in the U.K. would not be indicative necessarily of either a place if effectivemanage or central management control. There are no directors to meet, there is only a single director. It is a truly fucked situation which would not be resolved cheaply. The OP would best be advised to start again with a clean company in the jurisdiction most appropriate to his business which does not sound like the U.K.
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“The tie-breaker clause of the treaty for the company is predicated on a decision of the two competent authorities.”
Under what articles and through which procedure?
Thats not relevant to my point. As I mentioned the OP must determine his residency position by applying the tie-breaker provisions per article 4 of the DTA and organise his tax affairs accordingly. The competent authorities will only liaise with each other to determine a persons residence under articles 4 and 25 of the OECD MTC through the MAP procedure, when there is a formal tax dispute and not at any point before that.
As regards, place of effective management(POEM), why has it not been litigated in these jurisdictions before? Is it because the concept is clear and straightforward?
“Concluding if contracts in the U.K. would not be indicative necessarily of either a place if effectivemanage or central management control.”
Crazy talk, a business without customers is not a business. Negotiating and concluding contracts is a vital activity in any business, probably the most important activity. Noteworthy is its specific inclusion under article 5 of the OECD MTC regarding establishing PEs.
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- the Multilateral Instrument brought in as part of the BEPS project modified the tiebreaker for company residence in the U.K./Ireland DTA in 2019.
- company residence is partly a function of place of effective management which has nothing to do with company residence which is related to the strategic direction of the company and the place where the directors make decision. Concluding contracts is absolutely relevant to PE status but by definition a company can only have a PE in a country U.K. which it is not resident. You are confusing/conflating topics. A little learning is a dangerous thing.
- whether the is a claim for actual PAYE and NI/PRSI in both territories is absolutely relevant.
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Really?
The following paragraph 1 of Article 4 of the MLI replaces paragraph 3 of Article 4 of this Convention:
ARTICLE 4 OF THE MLI – DUAL RESIDENT ENTITIES
Where by reason of the provisions of this Convention a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the Contracting State of which such person shall be deemed to be a resident for the purposes of this Convention, having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. In the absence of such agreement, such person shall not be entitled to any relief or exemption from tax provided by this Convention except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting States.
taken from here.
and that’s just supporting item 1.
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Thanks All.
So is there any clear answer? All I know is I am paying my taxes and indeed corporation tax and vat etc. Nobody is able to tell me what's right or wrong, as Boris would say, a wif waf over very little.
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If you are genuinely operating only from Ireland but the company is charging VAT and paying U.K. corporation tax the. You are almost certainly doing it wrong and exposing the company to significant issues. Payroll is more complex as if it is directors fees rather than salary then will remain chargeable to U.K. income tax. However, as you are resident here, it will also be chargeable to Irish income tax. PAYE exposures will exist for the company if it should have been operating an Irish payroll. Irish VAT costs can likely be mitigated by a “no loss of revenue” approach to compliance. However it is certainly a clusterfuck.
And just to be clear, if the company is engaged in professional services then There is also a surcharge on the y distributed income of the company. Unlike the U.K. it will generally be unattractive to roll up the income in the company in those circumstances.
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Well, all of the financial management, accounting, banking and marketing is done in the UK and the clients are based in the UK too The work that the company engages in is indeed professional services and this is done by external consultants.
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The only director of the company is in Ireland. Where are the “external consultants” based. Up until now, I had taken this to be a one-man band.
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I am back after a holiday, I needed it as I am working too hard.
With all due respect, you obviously don't work in the area of International tax. Below is a quote from an earlier post of mine:
"Thats not relevant to my point. As I mentioned the OP must determine his residency position by applying the tie-breaker provisions per article 4 of the DTA and organise his tax affairs accordingly. The competent authorities will only liaise with each other to determine a persons residence under articles 4 and 25 of the OECD MTC through the MAP procedure, when there is a formal tax dispute and not at any point before that."
What does MAP stand for...? Mutual Agreement Procedure. On what basis can it be accessed? Under article 25 of the OECD MTC. When is it beneficial to access it? When there is a dispute regarding the application of the relevant bi-lateral tax treaty and both parties do not wish to explore the litigation route. MAPs can be a costly and drawn out process but inevitably will be cheaper than litigation.
