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bigduckontax, Accountant
Category: Tax
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I have just ceased working as an MD in the UK on PAYE and am

Customer Question

I have just ceased working as an MD in the UK on PAYE and am moving to South Africa permanently - I am retained by former employers as a Global Consultant on a self employed basis. As I will be living in SA and visiting UK for only a short amount of time each year, I wish to register in SA for tax and I do not want my fees from the UK company to be subject to UK tax. Can I do this
XXXXX XXXXXon
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello Terry, I'm Keith and happy to help you with your question.

When you leave the UK send your tax office a P85. You can do this on line. HMRC will then treat you as non resident in the tax year after the departure year and split that year into two parts, one resident and one non resident.

Your UK company fees may still be subject to UK tax, however. Here is HMRC advice [edited] on the subject.

'Tax on your earnings

Working partly in the UK

If you're not UK resident, but work partly in the UK, you will pay UK tax on the part of your earnings allocated to your UK work. You can usually allocate your earnings by looking at the number of days you work in the UK and the number of days you work outside of the UK, where the work is of the same type in both countries.

The exception is where your work in the UK is considered to be 'merely incidental' to your overseas work, for example you are coming to the UK for a short period of training or to receive fresh instructions. Your work in the UK cannot be 'merely incidental' if it is substantial in time or nature or of the same type as the work you carry out abroad. If all your work in the UK is 'merely incidental' then all your income is treated as foreign income and is not taxed in the UK.

If you're employed in the UK, your employer or the person you work for may have to operate PAYE.

When and if you visit the UK ensure that you don't spend more than 91 days in the UK to retain your non resident status, but you must be out of the UK a full tax year to establish your non resident status. The 91 day rule can be averaged over 5 years, but you are better advised not to breach it at all.'

Of course your split time will probably reduce your director's fees proportion to below the Personal Allowance level of 11K which will make them tax free. You will have to keep a beady eye on HMRC though. Remember as a company director you are an employee per se and there is no way round that. It's a bit of a complication, but you should be able to get around that.

I do hope I have helped you with your problem. Enjoy South Africa, been there, got the T shirt!
Customer: replied 3 years ago.

Thanks Keith - very helpful. BTW I am no longer a Director and have formally resigned via Companies House. I guess one problem I have is the definition of "work". I will certainly not need to come to UK to actually work as virtually everything I do can be done remotely wherever I am - even sitting by my pool in Cape Town with a cold beer! The crux is, that some of the clients I will be working for will be based in UK, others USA etc. - I am described as Global Consultant and will be paid each month by my former employers on invoice. Do you still feel that I can be classed as non UK resident and therefore not be subject to UK tax? Certainly it seems that non UK residence is important and I have a permit to reside in SA. I am eligible for my State Pension in the UK which I have deferred to end of Jan 2015 and I accept that would be classed as UK earnings. So, I feel I must declare that but do not want to declare to HMRC my fees as a Consultant - I would rather deal with SARS for that (rate is 18%!). Am I on the right lines?


Terry

Expert:  bigduckontax replied 3 years ago.
On reflection though, if you have ceased to be a director then things will be much easier as you will no longer need to be an employee and can indeed be classed as a self employed overseas resident being paid on invoice.

The interaction with South African tax is beyond my expertise, but this is an UK tax advice site. You appear to be on the right lines though. Remember that under the Double Taxation Treaty between South Africa and the UK any tax levied by the UK is allowed as a tax credit against South African tax. Bear in mind also that as a UK State Pensioner your pension is paid gross and frozen at the point of entitlement so you will not enjoy the annual pension increases as you live in South Africa. The law on this may change as it is the subject of heavy criticism in the media.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support and sorry for my slight misreading of the position earlier.