Your supporting statement:
"Where by reason of the provisions of this Convention a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall endeavour to determine by mutual agreement the Contracting State of which such person shall be deemed to be a resident for the purposes of this Convention, having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors. In the absence of such agreement, such person shall not be entitled to any relief or exemption from tax provided by this Convention except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting States."
The MLI is an instrument which is used by jurisdictions to easily adjust their existing bi-lateral tax treaties to incorporate OECD and their BEPS action plan best practices. The mutual agreement procedure is not accessed through the MLI.
Post edited by Taxes on0 -
I love this line…
With all due respect, you obviously don't work in the area of International tax.
Which you then follow up by telling me that MAP is accessed via the OECD MTC. You do understand that the MTC means the Model Tax Convention, essentially a standardised version which comes with a supporting commentary. The MTC is not a bilateral tax treaty, it’s a format. Whethwr and when a matter has to be dealt with under a mutual agreement processors, such procedure takes effect under the actual double taxation agreement between the relevant countries (which may adopt the MAP clause from a model tax convention popular at the time when it was entered into - the MTC has changed over time from when the first one was published in 1963. The DTA between the U.K. & Ireland which is currently in force was put in place in 1976 (hence the references to corporation profits tax and corporation tax) and has been amended by bilateral protocols since then. By nature, agreeing protocols to amend international treaties are cumbersome and involved processes.
As part of the BEPS process, with which I assume you are intimately familiar, a Multilateral Instrument was conceived to facilitate the “amendment” of existing treaties to accommodate changes to PE definitions, a principal purpose test to limit treaty benefits and an amendment to the procedure for determining where companies were resident in circumstances where they were potentially resident intwo countries. Prior to this, the Ireland-U.K. treaty had a tie-breaker based on place of effective management. Following modification of the treaty by the MLI deposit process (essentially a type of Tinder where each country submitted it choices for treaty changes and where the counties matched up in their choices the treaties are deemed to be amended) the tie-breaker is now subject to the Mutual Agreement Procedure, ie a decision by the Competent Authority in each country. It’s unsatisfactory, especially for small companies such as this one, but it is what it is.
Perhaps you could now withdraw the condescending tone of your prior post.
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Let anyone who has ears to hear, hear.
Here is a run-down of the back and forth we had.
You said that I had over-complicated the situation greatly with my analysis of the OPs predicament.
You said the competent authorities will liaise with each other to determine the residence position of the company for tax treaty purposes.
I said the competent authorities will only liaise with each other in this context when a dispute has arisen.
I said that the MAP procedure is followed in these specific circumstances in accordance with articles 4 and 25 of the OECD MTC.
I referenced the OECD MTC as all of Ireland’s bilateral tax treaties are based on this convention.
You said that the MLI adjusted article 4 of the Ireland/UK DTA and because of this the competent authorities of both states will determine by mutual agreement the residency position of the company for tax treaty purposes. Basically you repeated what I had stated more clearly in a previous post. ( I said that the MAP procedure is followed in these specific circumstances in accordance with articles 4 and 25 of the OECD MTC./ its equivalents in the Ireland/UK DTA.
I said that the MLI is an instrument that jurisdictions use to incorporate OECD best practices in accordance with the BEPS action plan within their bi-lateral tax treaties.
your response below:
“As part of the BEPS process, with which I assume you are intimately familiar, a Multilateral Instrument was conceived to facilitate the “amendment” of existing treaties to accommodate changes to PE definitions, a principal purpose test to limit treaty benefits and an amendment to the procedure for determining where companies were resident in circumstances where they were potentially resident intwo countries. Prior to this, the Ireland-U.K. treaty had a tie-breaker based on place of effective management. Following modification of the treaty by the MLI deposit process (essentially a type of Tinder where each country submitted it choices for treaty changes and where the counties matched up in their choices the treaties are deemed to be amended) the tie-breaker is now subject to the Mutual Agreement Procedure, ie a decision by the Competent Authority in each country. It’s unsatisfactory, especially for small companies such as this one, but it is what it is.”
Again, basically repeating what I had stated more succinctly above, I.e. that the MLI is an instrument that jurisdictions use to incorporate OECD best practices in accordance with the BEPS action plan within their bi-lateral tax treaties.
In conclusion, If you think that the competent authorities of the UK and Ireland liaise with each other on a daily basis to determine the residency position of all companies who have a nexus to both Ireland the UK,(to steal a quote from Roy Keane) you are living in ‘la-la land’.
The competent authorities will only liaise with each other in this context when a dispute has arisen regarding the application of the Ireland/UK bilateral tax treaty. The MAP procedure is followed in these specific circumstances in accordance with the relevant articles of the Ireland/UK DTA.
Finally, I apologise if my tone seemed condescending to you.
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The OP’s U.K. incorporated company is treated as U.K. tax resident for U.K. domestic law purposes by virtue of section 14 Corporation Tax Act 2009 which is essentially the reenactment of a provision which was introduced by section 66 Finance Act 1988 to make all U.K. incorporated companies U.K. tax resident. Prior to that, “central management and control” (as understood in De Beers Consolidated Mineworks v Howe, a 1907 House of Lords decision) was the criterion used to determine U.K. tax residence of a company and applied equally to U.K. incorporated companies as well as those incorporated overseas. From 1988 onwards, incorporation and central management and control co-existed and either could make a company U.K. tax resident. There then then flourished a myriad of dual resident companies and in 1994, U.K. statutory recognition was given to the effect of treaty tie breakers.
Ireland has continued to use the central management and control test for non-Irish incorporated companies since independence in 1922. (A discussion of the treatment of Irish incorporated entities is not necessary for this discussion.)
It is a reasonable inference that the OP is either the sole director of the U.K. company or is the director with the most significant power/influence. Following his change to Irish residence, had he wanted to avoid the U.K. company becoming Irish resident he would have had to take positive steps to ensure that occurred. It is a reasonable inference that he did not take any of those steps such that it is substantially likely that central management and control has migrated to Ireland. On that basis, the company would be Irish tax resident for the purposes of Irish corporation tax.
That is the dispute; I did not think that it would need to be so plainly laid out. Prior to the changes to the Ireland/U.K. treaty introduced via the MLI, the OP would have been advised to determine where the “place of effective management” of the company resided. That is an objective test which would apply in both jurisdictions which each operate a self-assessment tax regime.
Since introduction of the MLI, that objective test which was capable of being assessed by the taxpayer and its advisers has been replaced by a subjective determination by the Competent Authories of the contracting parties. Apart from guidance on the treatment of companies which had already applied the tie-breaker, no further guidance is given as to what weighting is applied to the various factors (place of incorporation, poem, etc).
Obviously it is not practical to engage MAP in relation to this company. However, the OP is running an open exposure to CT in both countries including penalties and surcharges. The company has not even notified its chargeability. As it is clear there are now other employees then PAYE is an issue as absent an exclusion there is an obligation to deduct. Likewise the determination of whether someone is or is not an employee differs between the counties, especially in relation to the U.K.’s intermediaries legislation. VAT is also likely to be an issue albeit there is potentially a “no loss of revenue” defence, there will be an absence of filings, notifications etc which can lead to costs.
The OP should decide where his future lies and create a new company.
The non-apology re condescension is undermined by the la la land comment. Clearly the CAs only engage when action is sought but hopefully you will understand from the above why there is no clear path to a determination otherwise. This is a matter on which many companies have had to seek advice over the past 4 years including a decent number of listed entities which have altered residence between Ireland and the U.K. in that period. The uncertainty inherent in a subjective tiebreaker was desirous to limit the prospect for planning but as I hope you will be able to discern from the foregoing, it makes life difficult for SMEs.
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@Marcusm, to steal a quote from Steve Staunton, you do not have a 'Scooby-Doo' when it comes to tax. Let he who has ears to hear, hear. Let them review my posts and cross-reference your posts. Let them determine who has made the most contradictory comments, who has gone off on the most tangents, who has not addressed each others points in their responses, he who does not have an understanding of basic VAT principles and cannot identify a domestic VAT transaction from a EU/Non-EU cross-border transaction.
This is my last post on this thread. To the OP, your original question was regarding your personal tax affairs and my initial response reflected that, take that response on board. Subsequent to my initial post, @Marcusm went off on a tangent.
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I accept this Taxes entirely obviously! You do not address my points but simply attempt to play the man. I’d be interested in a forensic analysis of my comments rather than ad hominem attacks.
That company has a VAT establishment in Ireland and none in the U.K. I did not even address VAT. To the OP, regularise your affairs.
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The Consultants are based overseas
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